–No greater disappointment than from those you love

Twitter: @rodgermitchell; Search #monetarysovereignty
Facebook: Rodger Malcolm Mitchell

Mitchell’s laws:
●Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
●The more federal budgets are cut and taxes increased, the weaker an economy becomes. .
Liberals think the purpose of government is to protect the poor and powerless from the rich and powerful. Conservatives think the purpose of government is to protect the rich and powerful from the poor and powerless.
●Austerity is the government’s method for widening
the gap between rich and poor.
●Until the 99% understand the need for federal deficits, the upper 1% will rule.
To survive long term, a monetarily non-sovereign government must have a positive balance of payments.
●Everything in economics devolves to motive,
and the motive is the Gap.

There is no greater disappointment than from those you love.

I love MMT (Modern Monetary Theory). It is the only, absolutely factual, description of federal financing, i.e., Monetary Sovereignty.

So it is particularly painful to read articles in which MMTers depart from fact and begin to theorize, falsely. For example, their “Jobs Guarantee” (JG), formerly named “Employer of Last Resort (ELR),” demonstrates how otherwise clear-thinking people can go wrong.

The name change only hints at the confusion. (At first, the federal government was the ELR. When that idea proved flawed, they thought up a fix, in which private industry would be the ELR, and changed the name to JG.)

I’ve read many descriptions of JG, all different (Ask any 10 MMTers, “Exactly how does JG work?” and you’ll get eleven different answers.)

Perhaps it is the simplicity of the words “Jobs Guarantee” that MMTers find so enticing. Hey, “if people lack jobs, just give ’em jobs.”

But to be truthful, they should call it the “Low-Pay; Crappy-Jobs Guarantee,” for if you dig under the surface, you learn that by necessity, the jobs must be at or below the lowest legal pay, and almost surely will be the dregs of jobs.

MacDonald’s would be thrilled.

Then there is the ongoing MMT theory that federal taxes are necessary to give value to dollars. Once, I mentioned to Professor Randy Wray that not only was there no proof than any taxes were necessary for that purpose, but there already were plenty of local taxes. No federal taxes needed.

At the time he agreed. But since then I’ve not seen a correction to the “federal-taxes-are-necessary” theory. Perhaps I missed it.

And now the latest, painful disappointment comes from that solid MMTer, Yves Smith (actually Susan Webber), who authors the excellent blog, Naked Capitalism, where she published “Removing the Social Security Tax Cap Would Benefit Most Workers”.

Lord save the middle class folks from well-meaning, but economically ignorant, souls who wish to help them. Susan writes:

As Nicole Woo discusses in this Real News Network interview, one simple fix, that of eliminating the cap on who is subject to the tax, would solve most of the gap that is anticipated in long-term projections.

The Social Security tax, as now constituted, is regressive and thus promotes inequality, so lifting the cap also moves the tax system toward being more progressive.

That’s before we get to the MMT issue that “taxing” to fund any government activity is a political mechanism that is a holdover from the gold standard days, and not how government functions are funded operationally.

Eliminating the cap would “solve” virtually none of the gap (i.e. the gap between taxes collected and benefits paid), because the wealthiest of us collect very little in salaries. And for the same reason, lifting the cap would give only the illusion of progressivity.

And anyway, that gap does not need to be “solved.” Only problems need solutions, and that so-called gap is not a problem.

Susan even says it: “. . . taxing to fund any government activity is a political mechanism that is a holdover from the gold standard days, and not how government functions are funded operationally.”

She says it, then completely forgets is, because the rest of the article pretends that FICA funds Social Security.

. . . with more and more promised pensions being slashed, and investment returns flagging thanks to QE and ZIRP, the notion that ordinary people can save enough for their retirement is a chimera.

Thus preserving and strengthening Social Security is more important than ever.

Yes, QE and ZIRP have been an economic negative, but with the stock market up about 15% annually for the past 5 years (plus dividends), investment returns are far from “flagging.”

Her point, that Social Security needs to be strengthened is true, but raising taxes won’t strengthen Social Security one iota. That kind of belief has done nothing but punish the middle class.

The rest of the article contains Jessica Desvarieux of The Real News Network interviewing Nicole Woo, the director of domestic policy at the Center for Economic and Policy Research in Washington, D.C. “Her new paper is titled Who Would Pay More If the Social Security Payroll Tax Cap Were Raised or Scrapped?

DESVARIEUX: So, Nicole, who would actually pay more if this tax cap were raised or scrapped?

