Theft From The Middle Class. Will Social Security Theft Be Next?

I had an "a-ha" moment the other day!  I suddenly realized why the government might be allowing the debt to skyrocket. But I will get to that soon.  First...

It's becoming more well known that elements of the US government and US big business have been involved in stealing large amounts of money from the American middle class.  Before I begin writing about Social Security, left me outline theft from the middle class.

This article of mine mentioned the thousands of comments demonstrating public outrage over the SEC's refusal to stop financial institutions from engaging in theft.  Institutions were stealing money directly from investors, through the issuance of massive numbers of counterfeit shares.  The SEC allowed this to occur for many years.

Lately, I had been thinking that there are few remaining areas from which the criminal elites could plunder middle class wealth.  I believe that the middle class (and in some cases the upper and lower classes) have had money directly stolen from them in the following areas:


THEFT FROM AMERICANS

1) Gasoline: You could argue that there's been enormous theft resulting from criminals illegally raising the price of oil (which leads to higher gasoline prices). There is substantial evidence of this; however, I will analyse this in a future article.

If gasoline prices are, say, 50% higher than they would be if the market was fair, and if a typical American spends, say, $3,000 a year on gas, then the extra $1,000 spent as a result of criminally high prices (meaning one spends $3,000 instead of $2,000 annually) results in theft of about $300 billion from Americans from criminal gasoline related action alone!

2) Higher retail prices: Although I haven't extensively investigated this, I think it's reasonable to assume that big business has probably been charging higher prices for their products since the 2007-2009 recession. One report did suggest that 2010 prices have been rising quicker than inflation:

"Holiday spending reached the highest level on record last year, but that news isn't as good as it sounds."

"Although inflation has been tame over the past few years, holiday spending would have had to clear $478 billion to signify spending was back to pre-recession levels."

How is it that retailers have apparently been able to raise prices?  After all, even though the recession is officially over, the economy is still in the dumps!  If it wasn't for the artificial boost to GDP that has resulted from government borrowing, the economy would appear to be in far worse shape! (And that is its actual condition, since borrowing can eliminate every single recession by simply pumping in more money to produce more GDP!")

That fact that retailers are apparently raising prices at a rate quicker than some of their costs are rising (inflation) is perhaps more astonishing given this:  People's recessionary shift from buying at higher priced stores to buying at lower priced stores, like dollar stores and WalMart (although that shift in habits may have begun to reverse, which would negate some or all of this paragraph's argument).

Rather, perhaps Walmart and dollar stores are some of the businesses that are actually also raising their prices at a high rate?  Just because their final prices are lower than their competition doesn't mean they can't raise their prices at rates higher than inflation (or their competition's rates).

Regardless of which US businesses are the culprits, what accounts for this apparent overall phenomenon of disproportionately higher prices being charged by big business?

Well, this is my theory:  I believe that so many small businesses have failed and gone bankrupt during the recession, that big businesses now have far fewer competitors post-recession as compared to pre-recession!

And when you have less competition, you can charge higher prices, everything else being equal.  It's simple supply and demand.

This brings me back to my initial assumption:  that prices are rising.

One reason I didn't do an extensive investigation to confirm that prices have been rising is because it would be expected that prices would rise more than they would otherwise, resulting from the above mentioned change in supply:  Since small businesses have been hit disproportionately hard during the recession; it means that big businesses have less competition and it's to be expected that they would be raising prices at a rate greater than their costs are raising and greater than they otherwise would.  (Small businesses have been hit hard in a variety of ways:  When consumers spend less, they are more likely to reduce spending at the small businesses who charge more due to higher costs, and consumers tend to gravitate to big businesses that have lower costs and can charge less.  When the credit crunch occurred and lending froze, many small businesses were out of luck, while large businesses were more likely to have enough cash to weather the lending freeze, and some businesses were able to borrow from the government instead!)

So, why do I consider the price raises to be considered criminal theft?  Well, I don't consider them to be direct criminal theft, at least in most cases.  I believe it's indirect criminal theft:  because criminal actions led to the theft of wealth from investors, a high unemployment rate and less retail spending, it led to more small business failures; therefore, the criminal actions eventually contributed to small businesses failing.  As a result, big business has less competition and raises prices, indirectly benefiting from the criminal actions that started the recession!

