–Letter to President Obama with one big question about Social Security and Medicare. Can you answer it?

Mitchell’s laws: Reduced money growth never stimulates economic growth. To survive long term, a monetarily non-sovereign government must have a positive balance of payments. Austerity breeds austerity and leads to civil disorder. Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.

Here is my (dumb?) question about Social Security and Medicare:

The “experts” tell us: More and more people will receive benefits from Social Security and Medicare. Current FICA payments are inadequate to cover these increased benefits. So, either FICA must be increased and/or benefits must be decreased. Otherwise, Social Security and Medicare will go bankrupt.

In short, Social Security and Medicare are self-funding entities. They even lend money to the government. They are separate from the rest of the U.S. government finances, which is why they can go bankrupt.

But . . .

Mr. President, you and Congress tell us the federal deficit is too high, and the federal government must “live within its means,” and one way to accomplish this is to cut Social Security and Medicare benefits.

Now wait a minute. You can’t have it both ways. If Social Security and Medicare finances are separate from the U.S. government, and these agencies could go bankrupt separately from the U.S. government, that means the federal government isn’t supporting them.

So my dumb question is: If the government isn’t supporting Social Security and Medicare, how can cuts in benefits help the government live within its means? And if the government is supporting them, how can they go bankrupt?

I look at it this way: My working adult child receives no financial aid from me. Her job doesn’t pay enough, so she either must cut her expenses or go bankrupt. How does her cutting her expenses help me live within my means?

It’s all so terribly confusing, Mr. President. Can you clarify this for me, before I award myself a dunce cap?

Rodger Malcolm Mitchell

No nation can tax itself into prosperity, nor grow without money growth. Monetary Sovereignty: Cutting federal deficits to grow the economy is like applying leeches to cure anemia. The key equation in economics: Federal Deficits – Net Imports = Net Private Savings


8 thoughts on “–Letter to President Obama with one big question about Social Security and Medicare. Can you answer it?

  1. Even within the conventional economic wisdom, it’s flat out a false dilemma fallacy to think the only options are to cut welfare or increase Fica. They could cut military spending for a start, or just decide to fund welfare out of general revenue rather than having some silly separate levy. Or of course, they could do what you and Warren etc, keep suggesting, and scrap fica all together, then keep fully funding it anyway – because they can.

    We have something similar in Australia for healthcare. There is a separate Medicare levy in our income tax used to “fund” Medicare, and the need to increase this levy is held out as a reason not to increase funding for our universal healthcare system. We are in a much better situation than the USA in this respect, but the same flat-earth economist types have been white-anting it for the last 15 years or so, meaning it isn’t as good a system as it could be.


  2. There was an article linked on Real Clear Politics not too long ago asking if Obama was “really all that smart.” So much had been made of his intellectual ability and, after a string of political bruising from the GOP, the author was asking if he really was “all that” with regards to political skill.

    I can tell you that when Obama is saying that we need to cut Medicare and Social Security to keep from going bankrupt, he’s basically reciting GOP talking points. Used to, Democrats retort to the whole “cut these benefits or go bankrupt” argument was to give the other option you stated: These programs are “self funding and apart from the federal finances.”

    I’d say that Obama is 1) getting bad advice (obviously with regards to economics) and 2) too much of an idealist. This term has been a learning experience for him with regards to realism in politics.

    Going back to your previous article I commented on, getting things done in politics is basically a marketing/messaging war, and the Frank Luntz’s of the world are winning. That’s my two cents anyway….


  3. i’ve been watching the republican debates and in the one that took place in detroit on 11/9/11, as per usual, they got on the subject of SS and newt gingrich had something interesting to say (for a change) that i had never heard before.

    he said that it was during lyndon johnson’s term (i think he said “in ’68”) that SS was switched to the “general budget.” he said that that was a mistake and that it should be switched back off-budget. i understood that statement of his to mean that switching it back to where it was before would end this whole bogus debate over whether SS is “sustainable” or not.

    unfortunately (and expectedly), nobody on the stage nor on the panel commented on it and it just went out thru the ether…


      1. yes, of course, i understand that, but the point that gingrich was making was that moving SS back “off-budget” would “save” it by ending the bogus debate.


  4. Kim,

    The bogus debate has to do with the mistaken belief FICA pays for Social Security and Medicare. So, because FICA collections will be less than SS & Medicare benefits in the future, Congress and the President wish to reduce benefits (They already have started, by delaying SS benefits).

    I wish Newt simply would say, “FICA has absolutely nothing whatsoever to do with Social Security and Medicare viability. FICA could be eliminated tomorrow, and SS & Medicare would be just as healthy as ever.”

    One of my suggestions is Medicare for everyone, while eliminating FICA (See: “Ten Reasons to Eliminate FICA”

    Rodger Malcolm Mitchell


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