WOO: . . . the top 6 percent. So the people who are at the very top of the income scale are the only folks who would have to pay more if this payroll tax cap were raised or eliminated.

DESVARIEUX: And how high would that payroll tax cap have to be raised?

WOO: There are some proposals to eventually slowly phase the cap out entirely. And that would mean that the wealthiest people among us would pay the same rate as the rest of us, which seems kind of fair.

If Congress were to pass a bill like that, the Social Security shortfall that we’ve seen in the future would be reduced by about 70 to 80 percent.

A pants-on-fire lie. Even if Congress raised FICA to 100% of all salaries, the wealthiest among us never would pay the same rate as the rest of us — and Woo knows it. The highest income people have only a tiny fraction of their incomes in salaries.

Many of the upper 1% receive $0 in salary.

And there is no Social Security shortfall. Repeat, THERE IS NO SOCIAL SECURITY SHORTFALL. An honest and knowledgeable interviewer would have screamed “Bullsh*t Nicole. FICA does not pay for Social Security”

DESVARIEUX: But should we really be concerned about Social Security, since it’s solvent and currently has close to $3 trillion in its trust fund?

More bullsh*t. There is no trust fund and there is no money in that non-existent trust fund. It’s an accounting fiction, and the federal government controls the accounting.

WOO: Right now the Social Security trust fund does have a lot of money in it. And that’s because back in the ’80s Congress . . . decided to sort of pre-fund Social Security.

So since 1983, workers, American workers, have been putting more into Social Security than has been coming out. It’s their money that’s in the trust fund.

More bullsh*t. FICA dollars, like all federal taxes, disappear from the economy. When the government wishes to spend, it creates brand new dollars, ad hoc.

WOO: What has happened since the ’80s is actually inequality has increased. So more and more of the wages in this country are above the payroll tax cap–they’re above what’s right now $118,500.

That cap has been moving up with inflation every year. But as the income gaps have gotten wider, more and more of the wealthy’s income has been shielded, which is part of why the trust fund isn’t quite as big as we needed it to be.

Social Security will be fine until about 2033. After that point, Social Security will be able to pay about three quarters of the benefits promised, and nobody wants to see a cut of 25 percent. But that’s still significant money.

More scare-mongering bullsh*t. It means, “If you suckers don’t pay more FICA the federal government will run short of dollars to pay Social Security benefits.”

Do you believe the U.S. federal government, which creates from thin air, millions of dollars every day, somehow can run short of dollars? It’s part of the BIG LIE, funded by the upper .1%.

DESVARIEUX: So, Nicole, are you saying that if we were to do away with this cap, then we wouldn’t run into that issue?

WOO: Some of the bills out there that were in the last Congress would slowly eliminate the cap entirely, and that would take care of 70 to 80 percent of the shortfall. [I.e. the non-existent shortfall]

There are some other bills that raise the cap, like, from 118,000 to 250,000 or to 400,000, and that would mean people would pay the payroll tax, but not on all of their income for the wealthiest,.

And, of course, those bills would take care of less of the shortfall. As people talk about ways to shore up Social Security, this is one of the most effective ways to take care of it.

Even more bullsh*t. Raising taxes does nothing to “shore up” Social Security.

Unlike the state, county and city governments, which are monetarily non-sovereign, and do use tax dollars, the federal government neither needs nor uses tax dollars for any purpose whatsoever.

Even if all federal taxes fell to $0, the federal government could continue spending, forever. (See Step #1 in the Ten Steps to Prosperity.)

And, again, it’s about fairness. It’s about making sure that all workers pay the same rate in their Social Security taxes.

What’s really depressing is not that someone like Woo, who is paid to slather the bullsh*t wide and deep, earns her ill-gotten gains.

No, what’s depressing is that someone like Susan Webber, who knows and supports the facts, chooses to provide a forum for these harmful lies.

There is no greater disappointment. This truly is painful.

Rodger Malcolm Mitchell
Monetary Sovereignty

Ten Steps to Prosperity:
1. Eliminate FICA (Click here)
2. Federally funded Medicare — parts A, B & D plus long term nursing care — for everyone (Click here)
3. Provide an Economic Bonus to every man, woman and child in America, and/or every state a per capita Economic Bonus. (Click here) Or institute a reverse income tax.
4. Free education (including post-grad) for everyone. Click here
5. Salary for attending school (Click here)
6. Eliminate corporate taxes (Click here)
7. Increase the standard income tax deduction annually. (Refer to this.)
8. Tax the very rich (.1%) more, with higher, progressive tax rates on all forms of income. (Click here)
9. Federal ownership of all banks (Click here and here)

10. Increase federal spending on the myriad initiatives that benefit America’s 99% (Click here)

The Ten Steps will add dollars to the economy, stimulate the economy, and narrow the income/wealth/power Gap between the rich and the rest.