3) Home Prices:  There is no doubt that home prices were artificially and criminally high as a result of loans given to people that weren't actually qualified.  Because there were more people buying homes than there should've been, more people bid for homes and bid prices up.

Now, it is true that wealthy criminals also suffered from the housing downturn, and in fact they initially probably lost a greater dollar value than the middle class did, in absolute terms.  However, in respect of the housing related criminal actions, I believe it's likely that the wealthy criminals will still end up having benefited in the long term.

In the short term, their criminal actions results in a starting advantage, resulting from the fees they earned on illegal mortgage transactions and artificially high prices.  They then suffered a loss in their home's value that was greater than the middle class suffered, but the middle class was more likely to be forced to foreclose as a result of the decreased home value and greater subsequent unemployment (foreclosure means a complete loss of their investment, since one loses all of the money they've paid on their mortgage when the bank takes over the home).

Also, the wealthy criminals were more likely than the middle class to be able to buy a second home at their newly depressed prices, positioning them to be able to profit in the long term if home prices rise.  The second home could also provide them with immediate revenue by renting the homes out to people (and you'd think there might be even more demand for that these days, pushing up rental prices, given the huge numbers of people that have foreclosed on homes and been forced to become renters again!)  In fact, the Census stats from Q4 2010 show a large increase in the number of housing units that are being rented: a one million unit increase from 37 million to 38 million!

However, some of the middle class victims may have been able to actually benefit, in one sense at least, from foreclosure, by being able to simply walk away from the home.  By doing that, although they lost their entire investment in the mortgage, they have avoided paying the difference between the home's new lowered price and the original mortgage value. Although mortgage holders have benefited in this regard, remember that they haven't actually benefited by an amount that you might think they've saved, because their original mortgage value was artificially high in the first place!

It would probably take a complex analysis in order to estimate whether the advantages homeowners enjoyed by being able to walk away from their mortgage would outweigh the costs they suffered when they paid artificially high commissions and housing transaction fees that they otherwise wouldn't have, since they shouldn't have been sold the home in the first place!

Also, even if the middle class had an advantage when looking only at their ability to walk away from the mortgage, certainly not all walked away from their mortgage, and I would venture that most didn't.

Also, even if homeowners did enjoy an initial advantage resulting from being able to walk away from their mortgage debt, there are two more costs resulting from having walked away:  1) A lower credit score (which likely resulted in their paying higher interest on some existing loans, difficulty getting new loans, and prevented them from buying a home again anytime soon);  2) Money lost by being forced to rent a home, meaning none of their monthly payment is going towards an actual investment!

4) The stock market:  Widespread theft from the investments of the middle class has been well documented, I don't need to investigate it here.  Needless to say, Deep Capture provides numerous articles confirming the theft; here's a good article of theirs outlining the massive amount of theft resulting from sales of counterfeit shares.

5)  Free trade agreements:  If free trade agreements have led to greater ability of big business to fire American workers and replace them with lower paid foreign workers, that Americans have been hurt (and big businesses have benefited, in the short term at least, by having lower costs and greater profits).

However, it's unclear whether this could be considered criminal or not, because I am unaware of whether the elite who signed the agreements knew that a result would be that big business would benefit at the direct cost to Americans.

So, I've outlined direct and indirect theft from the middle class having occurred in the areas of gasoline, higher overall retail prices, home mortgages and the stock market.

Where else can criminals find money to steal?  How many other potential areas are there?  Aren't there fewer assets remaining to steal? Yes, there are fewer. Criminals may need to start looking in other areas.

Which brings me to my next topic.


IS THEFT OF SOCIAL SECURITY COMING?

Social Security is an asset that Americans are supposed to be guaranteed to receive upon retirement.  Is it possible that wealthy criminals and elements of the US government have been plotting to attempt to steal at least a portion of Social Security funds from Americans?

After having my recent "a-ha" moment, this is a big worry of mine.  I do believe it's plausible that the government will attempt to enact laws that will result in future Social Security payments being lowered.

