Richard Light

5-03-2016

Fixed income?

You have been, and continue to be, robbed.



Not only is the cost of living for those who paid into and collect social security going down as a result of mismanagement and government theft of the ‘investment’, but people who worked so hard to prepare for their retirement face depreciation of their money by 12 to 30 percent per year as a result of bailouts, printed money, and private bank control of our government.

Mainers on fixed income face assaults from both sides of the equation, their incomes have less purchasing power and less cash on hand. The solutions to this are radical, but so too was the idea that social security could exist.

Retired Mainers need a clear picture of why and how their money is diminishing.

 


The first part of this equation is costs:

Raising wages, raising gas taxes, raising sales taxes, raising income taxes, raising healthcare costs, and raising educational spending all add to the burden of costs. These inflations (which are shrouded in lies about low pay and poverty) all contribute to higher costs on every purchase.

Raising the minimum wage has no result but needing to zero the balance of labor costs by raising the costs of products. People on fixed income do not get a raise, but for a 17 year old to have more money for his PlayStation games we raise minimum wage (proposed right now to be doubled from 7.50$ to 15). Whether or not you think low wage, entry level workers should make more money, the reality of the generosity of giving them a 100% income increase means those on fixed income will lose exactly half of their money’s value. This is simple math, but this is math which is often not understood or misrepresented. The actual result of doubling the minimum wage is that the prices of all goods and services double. Minimum wage workers have a bigger check but that is a math game which gains them nothing and causes those on fixed incomes to spend exactly twice what they pay now for food, gas, clothes, entertainment…quit literally everything doubles in cost.

Raising gas taxes is a sure fire way to provide more money to the roads as gas taxes fund these projects. And yet, as much as we tax gas, the result is that our roads are worse, road crews are less productive, costs are ever higher, and crony politicians and gravel & tar corporations reap millions in excessive profits. Gas companies make 9 cents per gallon (and people bemoan the billions in profit these corporations make) while the government makes 43 cents per gallon (5 times as much money as oil companies…). Gas taxes increasing means people on fixed income spend more to go the same distances. This tax takes grandparents from their grandkids as costs to travel become too high to make trips out.

Raising sales tax is a favored game of politicians. This is a tax that costs pennies per product and doesn’t add up to a noticeable pain until we go shopping for food, cars, go to a movie, or make another purchase more than a few dollars. This method of taxation is impossible to fight, curb, control, or have representation for. We as Americans are supposed to be able to have representation for our taxes (that is to say we have the right to determine where our money goes). Sales taxes have no method of representation; they are put forth by computer and bleed people slowly. No one is more affected by sales tax increases than those on fixed income.

Raising income taxes seems like a tax that would not affect those on fixed income. The truth is that as wages are increased, taxes are increased. Just like they say to shave your face when you get a new haircut, lawmakers attempt to hide their tax increases inside the raising of minimum wage. This form of deception works. Workers who make X$ per week still make more money, yet the government makes double their prior money off those increased checks AND gain some added money from their increased percentages. The worker ends up paying more than double the amount of taxes while the person on fixed income covers all the costs through raising prices on purchases. There is no tax which doesn’t pinch and harm those on fixed income.

Raising healthcare and education spending destroys the incomes of those on fixed income. The best way to make people look evil is by using kids, the sick, and the elderly as purported victims. We spend more on education and healthcare than any nation in the world. As a result, we have the worst educational and healthcare systems of first-world nations. The trillions of dollars in healthcare and educational spending Americans are taxed for do NOT go to teachers, doctors, nurses, counselors, nor the students, nor the patients. Our tax money instead goes, first to corporate entities that control government ensured monopolies, and then to the government cronies who helped assure these contracts. Politicians and lobbyists steal money from this pool before handing the funds to unions and administrators. These unions and administrators steal nearly half of the money (note my rebudget 2016 for sourcing) before finally paying the people who do the work, teach the kids, test and experiment with innovations, and work to help people. The result on the dollar of those on fixed income is that property taxes skyrocket; renters and home owners alike pay for these increases.

 


Increased costs destroy the purchasing power of those on fixed incomes. Raises for fixed income do not match GDP nor do they match inflation. Raises for fixed incomes are a product of politicians looking for votes.