10 Steps to Economic Misery: (Click here:)
1. Maintain or increase the FICA tax..
2. Spread the myth Social Security, Medicare and the U.S. government are insolvent.
3. Cut federal employment in the military, post office, other federal agencies.
4. Broaden the income tax base so more lower income people will pay.
5. Cut financial assistance to the states.
6. Spread the myth federal taxes pay for federal spending.
7. Allow banks to trade for their own accounts; save them when their investments go sour.
8. Never prosecute any banker for criminal activity.
9. Nominate arch conservatives to the Supreme Court.
10. Reduce the federal deficit and debt

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.
1. A growing economy requires a growing supply of dollars (GDP=Federal Spending + Non-federal Spending + Net Exports)
2. All deficit spending grows the supply of dollars
3. The limit to federal deficit spending is an inflation that cannot be cured with interest rate control.
4. The limit to non-federal deficit spending is the ability to borrow.

Monetary Sovereignty

Monetary Sovereignty

Vertical gray bars mark recessions.

As the federal deficit growth lines drop, we approach recession, which will be cured only when the growth lines rise. Increasing federal deficit growth (aka “stimulus”) is necessary for long-term economic growth.


43 thoughts on “–No greater disappointment than from those you love

  1. For those who think Woo is telling the truth:

    Apple (AAPL) CEO Tim Cook earned $9.2 million last year.

    Aron Pinson dug deeper and crunched the real numbers. He found that Tim Cook actually made over $100 million in 2014 — more than $90 million of which came from his vested stock.

    A large portion of Cook’s earnings are from the nearly $400 million in stock awards he received when Apple hired him as CEO in 2011.


        1. So, if the income doesn’t qualify him for benefits, why should it qualify him to pay the taxes?

          I’m not suggesting that the taxes fund the benefits, just that the social contract is that you get the benefit if and only if you pay the tax.


          1. Yes, that’s the pseudo-contract. He pays FICA based on his COVERED salary (not income, nor total salary). Then, when he reaches retirement age, he receives benefits based on that same COVERED salary level.


  2. “the jobs must be at or below the lowest legal pay, and almost surely will be the dregs of jobs.”

    Which of the 11 descriptions was that in? All that I’ve seen have described $10 or more cash wages, plus health care and child care. Some mention $15, many call for a “living wage”. I’ve seen no suggestions of sub-minimum-wages.


    1. Think.

      If the government offered $15 plus health care and child care, to anyone who wanted a job, what company in America would be able to offer less?

      The government’s offer would become the defacto floor for wages and benefits.

      It’s telling that you have heard:
      “or more”
      “Plus health care”
      “And child care”
      “Some mention $15”
      “Living wage”

      That is the problem to which I referred. Trying to discuss JG with an MMTer is like eating Jello with chopsticks. It’s impossible to get hold of any solid proposal.

      Object to one proposal, and suddenly they propose something else.

      Remember, this all began as government provided jobs (“Employer of Last Resort”) and when that became obviously flawed, it morphed into “Jobs Guarantee.”

      The people who angrily defend it (It always is angrily defended — like religion) not only don’t agree with one another, but don’t supply specifics about what jobs, where the jobs will be, where they will come from, who will pay whom, salaries, the competition with private industry, and on and on.

      The whole thing is a big ball of smoke, based on the vague notion that everyone deserves a job. In the South, half the population had jobs. They were called “slaves.”

      The biggest problem in America is the Gap between the rich and the rest. Somehow, adding millions of low-paid jobs by some unknown method, is not the answer.

      The answer: The Ten Steps to Prosperity.

      See Wray’s actual words at: http://www.nakedcapitalism.com/2012/04/randy-wray-the-job-guarantee-and-real-world-experience.html

      “In a sense, the jobs guarantee/employer of the last resort program really is targeted “to the bottom” since it “hires off the bottom”, offering a job to those left behind. Its wage and benefit package is the lowest, setting the minimum standard that private employers can offer.

      It does not try to outbid the private sector for workers, but rather takes those who cannot find a job. Further, by decentralizing the program, it allows the local communities to create the projects and organize the program.

      The local community probably has a better idea of the community’s needs, both in terms of jobs and in terms of projects. However, actual project formulation must be done on a case-by-case basis.