Why?  Because the deficit and debt are out of control, and the government might need to lower costs (which can be achieved by lowering Social Security payments) in order to pay down government debt and avoid default.

Now, if the government does do this, it doesn't necessarily mean that the action is theft from the American people.  I would argue that it's only theft if some people have plotted this course intentionally, as a means to eventually unfairly take money from Americans.

The following is an analysis meant to outline whether it's plausible that a plot has been in place.  It is not meant to suggest that it's likely that a plot actually is in existence.  It's simply an attempt to provide a hypothesis that would connect the dots between things that have occurred.

Is it plausible that there's a plan in motion to steal Americans' Social Security? Yes. Consider the following:

The debt has been increasing rapidly since at least 1970.  In recent decades, it appears that the debt has been doubling approximately every 7 to 14 years:

1970: 1,038.3 million
1977: 2,030.1     (7 yrs to double)
1984: 3,930.9     (7 yrs to double)
1996: 7,838.5     (12 yrs to double)
2010: 14,623.9   (14+ yrs to double)

You may be shocked to see that the rate of the increase under Clinton and George W Bush actually decreased versus earlier decades! (A further analysis would be needed to determine how much interest rate variation played in the slowing rate).

It's possible that elites have been plotting to raise the debt for a very long time, with the specific intent of using the debt as an excuse to pass legislation that reduces Social Security payments in order to pay down the debt.

If there has indeed been such a plot, it's unclear when it would've started.  Although the debt increased massively under Reagan, perhaps it was done with the main intent to purchase arms and win the Cold War.  Notably, Clinton actually reversed deficits in his final years, but the debt still rose from 6667.4 to 10,286.2 during his terms (some of that was due to interest on the debt, it wasn't all from annual deficits).

That leaves us with George W. Bush and Obama.  Could a Social Security plot have started with Bush and continued with Obama, given that Bush was the one who reversed the Clinton annual budget surplus? It's plausible, given the other criminal actions that accelerated (but may not have originated) under Bush's watch (I'm referring to stock market and housing market crimes).

And as for Obama...well, just read this expose of mine and you'll see that he is hardly an honest individual.  It wouldn't be surprising if he was involved in an attempt to effectively steal Social Security payments.

To be fair, I believe that George W Bush, at one point during his terms, stressed the need for Social Security reform.  If there is a Social Security plot, perhaps this was simply lip service from Bush, knowing that Congress wouldn't act...or perhaps Bush wasn't involved, perhaps members of Congress are involved in a plot...or perhaps lobbyists and elites behind the scenes simply use politicians as puppets.

Although the rate of debt increase slowed under George W Bush, that doesn't necessarily mean that he wasn't aware of or part of a plot.  The debt increase could've slowed for many reasons:  trying to appear to placate the public; lower interest rates post Sep 11, and other reasons.

Some might argue that it's not realistic to believe that elites could continue a plot for decades.  I disagree.  I'm not saying it's probable, just realistic.

Also, not every President/Congress would've had to be in cahoots.  It's entirely possible that Reagan increased the debt out of genuine concern for national security (by spending on the military); we know Clinton attempted to begin decreasing the debt; which leaves Bush.  Again, perhaps a plot started with Bush.

Also, wealthy big business has been basically influencing Congress for decades, and they could've easily discovered a Social Security plot decades ago and kept supporting candidates who backed them.  The Federal Reserve, which is actually privately, not governmentally owned (!), has been around since the early 20th century.

It would be interesting to see if a rapid increase in the debt occurred soon after Social Security was first created. 


GOVERNMENT UNWILLINGNESS TO PAY DOWN DEBT

Are there any other reasons that suggest that elites may be plotting to run up the debt as an excuse to taken money from Social Security?

Well, how about this: the fact that the debt has been massive for years, yet Congress is unwilling to pass legislation that will reduce government spending!  What does Congress expect the eventual outcome of the debt increase to be?  Eventually there may be a breaking point, a point when the currency may inflate rapidly, dropping the value of the US dollar, a point where the government may default on their debt, a point where lenders stop lending to the US, a point where the US can't even make the interest payments!

