Brokerage founder Charles Schwab tells Newsmax that if Mitt Romney is elected the economy will “pick up steam” and reverse the “no-growth policy” of President Obama that is crushing seniors with low interest rates.
He also predicts that Obama’s plan to raise taxes on wealthier Americans would not solve even “a fraction” of the problem with the federal budget deficit.
Schwab is founder and chairman of the Charles Schwab Corp., a discount brokerage that has made investing accessible to people around the globe. The San-Francisco-based company was founded in 1971 and now has more than 8 million brokerage accounts.
In an exclusive interview with Newsmax TV in Florida on Thursday, Schwab — who supports Romney for president — was asked what Obama policies have been the most damaging to retirees in the Sunshine State and elsewhere.
“The most difficult thing I have to see and watch in the Obama administration is their almost no-growth policy. Everywhere you turn it seems as if they’re suppressing growth —on an attitudinal thing, raising taxes or regulation. It goes on and on and on,” Schwab says.
“And what has happened is the Obama administration has really deferred to the Federal Reserve to do anything that might help the economy. They brought interest rates down. In fact, they brought rates down to near zero.
“Who took the brunt of all of that? It’s the seniors. There are 40 million seniors in the United States. Florida has a huge population of seniors and these people are suffering. They get virtually no interest on their CDs, their money market accounts, their savings accounts. These are things that people planned on 35, 40 years ago. They’ve just seen their income, their nest egg, sort of disappear.
“Yes, they have the principal there, and that’s safe, but none of the income that they’d planned on to supplement their Social Security.”
Romney will not likely raise interest rates, Schwab opines.
“He won’t be raising rates or lowering them. What will happen is the economy will pick up steam, will start growing again. People will become employed. More tax revenue will come off people’s employment. It will spin on its own way as we grow out of this thing.
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“We need about a 3 percent growth. So I would recommend to seniors, find the president that is going to make us grow faster. If you ever want to have any income from your savings account, we’ve got to get a growing economy. That’s the only way interest rates will ever go up. Get back to normal. Normal was when we had a 3 percent coupon, so to speak, on our savings account. It’s zero today.”
A President Romney would implement policies to encourage natural growth, according to Schwab.
“The Fed would have to increase rates because they flooded the whole world with money, the United States included. If we had growth with no increase in interest rates, we’d have massive inflation. But we have to get back to a growing economy in order for us to get some lift in interest rates for our savings accounts.”
As for Romney’s tax plan, Schwab tells Newsmax: “It would provide a great amount of psychological incentive. It would also inspire people that hard work is rewarded by their ability to keep more of their hard-earned income.
“In my case, someone who’s been quite successful and lucky along the way, my rates will probably go up 10 percent, which I’m perfectly happy to do because I spend a lot of my time now with non-profit institutions and I give a lot of money away to them and I’m able to deduct that.”
Romney has talked about lowering income tax rates and eliminating or limiting deductions, which include the mortgage interest deduction and charitable deduction, but Schwab doesn’t believe he will eliminate all the deductions.
“I don’t think he’s going to do that, but at my level if we eliminated all deductions, I would end up paying slightly more in the way of taxes,” he says.
“Now I’m sure he’ll probably have exemptions for the middle income people of America, whether it be we deduct the mortgage payments they’re making or interest on the mortgage payments. That will probably not go away. In my case, fortunately, being 75 years of age, I paid off my mortgage finally and I don’t have a mortgage anymore. So I don’t worry about the deductions.”
Asked if a lot of the problems with the economy now are psychological, Schwab responds: “Absolutely. But they’re also instituted by the leader of the organization, meaning our president.
“When the leader of any organization gives suppressing notes, beats up on different sectors of the economy for being too successful, that ends up converting people to being pretty depressed about their position.
“Successful people work hard and you’re going to get less work, you’re going to get less rewards, you’re going to get less income, and we’re in a funk right now as an economy.”
President Obama’s plan to raise taxes on higher income families and businesses “wouldn’t be enough, really, to accomplish a fraction of the problem we have with deficits of over a trillion dollars a year,” Schwab declares.
“So I don’t think anyone who’s successful is worried about paying slightly more. That’s not the issue. You want to create a system of taxes that will maximize output, maximize work, maximize incentives to do work, and then, out of the maximization of that, you get an adequate cash flow going to your federal government, your state and counties.”
Looking beyond the election, Schwab was asked if real reform of the tax code and budgetary process can be accomplished without everyone having to pay more.
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“We probably will have to pay more because we want more services, frankly,” he responds.
“We all agree that if there is a large group, 30 million people supposedly, without insurance for their medical services, everyone feels we should help them too. That’s going to cost a bunch of money. We all want a lot of new things in the economy and some of that is going to take money.
“But what happens is once you start growing, there’s all kinds of new money being created. If you’re shrinking, as we have been, it gets less, the pie gets smaller and smaller and smaller. We want to turn things around and get the pie bigger. The growth sort of begets itself.”
Read more on Newsmax.com: Charles Schwab to Newsmax: Obama’s Economics Crushing Seniors.