More Generous Inflation Protection

By: The Mogambo Guru | Thu, Nov 8, 2007
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"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'!"

Around here, the governments are freezing open staff positions and trimming budgets, which are bad news for an economy that depends on government spending, like ours. And so it seems natural that we learn from 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 percent decline in overseas travel, costing America 94 billion dollars in lost visitor spending, nearly 200,000 jobs and 16 billion dollars 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 tax bill of 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 you 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 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 per cent 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 per cent." Hahaha! 5% 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 a thousand 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 percent 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!

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The Mogambo Guru

Author: The Mogambo Guru

Richard Daughty, the angriest guy in economics
The Mogambo Guru

The Mogambo Guru

Richard Daughty (Mogambo Guru) is general partner and COO for Smith Consultant Group, serving the financial and medical communities, and the writer/publisher of the Mogambo Guru economic newsletter, an avocational exercise to better heap disrespect on those who desperately deserve it. The Mogambo Guru is quoted frequently in Barron's, The Daily Reckoning, and other fine publications.

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