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Monday, September 26, 2016

 

Another financial crisis looms for U.S. taxpayers, a disaster likely to create even worse human misery than the mortgage fiasco that some of us warned about years before the Wall Street meltdown in 2008.

The crisis next time: collapsing investment incomes for older Americans as artificially reduced interest rates force them to use up their savings and drive more pension plans into failure.

Eviscerating the interest income of savers is the undeniable result of a long-running Federal Reserve policy to reduce interest rates, especially since December 2008. The Fed reiterated on Aug. 1 that it plans to keep interest rates low through late 2014. It says this helps to promote stronger economic growth and bring down the jobless rate.

As in the mortgage crisis, you can see this disaster building by examining the official data.

At the broadest level, 53 percent of taxpayers earned interest in 2000. But by 2010 just 39 percent did, my analysis of Internal Revenue Service data shows, while high-interest debt has become ubiquitous.

From 2000 to 2010 total interest earned by savers fell 53 percent in real terms, a decline of $134 billion. Average interest earned per taxpayer, measured in 2010 dollars, plummeted from $1,950 to $825.

A drop of $1,125 per taxpayer may not seem like much, especially since the average income reported on 2010 tax returns was more than $56,000. But look at who relies on interest to make ends meet and the problem comes into focus.

Americans overall received just 1.5 percent of their income from interest payments in 2010. But among those with tiny incomes – the 37 million taxpayers making less than $15,000 – interest accounted for 9.3 percent of their money.

More than three-fourths of these low-income Americans reported no interest income. This means that the minority who saved relied heavily on the interest their savings earned. IRS and other government data show that minority consists mostly of older Americans who saved during their working years, prudently spending less than they earned so they could avoid poverty in their golden years.

The low interest rates paid on savings and bonds are not the result of market forces, but official policy. As readers here know, I favor competitive markets to set most prices, including interest rates.

The Fed has been suppressing interest rates for more than a decade – a major factor in the housing bubble that began in the mid-1990s. The bubble was obvious in official data by 2002 as housing prices grew much faster than incomes, a trend that could not be sustained. But those of us who pointed this out were ignored. Alan Greenspan famously claims no one saw it coming, which is true if you suffer willful blindness.

  • This article is right on the money. Tens of thousands of seniors, aware of the fact that Social Security checks are not enough to cover our expenses when we retire, saved money throughout our professional lives to use the interest on our savings to supplement the SS income. The low interest rates that are being used to stimulate investment and job creation are forcing seniors to withdraw from their principal, which means that if the current conditions continue for a couple more years most of us will have nothing to fall back on. This issue, Ryan’s proposal to dismantle and defund MEDICARE, and the GOP insistence on privatizing Social Security make the future of American senior citizens bleak, to say the least.

    • 1standlastword

      And so how can future seniors rely on a “voucher” for health care???

      • If MEDICARE remains as it is today, seniors will not have to rely on vouchers for healthcare, and younger people who have healthcare coverage through their employers will not need them either. ACA addresses, mostly, two things: the need to provide healthcare coverage to 41 million fellow Americans, and the elimination of insurance company clauses worthy of devout fascists. Ancillary benefits include potential reductions in the cost of insurance premiums as a result of a large pool of insured persons, a decline in out of control medical costs as a result of people no longer needing free care in ERs and the benefits derived from having access to preventive medicine, and more control over the charges that service providers make.

        • onedonewong

          Barak is taking $300B from medicare so it will be a shadow of its former self

          • Theodora30

            That is actually more like $700 b but it comes mainly from cutting the taxpayer subsidies Bush and his Republican Congress gave to private, for profit insurers so that they could compete with the government for Medicare dollars with their program, Medicare Advantage. Those plans costs us more than $1,000 more per Medicare recipient than does traditional Medicare. To get people to sign up Advantage programs provided such things as gym memberships – hardly something we taxpayers should be paying for.