      That’s the business plan????


      1. You are right, there are almost as many opinions about JG specifics as there are MMTers. But each one has specifics that address your issues, and I don’t think you will find a single person changing their proposal as they talk to you. A different person would have a different proposal. They may speak in generalities at first, and get more specific as you question them, but that is clarification not change.

        Nearly all say, as Wray does in your quote, that the JG compensation package would become the de facto wage floor. I don’t buy that, completely. It’s surely true enough for full-time breadwinners, but I think there are people who would take jobs at lower wages or fewer benefits if they offered different benefits that the worker found to be more desirable. (Not everyone needs health insurance and child care from their job, they may have no children and insurance from another source, like their spouse’s job.) Opportunity for advancement is the first that comes to mind. Also, people who are working for some reason other than that they need the money to support themselves and their families might do work that they find particularly rewarding in other ways, for less money. Travel agents used to work for peanuts because they loved travel and got free trips. That sort of thing could come back, under full employment conditions.

        In a good economy, business competes for labor. When everyone who wants a paying job has one (no slavery allowed in MMT), aggregate demand will be high and there will be more jobs with good pay. That’s the objective of JG. It’s not to give low-paid jobs to the 92 million working age Americans who aren’t working, it’s to employ maybe 4-5 million that the private sector doesn’t want at the moment, and the private sector lures the other 87 million back into the labor force, paying whatever it has to pay to attract enough workers to meet the demand for their products.

        MMTers say that everyone who wants a job should be able to have one, and that the reason they don’t is because government reduces aggregate demand too much, by taxing too much. Economists think there is a good reason not to reduce taxes until every last person is employed in the private sector, because shortages will crop up long before that last person is employed. Still, they should all be employed. (The UN even says it is a human right that everyone should have a job of their choice. Ridiculous on the face of it — there are at least a dozen people who want to be Chairman of IBM — but that is a flaw in their rhetoric, not the substance.) JG fulfills that obligation. I say that government, as sponsor of the monetary system, has the moral obligation to alleviate the ill effects of that system, unemployment being the primary one (you would say the Gap is primary, but I think we can agree on the top two). Marx said that capitalism requires a buffer stock of unemployed workers. JG turns that around, with a buffer stock of employed workers.

        There are many variations of details, some not so well thought through (IMO), but in the uniquely American way MMT says that the details can be worked at the local level, only the funding is required to be Federal. Like anything else, it will not be conceived in perfect form on day 1, it will evolve over time.

        And it doesn’t preclude any of your ten steps.


  3. “I’ve not seen a correction to the “federal-taxes-are-necessary” ”

    Professor Wray has said adamantly, repeatedly, and loudly, that taxes are a sufficient condition to drive the currency, not a necessary condition.


      1. In his own words,

        “If I said “taxes are a necessary and sufficient condition” then that means you must have taxes and nothing else will do. I don’t say that.

        If I said taxes are a necessary condition, then that means you must have taxes, but maybe that alone is not enough. I don’t say that.

        If I say taxes are a sufficient condition then that means if you have taxes you will drive a currency. However something else might drive it, too.”


        See also



        Those are the first three in Google. There are more. I got 4,450,000 hits on “Wray necessary sufficient”.

        BTW, as you can see in one of those links above, the simple “taxes are sufficient” is shorthand for any sort of obligation imposed by government that can be met only with the government’s fiat money: fees, fines, whatever … doesn’t have to be a “tax” as we think of it. And surely the tax doesn’t have to be imposed by a particular level of government. Local taxes payable only in Federal currency will drive the Federal currency.


        1. I agree.

          As I long have said, Taxes are not necessary to drive the acceptance of the dollar.

          I’m glad that’s settled.

          By the way, there’s an old joke that goes like this:

          Christ told a follower, “I am concerned that the people don’t understand my parables.” The follower replied, “Don’t talk in parables.”


  4. Wealthy corporate executives, especially those in the financial sector , are playing in their fantasy world of astronomically insane price to earnings ratios , supported and manipulated by cohorts , lawyers , and lobbyists making a mockery of what is euphemistically referred to as free market capitalism. Crony capitalism for our wonderful plutocracy is the sad current reality. One day soon it will morph into fascism. History does tend to repeat itself , and you can almost see it happening in slow motion. Revolving doors between government and big business ,accompanied by economically ignorant constituencies , probably guarantees it. . . Obama is happily leading the hit parade now, but this insanely unfair economic model has been getting steadily worst since Nixon broke our gold window. If thats not enough to make you question things , what is? Nixon unintentionally opened the door to a wonderfully fair and benevolent society. Sadly the wind keeps rushing by ,just ahead of a gorgeous day, while everyone vehemently begs to hurry up and close it.