Cost of living increases:

January 2006 -- 4.1%
January 2007 -- 3.3%
January 2008 -- 2.3%
January 2009 -- 5.8%
January 2010 -- 0.0%
January 2011 -- 0.0%
January 2012 -- 3.6%
January 2013 -- 1.7%
January 2014 -- 1.5%
January 2015 -- 1.7% 
January 2016 -- 0.0%

https://www.ssa.gov/news/cola/automatic-cola.htm

A President’s first year in office sets the tone for how they are received throughout their tenure. Barack Obama is noted in the above chart but all presidents and elected officials play this game. Notice that the “Economic stimulus package” of 2008 by Bush was used as a tool for gaining Republican support in the 2008 election. In 2009 Obama pushed through a raise for social security. His generosity stopped for the two years of his first presidency (no increase at all) until his reelection in 2012 where the Democrats tried to buy support by raising the COLA (5.8%). A steady gain had been offered to seniors for three years and is now at zero again as we head for a new election. You can be guaranteed that there will be a COLA increase either just before the election of 2016 or just after a new president takes office. If a Republican looks poised to win, A proposed raise will come before November; if a Democrat looks poised to win, they will reward their victory with a minor increase on their first year in office. Either way, your investment is being used against you to gather favor in political games.

The real disservice here is this: if this chart of “cost of living” increases was an investment account, the company offering these gains annually would be put out of business. Social security was not only robbed long ago by politicians paying for more wars, more programs, and more profits in corporate pockets, but it is so far below the return of an investment account that is should be criminal.

If you paid into social security, you were not only robbed of your ability to choose how it is invested, but you have been robbed every day since. This money should have been invested by people who know how to make money, not by those who steal money. Retirement accounts all over the world would have generated, and would continue to generate, 10% (and more) interest while the United States Federal Government offers mostly 1% and often 0%.

You deserve more for your work and your money should grow your future, not line the pockets of government thieves.

 


What can we do?

 The solutions to this issue are as radical as the idea of social security. This money needs to leave the United States central government piggy bank and be placed in an account closer to home. Like any 401k or other retirement investment program, every dollar of your money needs to be placed in multiple portfolios and invested by professionals. Any losses generated by an investor can be partially recovered and with this process of the market liability can be prosecuted. When the government loses or steals money you lose the money and NO ONE suffers a day in jail or even a lost job. Instead, the government dumps dollar after dollar into their pocket and you get nothing.

Diversification is the key here and investors know how to make more money than they lose. And, if you worry about this process because you feel there may be more losses than gains (risk), we can compare the federal social security program with the Maine retirement program. While 2.1% is a moderate gain, the stable 2.1% blows away the earnings gains of the federal social security program.

Ultimately we have three options.

We can leave the money where it is and lose any solvency, allow corrupt D.C politicians to rob the funds, and watch as the debt clock spools higher to replace the losses.

We can sue the federal government as a State for the earnings of Mainers within their pool of our cash and then use this money to invest as a State or in private investment programs.

Or, we can use a hybrid system where we put new money (of current workers) into a State based or private based retirement system while letting the money the federal government governs continue on its path with those who currently collect.

 

Added resources:


The USD will begin to depreciate.

It can be expected that the decrease in value will be in the 20% to 30% range.

http://philosophyofmetrics.com/us-dollar-will-devalue-by-20-to-30-freepom/

 

Fixed-income investors are the hardest hit by inflation. Suppose that a year ago you invested $1,000 in a Treasury bill with a 10% yield. Now that you are about to collect the $1,100 owed to you, is your $100 (10%) return real? Of course not! Assuming inflation was positive for the year, your purchasing power has fallen and, therefore, so has your real return. We have to take into account the chunk inflation has taken out of your return. If inflation was 4%, then your return is really 6%. 

This example highlights the difference between “nominal interest rates” and “real interest rates”. The nominal interest rate is the growth rate of your money, while the real interest rate is the growth of your purchasing power. In other words, the real rate of interest is the nominal rate reduced by the rate of inflation. In our example, the nominal rate is 10% and the real rate is 6% (10% - 4% = 6%). 

http://www.investopedia.com/university/inflation/inflation4.asp#ixzz47PTJWVba