            Other savings come from cracking down on inefficiency, unproven or unnecessary procedures and fraud. Not one dime comes from benefits to seniors. In fact, the bizarre “donut hole” in their prescription drug plan has been eliminated, saving about $600 for the many seniors who spend enough on prescriptions to hit that hole.

            Why Democrats or the media have never made a serious attempt to eexplain this to voters is beyong understanding.

          • onedonewong

            It doesn’t touch the $400Billion that trial lawyers steal from the system every year. Trial lawyers take more from medical premiums in 1 year then all the Insurance companies CEO’s pay since their inception.
            Barak refuses to touch them because trial lawyers are the single largest contributors to Dem’s

      • onedonewong

        That’s all SS will be able to offer..a voucher to buy goods made in China

        • For once I agree with you, if the Republicans have their way and they privatize Social Security the only thing seniors will get is a worthless voucher that may allow them to buy some cheap chinese junk before they figure out a way to put themselves out of their misery.
          Regarding the amount President Obama proposed to take out of MEDICARE, it is actually $500B over 10 years, and FYI the GOP loved the idea and approved $490B. The money will come from reductions in healthcare providers are allowed to charge and by eliminating unnecessary or redundant tests. Part of those savings will be used to eliminate the doughnut hole, which costs some seniors as much as $2K a year and to reduce the MEDICARE fees seniors pay after they retire.
          MEDICARE will not be “a shadow of its former self” if the Ryan plan is implemented since that plan consists of dismantling MEDICARE for people under 55 years old, and by so doing eliminating the main source of funding to keep the program running for people over 55.

          • onedonewong

            Sorry if barak wins SS will be administered by the Chinese since they will be bankrolling the program. Thanks to Barak and his tax cuts SS is BROKE and is having to borrow Yuan to pay current recipients.
            Barak is eliminating Medicare Advantage programs this year but is trying to keep the wool pulled over Seniors eyes with a demonstration project that costs $8B and will end in Jan 2013.
            The Ryan plan eliminates illegals and those who have never contributed to medicare from being able to us it

          • SS is self sufficient and does not use any money from the general fund.

          • onedonewong

            Its borrowing $$$ hand over fist from China..for 1 reason and 1 reason only the “trust fund” holds nothing buy IOU’s

    • I agree Dominick Vila with you. What if when Bush wanted to privatize Social Security and then the Crash of the stock market back in 2008. We would have got wiped out of the money that should never be touched by the Greedy Politicians. We cannot allow the GOP to touch Social Security!!!

    • That Is So True Dominick And The Key Is To Take The Power Away From All These Money Hoarding Thugs!!!

      • onedonewong

        Thank you Hitler the same socialist party that Barak belongs to

    • onedonewong

      Barak needed all that money to create jobs….ooops I forgot there are fewer people working today than at any time during W’s 2nd term

  • highpckts

    Heck, I might as well have put my money under my mattress!!

  • ObozoMustGo

    Hellllloooooooooooooo!!!! Has anyone been listening? You think low interest rates are killing seniors, wait until you leftist freaks start to see the effects of ever growing inflation that comes from Obozo and Benny’s money printing adventures over the last 4 years. You aint seen nothin yet, but it’s coming. There is no way the US can pay off it’s debts unless they devalue the currency and monetize those debts. I know you leftist hammerheads don’t like history, but money printing never turns out well. As sure as water will wet you, as sure as fire will burn. The die has been cast by Bush and Obozo. Sorry to inform you of this.

    Have a nice day!

    “The problem is not that people are taxed too little, the problem is that government spends too much.” – Ronald Reagan

    • 1standlastword

      Partisan BS and who’ the BOZO here! This is so deeply ingrained in American democracy that I consider it purely a fact of life.

      Have you ever heard of Citizens United…duh!!!

      The poor and the working have ALWAYS had just enough food in the belly to face the next day working for the man.

      This happens because most American JOB (s) translate to “Just Over Broke”

      Sorry to deflate your circus tent BOZO!!