  5. Several people I blog with are dubious about MMT. I actually think MMT is not a theory, like you, and calling it MMT is a disservice. I prefer Modern Monetary Mechanics, [the Reserve Bank of Chicago’s term]
    But now people are starting to interpret it as theory it’s causing problems, and you have correctly pointed it out. So thay will just make trouble in trying to get sense injected into the political debate on economics.


    1. The average “man-on’the-street” thinks of the word “theory” as describing something that might or might not be true. However, that word is “hypothesis.”

      In science, a “theory” is something that is considered true by the vast majority of scientists, as in the “Theory of Evolution,” or the “Theory of Relativity.”


  6. SOrry RMM that you dont think that everyone should be able to work full time if they want to.

    Sorry that you believe its good to have a buffer stock of unemployed people who cant find jobs.

    Sorry that you dont believe the Govt should guarantee full employment.

    Its really sad when intelligent people are against obviously good policies.


    1. I believe everyone who wants a full time, minimum wage, crap job should be able to get it.

      I don’t believe in the “buffer stock” concept. That’s an MMT idea.

      I do believe that implementation of the “10 Steps to Prosperity” would solve the real problem facing our nation — the widening income/wealth/power gap between the rich and the rest — a problem JG and its low wage, crap jobs wouldn’t even touch.

      I wholeheartedly agree with your final statement.


    2. Auburn, there are multiple ways to guarantee full employment. Why does MMT insist on roping us into just one way while ignoring all the other ways?

      Why does MMT insist on minimum wage? Why not prevailing wages, as recommended by the WPA’s final report? Who benefits from a pool of low-paid workers doing dead end jobs? Certainly not the workers!

      RMM advocates for full employment budgeting aka “functional finance,” similar to Abba Lerner and similar to former vice president Henry Wallace.

      I don’t agree with RMM on everything but some of his criticism of MMT, particular the JG, is legitimate.


      1. Dan, what are “all the other ways” to guarantee full employment?

        There are carpenters and computer programmers. If you try to achieve full employment just by goosing demand, as Rodger advocates, how do you make sure you won’t run out of programmers while there are still some carpenters unemployed? How do you employ that last unemployed person, with his particular skill set, when your stimulus is increasing demand for virtually all skills, and all but that one are already fully employed? No matter how much more you cut taxes, all you will do is drive up the wages for the skills in shortage, and not produce anything more that could employ the last person. Or the last 3 or 4 million, actually, when we run out of the most constrained skill set.

        JG employs those last few million without driving up wages for scarce skills. It isn’t a “dead end” job, it is a transition job, where people work while between jobs instead of being unemployed between jobs. That is a major benefit for the workers, as companies are much less willing to hire the unemployed than the employed. It also benefits their employers and their employers’ clients.

        As has already been discussed, nobody in MMT is suggesting minimum wage as we know it for JG. Many advocate a living wage, and all proposals include health care and other benefits that might be necessary in order for someone to work, like child care or transportation. Many also include things that make people more employable, like education, training, or job-hunting assistance. Like Rodger says, there are as many variations on JG proposals as there are MMTers.

        And Lerner’s Functional finance is part of the foundation of MMT. To paraphrase the AARP commercial, if you don’t know that, you don’t know MMT.


        1. You wrote: ” . . . nobody in MMT is suggesting minimum wage as we know it for JG.”

          You have just expressed one of my concerns about JG. It exists only as a wish and a promise, lacking consistent details. Trying to discuss the details of JG is like trying to pick up Jello with chopsticks.

          Everyone I talk with has a different JG.

          See Randy Wray’s actual words at:


          “In a sense, the jobs guarantee/employer of the last resort program really is targeted “to the bottom” since it “hires off the bottom”, offering a job to those left behind. Its wage and benefit package is the lowest, setting the minimum standard that private employers can offer.”

          A minutes worth of thought will tell you that is how it has to be. Whatever wage JG would set automatically would become the minimum wage.

          “Jobs Guarantee” presents such a beautiful image, like “eliminate poverty” and “pay doctors for results.” But no two people can agree on exactly how to do it.

          There is a whole flock of monstrous devils in the details.