Now, perhaps Congress actually intends to default on their debt.  Perhaps they feel that the extremely harmful effect default would have on the US economy is outweighed by the benefits that the US will enjoy by defaulting on their debt:  not repaying the debt! (Which means they borrowed money to buy things but don't pay it back!)

Perhaps this would also explain another curious government policy, their curious lack of action in punishing China (which could easily be achieved by taxing imports from China) for pegging and devaluing their currency to the point that Chinese goods are so cheap to Americans (and American goods are so expensive to the Chinese) that Americans buy much more from the Chinese than they sell to the Chinese.

This is a MASSIVE transfer of wealth that's been occurring annually. It's direct theft of Americans by the Chinese. That's simply what it is! (It's theft because the Chinese don't let a fair market determine the dollar/yuan exchange rate, they set the rate at a level that's advantageous to themselves).

Perhaps Congress intends on paying back the Chinese by saying:  "You fucked us for many years, now we're going to get the last laugh...we're not paying you back any of the money you've lent us over the years, money we've had to borrow from you because you've been stealing our money through currency manipulation".

So, it's definitely plausible that there hasn't been a plot by Congress to run up the debt in order to justify stealing Social Security from Americans; they may intend to run up the debt so they can default on it, or they may be running it up as a result of simple incompetence (unlikely) or as a result of excessive spending resulting from kickbacks to politicians in the form of "pork" spending.

But it's still plausible that there's a Social Security plot.  Let's investigate it further.

WHY WOULD THE WEALTHY BENEFIT FROM SOCIAL SECURITY REDUCTIONS?

Because it means that they don't have to pay as much towards the debt themselves!  (After all, in 2008 the top 10% of income earners paid 69.94% of all income taxes paid!)  If the time comes that a serious effort is made to pay down the debt, the only place the money can come from is the wealthy and the corporations!  Nobody else has enough money to make as significant a dent in the debt!  In 2008, the top 25% of income earners paid 86.34% of the total income taxes paid!

So, by reducing Social Security and using that money to instead pay down the debt, it means the wealthy no longer have as much debt to pay themselves!  If there's been a plot to do this intentionally, then it's direct theft from the American people!  In effect, this plot would reduce the progressive income tax rates that higher income earners are supposed to earn, because the burden of paying down the debt suddenly shifts a bit closer to the non-wealthy! Pretty clever way to appear to be paying those high income tax rates!


Now, it's true that if Social Security payments are lowered, the wealthy would have their Social Security payments lowered too.  But that's a small sacrifice, versus the relatively huge benefit gained by their not having to pay down the debt!

In fact, the wealthy have to pay taxes on their Social Security benefits, so they don't end up keeping as much of their benefits as other Americans do.  Therefore, compared to the non-wealthy, if Social Security was cut back, the wealthy wouldn't see as much of a reduction in their income anyway! (One filing jointly has to pay federal taxes on Social Security if they earn over $32,000.  In fact, up to 85% of Social Security is taxable if "the total of one-half of your benefits and all your other income is more than $34,000 ($44,000 if you are married filing jointly)".
 
About how much would the wealthy benefit if Social Security was reduced significantly?

Let me try to simplify things:


What the wealthy versus the non-wealthy will immediately LOSE if SS benefits are reduced

Although all eligible Americans would lose the total gross reduction of benefits, the wealthy would lose only a small portion of the net after tax Social Security benefit reduction (because if they would have received the money that was taken away, they would have been taxed on it at high rates anyway).

In contrast, the non-wealthy will lose most or all of their net Social Security reduction, because their benefits are either not taxed at all or taxed at lower rates.

Example (my actual percentages aren't accurate; but in order to make my point, there need only be a difference in tax rates between the wealthy and non-wealthy):

Let's say gross benefits were reduced by $100 a month for everyone.

Let's say the wealthy pay 85% tax on Social Security benefits.  If there hadn't been the $100 reduction in gross benefits, they would've receive that $100 and then paid $85 tax, and only kept $15.  So, by reducing their gross benefits by $100, they are really only losing $15 net.