      • Tom_D44

        Wrong in many cases 1stand. My company hires construction workers and I personally have helped many of them off the streets and into good paying jobs. During the boom times in Florida many of them made more money than I did working in combination for me and for others. In
        EVERY case, as soon as they had money they were out jacking up their trucks, buying new wheels and tires, boats and whatever made them immediately happy with their newfound success. Their purchases got even bigger with new $60k deisel trucks when they didn’t even need them. And their attitudes changed as they quickly became very arrogant – cherry picking jobs and forgetting about the people who pulled them out of the streets.

        Then came the slow down. Trucks got reposessed, work got scarce, and they had to settle for less money then they were used to making. Many of them were unwilling to compromise on their pricing expecting people to keep paying their inflated wages and went broke as they turned down work – they had no survival skills whatsoever. None of them had saved any money for a rainy day much less retirement even though they had been making great money for many years. None of them had bought themselves health insurance. Hell none of them even got property insurance on their trailers to cover the tools that made them their money. So when the tools got stolen they were all back at my door looking for loans to buy tools. It’s sad when this happens but how do people learn anything if they don’t live through this kind of hell and acknowledge their own role in it? Personal responsibility and tough love are hard lessons to have to learn, but to continue to coddle these people makes them even worse at taking care of themselves.

        • metrognome3830

          According to your tale, Tom, you must have hired a bunch of losers! Not a single person smart enough to save any money. Sounds like you did a lousy job of screening your applicants. But then, I guess, in your world, this describes anyone who works for a living. Just totally dependent on you for your charity. I’m glad you chose not to add, because of your charitable nature, that they were all incompetent and lazy as well. That’s just how it is with working class people, Tom. Right?

          • Tom_D44

            Metro you are ignorant and your pointless attacks on me show it. You know nothing about me or what I do, but you do dislike me because I believe in values that you don’t endorse. It pisses you off that I am an example of a small business owner who actually helps people while running his company, because it does everything to squash your, and all your leftist friends’ images of the greedy businessmen who only care about themselves. There are lots of business owners out there like me – many many more of them then the bad ones, and I can see that you have a hard time accepting that through your own partisan view of the world.

            I do not provide charity for people, I provide a service to my clients and need workers to perform many of those services. Is that a bad thing? When I do find people who work hard, show up on time, and seem to care about the job being done, I make a special effort to keep those people. And sometimes when I find that person and want to keep them, they have issues like no car to get to work, or no tools which they need to perform the work, or even no home to live in. I have, in many instances, loaned these guys money to get that apartment, buy that car or get their tools out of the pawn shop. And, I have done that knowing that I could lose every dollar I give them if they dissappear on me. I put my trust in them. Do you have a problem with this? I thought you and all your left wing friends were always screaming about helping the poor, and when someone like me does it you attack me over it – or insinuate that I am making it up. See the difference is you think we should just give all that money to the government to help these people out and not do it ourselves – hows that working out for you.

            So, yes, I have helped many people I have come across over the years, and many of them didn’t need any help – just the work. I hire all kinds of guys from carpenters making $30/hr to minimum wage laborers to work on my jobs. As to my ability to select people of character, well you are just showing your ignorance again – a trend with you. See I have no problem finishing my projects and keeping very happy customers which means that the people I hired did a fine job at what they were hired to do. Where these people failed is in managing their own lives which is neither a reflection of me or my ability to pick people, but rather a reflection on those people and what they engage in on their own time. So if I get to know a guy who is doing a great job for us, and is down and out at the time; And if I decide that I have the ability to help this guy by loaning him the security deposit on an apartment so that he has a roof over his head, then I will do so. This is charitable my friend because no employer has the responsibility to provide these things to people. And if in a couple of months that guy ends up back on the streets because he goes back to the drugs or the alcohol, or because he can’t budget his money and pay his rent, then that’s on him. And when you see the trends with people, drying out, trying to clean up their lives and then going right back to the streets and willing to be flat broke, homeless, carless or jobless in order to maintain their lifestyle, then that person needs to wake up or take responsibility for where he ends up in life. You only get so many hand up’s in life – unless you are getting it from the government – then you get it all you want.