          1. That’s why I said “as we know it”. Many say, as Randy does, that the JG wage would become the de facto minimum (nothing to do with the de jure Federal minimum wage law, or the various state minimums). That doesn’t mean it would be anywhere near the current Federal minimum wage of $7.25 an hour with no benefits. Health care alone would be worth more than the $14,500 annual full-time pre-tax cash minimum wage.

            We do a lot of things for which no two people agree on the details, not the least of which is the current minimum wage law, immigration policy, and virtually everything else you write about. That is not an argument for ignoring the idea.


          2. That is exactly what it is: An idea. Not a plan, not a program (There is no plan or program).

            It’s as though someone said, “Hey, I have a great idea. Let’s guarantee everyone a job. But don’t ask me any questions about who, how, what, where or which,” because everyone has different ideas.

            And even the idea itself is bad, as I discussed in comment 13., below.

            In the world of business, one begins with the problem, and then proposes a solution. The main problem in America is not unemployment, which currently is at 5.6%. The main problem in America is the Gap.

            Unfortunately, Randy Wray, Matt Forstater and Stephanie Kelton run the Center for Full Employment and Price Stability See the problem? They created an entire institute at the University of Missouri – Kansas City, dedicated to their solution for a non-existent problem.

            No way will they back away from it now.

            Maybe I should start the “Center For Narrowing the Gap.” What do you think?


  7. I have never been able to accept fully the hypothesis that taxes are the driving force for people to use the US dollar, not when the US dollar is the exclusive currency expended by the federal government. Our government and military paychecks, our Social Security income, our welfare entitlements, and our revenue from government contracts and sales in dollar-only form constitute a large enough chunk of the nation’s spending power, I would guess, to keep the dollar viable. Does it not seem plausible that the businesses and people from whom we buy things would always be eager to accept those dollars from us in order to gain our business? If not, I concur that state and local taxes should be just as effective for insuring dollar chasing as federal taxes. As for FICA, there should probably be no excuse for Susan Webber, but too many other people (hopefully not economists though) fail to even recognize FICA as a tax.


  8. Click to access Soc-Sec-Reform-Options_Monograph_03-03-2014.pdf

    Last year, the American Academy of Actuaries issued a well-written monograph on how to reform Social Security so it will remain solvent. However, the entire report is based on the concept that FICA funds Social Security — and that concept is considered a fact as certain as gravity. This is another example of how ingrained that concept is in the US — a concept demonstrated in this blog to be false.


    1. Thanks Ian,

      In each of these kinds of incidents, I always wonder, “Is it ignorance or intent?”

      In case it’s ignorance, I dropped them this note:

      Mr. Abrahms,

      Last year, you published “Social Security Reform Options,” a paper that, because it begins with a false premise, comes to false conclusions.

      Background: The U.S. government is Monetarily Sovereign. Unlike state and local governments, and unlike businesses, and unlike you and me, the U.S. government has the unlimited ability to create its own sovereign currency.

      The federal government pays its bills by sending instructions (not dollars) to each of its creditors’ banks, instructing those banks to increase the balances in the creditors’ checking accounts. At the moment the banks obey those instructions, dollars are created. That is how the federal government creates dollars.

      The federal government never can run short of instructions, and never can be unable to pay any debts denominated in dollars.

      That is true of the federal government as a whole, and of each department of the federal government.

      Your paper begins with the assumption that the federal government is like state and local governments in needing to ask people (taxpayers) to give it dollars, so it can pay its bills. But the federal government is not like state and local governments, and does not need to ask anyone for dollars.

      In fact, even if all federal tax collections fell to $0, the federal government could continue paying its bills, forever.

      Contrary to popular myth, FICA does not pay for Social Security benefits. Not long ago, FICA temporarily was reduced. Who paid the benefits? The federal government. Those payments did not come from the mythical “Social Security Trust Fund” (an accounting fiction). The federal government merely paid the benefits. It could continue to do so, forever.

      As actuaries, it is your duty to understand the facts behind your computations. When you publish a paper, the premise of which is that Social Security is like private insurance and paid for by the insured, you have added to a long-standing deception.

      I urge you to learn about Monetary Sovereignty, so you can correct the false conclusions of your paper.

      Thank you,

      Rodger Malcolm Mitchell

      It’s a drop of water, but enough drops of water can burst a dam.


      1. Rodger,

        It will be interesting to see if the Academy responds. Perhaps it would give a response like this:

        “Our conclusions are based on Social Security being a closed system between FICA, income earned in the trust fund, expenses, and benefits. Under current law, a deficit in the SS program cannot be unconditionally funded by the Federal Government. If the law were to be repealed, there would be no need for SS to be an actuarially sound program.”