Let's say the non-wealthy pay 20% tax on Social Security benefits.  If there hadn't been the $100 reduction in gross benefits, they would've received that $100 and then paid $20 tax, and kept $80.  So, by reducing their gross benefits by $100, they are losing $80 net.

So, one direct result is that the wealthy would lose less than the non-wealthy if Social Security Benefits were reduced.


What the wealthy versus the non-wealthy will immediately GAIN if SS benefits are reduced

When benefits are reduced, the money can go directly to paying down the debt.

The wealthy will benefit greatly from this, since they (and corporations) are the ones that would be called on to pay down the debt, since they are the ones with most of the money (10% of them pay 69.94% of income taxes).

In contrast, the non-wealthy would also benefit by there being less debt to pay, but not nearly as much, because the non-wealthy pay a small proportion of taxes, and hence are expected to pay little of the debt anyway.

So, one direct result is that the wealthy would gain more than the non-wealthy if Social Security Benefits were reduced.


Note that these are only some direct benefits that I'm referring to.  A more complete examination would involve looking at externalities related to the benefits reduction, but that's complex and outside of the scope of this article. Some possible externalities:  1) Since the non-wealthy would become even less wealthy in relative terms, they may be more desperate for money and willing to work for lower wages, which would raise the profits of wealthy corporations.  2) Since some non-wealthy would work for lower wages and then earn less, they will spend less on retail goods, lowering the profits of the wealthy corporations.

Looking only at these two externalities, does it appear that their effects cancel each other out?

Think again!  The wealthy may be the winner again!

The non-wealthy could be earning $100 less, and the wealthy might in turn make $100 less revenue from that person, but the wealthy person isn't actually losing $100 like the non-wealthy person is. The wealthy person is just losing the profit portion of the $100.  Part of that $100 would tend to be paid towards fixed costs that would be paid anyway, like labor and cost of goods sold!  Also, this example didn't even mention the immediately greater profit the company made when they lowered their costs and paid the non-wealthy $100 less in the first place, triggering this sequence!


LONGER TERM BENEFITS OF A SOCIAL SECURITY REDUCTION

The main benefits (not the externalities) that are listed above are the immediate benefits that a Social Security reduction would provide to the wealthy (in terms of the taxes and debt reduction that would occur in the tax year that the reduction took place, or soon after).

But there are other, ongoing, benefits that the wealthy may enjoy!

If Social Security payments remain at the reduced level, that means that the money saved annually by the reduction can be used to pay down the debt annually.

Or, because less money will be paid out in benefits annually, less money could be collected.  The wealthy may be asked to provide less tax income.

In 2010,  the first $106,800 of employee taxable income was taxed at 6.2%, and matched by the employer.
A wealthy employee making $200,000 would pay $6,621.60, while someone earning $35,000 would pay $2,170.

But if less money was being paid in Social Security, and less was to be collected, they might lower the limit from $106,800 to, say, $75,000.  The wealthy would benefit while many non-wealthy would pay the same amount!

And also, even if the wealthy saw as large of a net cut in their benefits as the non-wealthy did, the wealthy need the money far less than poorer Americans do.  Which leads me to yet another benefit that the wealthy will earn (er, wrong word? Let's use "enjoy") if Social Security payments are lowered:

The poorest of those receiving Social Security will now earn less money, and more of them will be unable to support themselves and pay for health treatment (assuming the government doesn't cover all of that).

This should lead to a lower life expectancy for those people, meaning they die earlier, and their Social Security payments would end earlier than otherwise would have if the payments hadn't been reduced in the first place! (In some cases after death, benefits would simply transfer to a spouse, but those spouses, many of whom also would have reduced benefits, would be dying earlier too!)

Because people would be dying earlier and Social Security payments ending earlier, the government would be paying even less in Social Security, and could justify collecting even less in taxes from the wealthy people!

CONCLUSION

So, to summarize, it's very worrying to think that there could be a plot by elites to run up the debt as an excuse to reduce Social Security.

Heck, regardless of whether there has been a plot or not, it's worrying to think that Social Security might be reduced in order to pay down the debt!

This would almost certainly harm the non-wealthy and benefit the wealthy.

Let's hope this won't be the case.