            This is not a tale my friend – this is the real world. It is not theoretical, it actually happens in my day to day activities. I do take these experiences with me and apply them to the many businesses out there like mine – and I do make the assumptions that the trends I see are similar the trends that other businesses like mine would see. And therein lies a major part of your poverty problem in the US. Do you have any real world experiences that you could share with me that would indicate I was wrong in my assumptions or do you just espouse your ideology and what you are taught from Maddow and Shultz on MSNBC? If I would hire my black laborer, and help him buy a car so that he can get to the jobs, am I really the racist that I have been called so many times on this forum – simply based on the side of the argument I take? Really? I really wonder who the bigots are in this country. And I really wonder who the intolerant ones in this country. I would hardly believe that this conservative is bigotted or intolerant and I can back it up with my actions not just a bunch of lip service like I see with many people. So I believe that people should be able to get help from the government and that the government should provide the safety net. But I do believe that people should be responsible when they take the help. I back Rick Scott when he says that people on welfare should have drug screenings as I have seen the negative effects of drugs on people and know that it keeps them in poverty. I also believe, through my own real world experiences, that continuous help creates people who continue to look for more help.

            I’ve said this before and I’ll say it again, the people on this forum are left leaning in their ideology and that is fine. I challenge you all with my thoughts and you challenge my ideas with your own. But more often then not, what I see around here are a bunch of really angry people who, rather than think about something said or debate seriously the issue, would just resort to thowing around barbs and attacking people who don’t think like them. And this, my friend is why I really feel sorry for you Metro.

          • metrognome3830

            Sorry, Tom, but that was my reaction to your post. That’s the drawback to short posts, no real discussion can take place. I don’t recall saying you were ignorant, however. A trait you have no trouble attributing to me. Nor did I say anything about hating you. As for life experience, Tom, I have been around a long time and have done a lot of things. I may have been around longer than you, I don’t know. I worked almost continuously from the day after my graduation from high school with a couple of short layoffs. I operated my own small business for a time. No, I never had to bail employees out, buy their tools or put up the deposit for their apartment, though I was willing to do that if I thought the employee was worth that to my business. My experience, Tom, is that the majority of people will do their best to do the right thing. There will always be those who disappoint. That can’t color your attitude about everybody. I would submit that if you are going to get belligerent and make claims about other people, the same thing will come back at you. You feel you can accuse me of living only a theoretical life and having no real life experience, or that I rely on Rachel Maddow or Ed Schultz for my education. For your information, I don’t listen to either of them or to any of the right wing pundits either. Do you get your ideas from Rush Limbaugh and Glenn Beck? I spent 38 years working in a trade that was a victim of the desktop computer. I didn’t complain when the last company I worked for went out of business, nor did my employer complain that it was my fault. I opened my own business and operated it, but within a couple of years, I could see that I was not going to make my fortune at that, so I shut it down. And found other jobs for my employees, instead of just saying sorry, good luck. And then I got a commercial driver’s license and drove school buses, and transit buses for a large metropolitan transit system and I supplemented my income by driving tour buses on my days off. Interstate and International trips. And won awards for my driving. I was a member of three unions during my working years, the International Typographical Union, Teamsters and Amalgamated Transit Union and I’m still a retiree member of the ITU and the ATU. I was married three times. Widowed once, divorced once and presently married and have been for the past 20 years. I raised five kids, I was a homeowner, Six of them during my lifetime. I have lived and worked in four states from the upper Midwest to the Pacific Northwest to the desert Southwest which is where I retired and where I went back to work for another 2.5 years driving a transport van moving hospital patients between facilities and to and from their homes, most of them on stretchers or in wheelchairs. In 100+ degree heat, I might add. Yes, sometimes I complained about lousy hours or working conditions, but I did the work I was hired to do and did it to the best of my ability. I punched in, went to work, and worked my full shift and quite often 2, 3, 4 or more hourse beyond. And, I also served on contract negotiating committees for the Typographical Union. And I knew a lot of people who did the same thing, Tom. So, if I get in your face when I start hearing about all the lazy workers and welfare cheaters that you allegedly deal with, why would you be surprised. And don’t ever call me ignorant to my face. I’m 74 years old, but I would still rather take a beating than let you talk to me like that.

