Tuesday, July 26, 2011

A Hidden Republican Punishment of the Middle Class

Here is another way that the middle class is being forced to bear the costs of the economic disaster foisted on us by the greed of the rich.  I have been surprised to never hear this spelled out directly, so finally I'm going to try to do it myself.

We constantly hear about people's responsibility to prepare for their own retirement.  In fact, a large part of Republican cant involve the constant claim that we should bear far more of that burden.  Let's consider what is happening to people who spent their lives following this advice:

Imagine a working class couple who, responsibly, saved carefully for their retirement, and over their working lives managed to save $500,000.

Before the Bush economic disaster, that money might have earned, say, 5% interest, or $25,000 a year.  That would be enough to more than double the money they get from Social Security, and if they don't have a mortgage, it would be a substantial contribution to their living an independent and relatively comfortable life.

Today, they are going to make 1% on their life savings, or about $5000 a year.  This is an almost insignificant contribution to their survival, but something else is going on here.  The difference between these two figures, $20,000 per year, represents an effective tax on these people, to pay for the economic damage done by the rich, who have largely been absolved from absorbing any of its costs. 

Let's say that they get $20,000 a year from Social Security, and let's just say one of them is lucky enough to have a pension paying a further $20,000.  With the $25,000 they should have been able to earn from their savings, this would have given them an annual income of $65,000;  enough, if they had a paid-off mortgage, to live relatively comfortably.  The $20,000 they are losing because of the economic crisis represents an effective 31% income tax, on top of any other taxes they may owe.  Consider that the next time you hear that hedge fund managers pay only 15% tax on the billions they make.

Our whole economy has turned into one gigantic swindle, but little of it is as galling as this way the rich have found to penalize people for having led honest and productive lives.  This is America today, and it is why we are headed for oblivion.

1 comment:

St. Joan said...

Math is hard, so I think people don't think this stuff through. But starkly put like this, it's scary and evil.