  9. I think I have figured out the meaning of life.

    One third of the US gets up early in the morning, as early as 4:00 AM, they walk in the rain, snow, a packed smelly train, a bus, or drive up to 2 hours to get to work early. They then work for up to 16 hours. Take the same trip back home to do the same the next day.

    They do this day in and out. On weekends, they are fixing things around the house, driving their families to placed, going to church, and on and on… they really don’t have time to analyze how political/economic policies impact them, the ones that carry the entire economy. I would venture to say that these folks make up the majority of voters, but are persuaded by the other interestd.

    Then we have the others, retirees, children, housewifes, the unemployed, those in poverty, etc..and those who game the system.

    It’s a given that the gamers are scammers, but there is more than just scsmmers. There are the wealthy, military interest, unions, federal and local government bureaucracies, etc…

    All these interest groups have a thing in common….they have it easy because the one third of the population allows them to rip them off. It’s no wonder that all roads lead to the same result, more theft of the workers. Notice the excuses, we need security, it’s for the children, etc…

    Unions want higher wages – which comes at the expense of other workers.

    The rich want more social programs – they prefer having a guaranteed income and more demand. Hmm mm something like foodstamps, the money is guarantee and the client base multiplies. Same with car insurance, etc… they are all scams..

    The military complex wants their guarantee too, more wars which effectively creates demand for their products.

    Federal and local workers want their full pensions, free medical care…

    And then there are the workers… those whose wages have gone down for the past 40 years.. those who are “fortunate” to have been thrown into the mice wheel. Those who have little choice but to keep hacking at the wheel nonstop.

    The meaning of life? We are a bunch of self absorbed a**holes. We go around talking as if we cared when we really don’t give a rat’so but about anyone. We’re a bunch of vultures hoping that the workers work even harder so that they can get a larger piece. Not that the workers are any better, it’s just that they don’t have time to figure out what’s going on. In fact, they are brain washed to think that what’s good for the rich (social programs) is good for them, to the point that an overwhelming majority of workers supports it.

    It appears to me that the human kind doesn’t ascend in a straight line, it’s more like a see saw. We have major developments that thrusts us to the next level, only to see it decimated by vultures for decades, until nothing is left. The vultures do such a great job that the workers eventually figure it out and kick the others where they should be kicked and sending them to handle on their own.

    I am willing to bet that we are near a major see saw bottom. Get ready to work your a**es off vultures. But don’t worry, while the ascend is awesome for workers, it’s usually fast – the destruction however, it’s like a slow motion train wreck…


  10. Rodger, I don’t agree with you on every single point but I agree with your general sentiment.

    I support some government job creation — for example, there is a real need for a CCC to help maintain our public lands — but it’s a giant leap from saying government can create a few legitimate entry level jobs, to saying that government should create an entry level job for every unemployed person no matter what the person’s skill level.

    CCC style jobs have their place, but I can’t envision cramming every unemployed person into a CCC. Nor can I envision the CCC putting a man on the moon, or even building a major bridge (they did build small bridges). The one-size-fits-all JG concept is ivory tower-ism run amok.

    Re: getting rid of federal taxes and relying on state & local taxes instead. That’s a political issue but my politics lean toward doing the opposite — getting rid of regressive state & local taxes and relying instead on Federal taxes and Federal grants and Federal revenue sharing for the states. In fact, why not get rid of state governments all together? When is the last time a red state did anything right?

    Re: lifting the FICA cap. Like you, if I were king I would eliminate FICA and “pay for” SS with keystrokes. But …. I’m not king. If I were in Congress and had to vote on lifting the FICA cap vs. cutting benefits, then I would vote to lift the cap. That may have been what Yves was trying to say.


    1. Dan, the jobs don’t need to be “created”, they are out there waiting for people to fill them. Go to your local food bank, or Habitat for Humanity, they will employ you today. Of course, they won’t pay you. The reason the jobs go begging is for lack of money, not for lack of work to do. JG would supply the money.

      CCC-type jobs, building bridges and such, should be done or not according to public purpose. If we need a bridge, government need only allocate the funds, and private construction companies will bid for the work. No need for more government agencies to build bridges, we do it all the time already. That is not JG, that is business as usual.


  11. JG is based on the false premise that unemployment is our problem. I never have understood why “full employment” is a worthwhile goal.

    When, in a discussion with Randy Wray, I objected to the term “full” employment,he explained that it wasn’t really “full” (which would be inflationary), but rather an unemployment rate of about 5%.