  • My mother is in that situation now and I will be there in the next two years. We always knew that the government would take from those that worked hard and give to those who did not work, now they are taking from those who saved and giveing to those who did not save.

  • 1standlastword

    Why isn’t this aspect of government being addressed in the economic plans of the candidates?

    Well simply put…there’ no SIZZLE!!!!

    But really its too much to take on for either party. The camel is in the tent as our SCOTUS and politicians have allowed big business to gain too big of a foot print in the people’ democracy. As the author said this is a policy that works for the rich and the banks.

    This forecasts the sun setting on a once great empire

    And

    It’ so anti-Christian

  • timeforchange321

    Let me explain the ‘voucher’ program Ryan talks about as it has always been done in this country. A pool of money is allotted..by Congress…(better hope for a democratic Congress). Vouchers are created from this pool of money. You wait in line to get a voucher or sign up somewhere. When the money runs out there are no more vouchers given. Section 8 housing is the best example of the voucher system here in America. I cannot think of another voucher program that Romney/Ryan would be talking about. Anyway, to continue. Once you have a voucher..you have to find a business that will accept a voucher…and there are very few….. So, to make my point. Ryan wants seniors to hope there is a huge pile of money..they hope to get a voucher..hope they dont have to stand in line. and I hope there are enough vouchers to give to everyone who needs medicaid …. HOW DOES THAT SOUND TO YOU SENIORS?????

  • Too little, too late. I live in a community of about 1000 individual home for people over 55. Many of the people in here still work, but there is a very large sub-group that can no longer work or have not worked for decades. These are people that own their own home, saved for decades but got caught in the crash. A growing number have used up thier saving and are now living on SS alone. They are barely getting by. I hate to see what will happen to them if Medicare and Social Security is dismantled.

  • onedonewong

    Maybe we can follow Old Joe Biteeme’s plan, charging the Secret Service $20+K to rent this cottage so they can protect him

  • ELLISD25

    I DON’T HAVE ALOT OF SAVINGS – MAYBE A THOUSAND DOLLARS – I WAS ALWAYS ON THE LOW END OF THE PAY SCALE – THEN I USED UP MOST OF IT RIGHT BEFORE I WENT ON SOCIAL SECURITY – ANYWAY, ON A THOUSAND DOLLARS I GET A FEW PENNIES IN INTEREST EACH QUARTER – BUT THE INTEREST THEY CHARGE ME ON MY CREDIT CARD IS TWENTY-FOUR PERCENT PER ANNUM (24%) !!!! TO PARAPHRASE SHCKESPEAR, COME THE REVOLUTION, THE BANKERS WILL BE THE FIRST ONES WE’LL SEND TO THE WALL.

  • the gop, party of by and for the obcenenly rich , have been rewriting all the laws since the bush klan got away with killing the kennadys and putting nixon in the white house. if the people are stupid enough to continue voting for nazis, what happens is deserved.

  • cmc1026

    I love how people want to blame Wall Street for the meltdown we had. Let’s go over this.

    It was a Wall Street tactic of bundling mortgages that led to the meltdown correct?
    But why would bundling mortgages be bad?
    It wouldn’t be bad, unless, the mortgages themselves were bad. Loans made to people who couldn’t pay them back. You see if the loans were all viable, there would have been no meltdown.
    Why would banks make loans to people who wouldn’t pay them back? Banks don’t stay in business by loaning money that they aren’t going to get back.
    But if someone told the banks to lower there lending standards (forcing them really) and they will guarantee the loans, the banks can’t loose. But who would do such a thing? What you say, the Democrats? I know you didn’t say that, because you’re part of the problem.
    But if you had said the Democrats you would have been right. And yes, the same Democrats that say it was all wall streets fault. How convenient.