More generous inflation
protection By The Mogambo Guru
Around here, governments are freezing open
staff positions and trimming budgets, which is bad
news for an economy that depends on government
spending, like America's. And so it seems natural
that we learn from Bloomberg.com that, "New York
Mayor Michael Bloomberg ordered agency heads to
freeze all city hiring and cut their budgets this
year and next, anticipating less revenue as Wall
Street profits drop and real estate sales slow."
The net effect is that "New York state
faces a budget gap of $4.3
billion next year, up from
$3.6 billion estimated three months ago, as Wall
Street job cuts and losses reduce tax revenue, the
Division of Budget said. The state normally
collects about 20% of its revenue from taxes on
Wall Street companies and employees." 20%! Wow! No
wonder Wall Street sharpies are always sticking me
with fees, expenses and commissions!
And
this is not to mention that the Discover America
advocacy campaign said, "Since September 11, 2001,
the United States has experienced a 17% decline in
overseas travel, costing America $94 billion in
lost visitor spending, nearly 200,000 jobs and $16
billion in lost tax revenue."
So there are
going to be herculean efforts made to wring money
out of stones and turnips, as we learn from Thomas
Donlan in Barron's, who summarizes the new AMT
(alternative minimum tax) bill of Congressman
Charles Rangel. He notes that, "The Rangel bill's
core gimmick is to raise taxes by more than $100
billion a year to replace a tax that most people
aren't paying." And how much tax? The top rate
will go from 35% to 44%!
Mr Donlan shows
his mathematical talents by offering that "You can
call this a 25% increase in tax", because taxes
went from 35% to 44%, but the other side of the
coin was the "keep rate", or how much Americans
keep of an extra dollar of income. A 35% tax rate,
he calculates, leaves you with a 65% keep rate,
but a 44% tax rate gives you a 56% keep rate,
which he says works out to be a 14% decline in
income from earning that one extra dollar of
income! Yow!
Ron Paul, hopefully the next
president of the United States because he is the
only guy running for the office who comprehends
economics and the actual meaning of the
constitution as written, summarizes it as, "Thus,
a new 4% surtax on incomes over $150,000 for
singles and $200,000 for couples is proposed to
'pay for' the estimated lost revenue. This
simultaneously raises $36 billion MORE than simply
leaving the AMT alone, and creates a huge new
marriage penalty tax."
And there is, of
course, talk of future social security payments
and benefits being subjected to "means testing",
meaning that wealth will be redistributed to the
"have nots" from the "haves". This is unavoidable,
as there are many more "have nots" than "haves"
who vote, and every day there are more and more of
them because every day the Federal Reserve is
allowed to create more money and credit, meaning
that every day is another day that more and more
people slip from being a "have" into being a "have
not" because prices will rise faster than incomes.
So wealthier Social Security retirees are going to
get the "means test" screw job.
And it is
not just loathsome Americans doing this crap,
either, as Business.timesonline.co.uk reports that
the British government "is proposing to remove
some of the inflation-proofing of final-salary
pension schemes".
How much "removing" of
the effects of price inflation? Less than you
think, because it wasn't much before: "Employers
will only be obliged to revalue pension
entitlements of former employees by up to 2.5% a
year if the new plans come in", which is supposed
to be better, because "Under the current rules,
they have to adjust for inflation of up to 5%."
Hahaha! Five lousy percent! Hahahaha!
So,
let me see if I have this straight: If inflation
is running 5%, or 10%, or 50%, or 300%, or 3,000%,
and a loaf of bread costs 1,000 British pounds,
the pensions of retirees can only be increased by
a maximum of 2.5% a year? Hahaha! And which is
worse than before, since payments could still only
go up 5%, no matter how high inflation got?
Hahahaha! Welcome to the real world of "we're from
the government and we're here to help you,"
chumps!
The article does not mention how I
was yelling out, "What a bunch of thieving
government scumbag wankers!", although they did
say (as if it had to be said at all) that "The aim
is to make defined benefit schemes cheaper to
run," which I guess that it does, seeing that a
bunch of old retired people are getting royally
screwed out of the extra money they need just to
achieve financial "stand still", since you don't
have to pay them the extra money they need to
offset the inflation in prices that the stinking
government and central bank create every freaking
day of their lives! Hahaha! "Cheaper to run!"
Hahahaha!
But current retirees can relax,
as "The lower inflation-proofing would only apply
to future entitlements. Past entitlement would
continue to enjoy the more generous inflation
protection." Hahaha! "More generous"!
Leaving aside the huge, yawning chasm
between what I consider "generous" and what they
call "generous" as regards protecting against the
ravages of inflation in prices, I am just
personally happy that I don't work there, as I am
sure that because I am given all the crappy jobs
around here, I would be given the crappy job of
calling all the employees together in the
cafeteria to explain it to them, and tell them a
lot of hollow crap about how everything is fine as
concerns their retirements, don't worry about a
thing, and how they are such terrific employees,
and how much we executives value their loyal
service to the company blah blah blah, which they
know is a lie because they know that I hate them
all as much as they hate me. Maybe more. Who
knows?
But perhaps I could get a little
sweet, sweet revenge by also saying to them "By
the way, you stupid employees are paying to give a
bunch of retirees a better retirement by
generously offsetting their inflation at a maximum
5% increase in their pensions, double what you
will get, assuming that you even live long enough
to retire, which you won't, because you will have
to work until you drop dead at your brain-killing
job, not just because the damnable central bank
has created so much money and debt that now you
are doomed to see all your savings and assets fall
to worthless crap as inflation in prices soars to
huge freaking multiples of your pathetic
retirement income, but mostly because we are
screwing you out of half of the maximum inflation
adjustment in your stupid pension, and thus you
will get poorer faster than the guys you are now
supporting, as the inflation the central bank is
creating literally eats you to death! Hahahaha! So
you're all screwed! Hahaha! Now get your nasty
butts back to work! Work! Work harder AND faster,
you worthless proletariat factor-of-production
scum! Hahaha! The central bank has forced you to
work all of your life ! Arbeit macht frei!
Work until you die, or feel my wrath!"
Hey! Now that I think about it like that,
maybe I WOULD like to deliver the news to the
employees! It could be fun! Hahaha!
Richard Daughty is general
partner and COO for Smith Consultant Group,
serving the financial and medical communities, and
the editor of The Mogambo Guru economic newsletter
- an avocational exercise to heap disrespect on
those who desperately deserve
it.
Republished with permission from The Daily Reckoning.
Copyright 2007, The Daily Reckoning.
Head
Office: Unit B, 16/F, Li Dong Building, No. 9 Li Yuen Street East,
Central, Hong Kong Thailand Bureau:
11/13 Petchkasem Road, Hua Hin, Prachuab Kirikhan, Thailand 77110