    Well, the latest unemployment rate (December, 2014) was 5.6% We almost are at “full employment,” and what good is it?

    There was a time when the South had “full” employment. Unfortunately, many of the employed were slaves. (Sort of an enhanced JG.)

    The notion that the nation needs to have everyone (almost) working, is outmoded.

    How does JG help the working poor? What about the guy who needs to work three jobs to support his family? How does it provide health care? Good housing? Education? Business?

    Our problem is not unemployment. Our problem is the Gap. The goal should be a reduction in the GINI ratio along with overall economic growth.

    The “Ten Steps to Prosperity” would accomplish that. None of the 1,001 variations on JG will.

    JG is a vague concept aimed at the wrong target.


    1. If the bottom is raised from 0 to almost where the middle is now, wouldn’t that close the gap? JG does not preclude any of your programs.

      Randy is well aware than mainstream economists call 5% “full” employment, and that may be as close as we can get with programs like yours, without causing inflation. When MMT says full employment, it means everyone who wants a job can get one. Not 95%, but 100%. The UN says it is a human right. The only way to do that is with a JG-type program.

      You say you want economic growth. Growth comes from more people working.

      JG includes health care. (After all, these are Progressives pushing MMT, not Tea/Republicans. They think Obamacare didn’t go far enough. They want single payer, not just Medicare for all.)

      Housing, education, business are provided as they are now, or by your programs.

      We are all better off with more of us working. Not just the workers, but the consumers, too. And even the 1%. Can’t help that.


      1. A full belly is a human right. Health is a human right. Education is a human right. Life, liberty and the pursuit of happiness are human rights.

        Work is not a human right.

        But I do love your latest idea: “If the bottom is raised from 0 to almost where the middle is now, wouldn’t that close the gap?” That’s a wonderful idea, and I won’t even ask you for details.


  12. “More bullsh*t. There is no trust fund and there is no money in that non-existent trust fund. It’s an accounting fiction, and the federal government controls the accounting.”

    Roger your position is based on an unfettered monetarily sovereign gov. But congress has passed tax laws. There is a ss trust fund they have a website. The ss tax money is invested.


  13. To stimulate the economy, Congress and the President reduced payments into that fictional trust fund, but miraculously, Social Security benefit payments continued as always.

    Where did these payments come from?

    Later, to satisfy the rich, payments into the fictional trust fund were increased.

    So tell me: How many dollars currently are in that “trust fund” — and do you “trust” it?


      1. Your source is the Social Security Administration, which tells you, “All securities held by the trust funds are ‘special issues’ of the United States Treasury.”

        Now think about this very carefully. Social Security (which is an agency of the federal government) has a so-called trust fund, which invests all its funds with the United States Treasury (which also is an agency of the federal government).

        You also learn this: “The cash exchanged for the securities goes into the general fund of the Treasury and is indistinguishable from other cash in the general fund.

        Finally, you learn, “Without legislation to restore long-range solvency of the trust funds, redemption of long-term securities prior to maturity would be necessary . . . the investments held by the trust funds are backed by the full faith and credit of the U. S. Government. .”

        Put them all together and you learn that, like all federal agencies, Social Security is back by the full faith and credit of the government. It cannot go bankrupt.

        But wait, if like all federal agencies, it cannot go bankrupt, what is this talk about “solvency.” Something that never, never, never can go bankrupt, never, never, never can be insolvent.

        In short, the trust fund is like the shell game, where the pea is slipped under a shell and the shells are all mixed around, and the pea is wherever the operator wants it to be.

        Bottom line, the “trust fund” is an accounting fiction, whose sole purpose is merely to “provide an accounting mechanism for tracking all income to and disbursements from the trust funds.

        It’s just a tracking device and not really a fund at all.


  14. Right and i understand your position but the other MMT’ers are trying to work with the laws that exist. You think everybody’s lying 🙂 I doubt that’s the case.

    I think as you have stated that the MMT idea is so radical that it’s going to take time for people to accept it and trust that society won’t fall apart. The inflation card cannot be thrown out as it would be the only constraint on spending.
    The we can’t afford it card would be gone 🙂


    1. ” . . . MMT’ers are trying to work with the laws that exist.”
      Not true. That’s why, for instance, they JG, which would require new laws. And MMT, like MS, suggests changing the laws to eliminate FICA.

      No one is “throwing out the inflation card.” As I repeatedly have written, the only limitation on federal deficit spending is an inflation that cannot be cured by interest rate increases.

      So far, we never have had such an inflation.


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