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●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.
“Megan McArdle is a Bloomberg View columnist who writes on economics, business and public policy.”
This says very little about Megan McArdle and even less about Bloomberg.
It’s sad, frustrating and angering that an organization like Bloomberg can have Megan McArdle as their economics writer. Here is her latest Bloomberg exercise in ignorance.
The Left Gets It Wrong About Social Security
APR 7, 2015, By Megan McArdle
Americans are underprepared for retirement. And given this sad fact, there’s a growing movement on the left saying we need a government solution, stat: specifically, an expansion of Social Security benefits.
Instead of reluctantly agreeing to a compromise where Republicans let some taxes rise and Democrats agree to entitlement cuts, (progressives are) demanding bigger tax hikes to fund bigger entitlements.
Get it? Americans don’t have enough money to retire in dignity, so Megan’s compromise “solution” is to increase FICA and reduce Social Security benefits. Huh?
Does it get any sillier than that? How in the name of common sense, will a FICA increase and a Social Security benefit decrease help Americans save more and have more for retirement?
(I should mention that since FICA does not fund Social Security benefits, the Democrats “solution” would be silly too, but at least it involves raising benefits.)
At the core of their argument is a good point: Americans really do need more money for retirement. Missing, however, is a realistic discussion of where that money might come from.
The (Social Security trust fund) trustees’ report predicts that by 2023, the gap between taxes collected and benefits paid will be almost $170 billion. The only reason that the system isn’t in the red already is the net interest the government is paying itself on the bonds in the trust fund.
Now, this should make any rational person stop and think: “Hmmm . . The government pays itself interest, and that interest has kept Social Security out of the red.
“Hmmm . . . again. If the government can do that, why can’t the government simply pay for Social Security and keep the whole program solvent?”
But, of course, that requires a rational person’s thinking.
If we want to pay Social Security beneficiaries more money than we are collecting in payroll taxes, the money has to come from somewhere, and ultimately, that “somewhere” is the United States taxpayer.
And there is where Megan McArdle, demonstrates her abject ignorance about federal financing. She simply refuses to understand or admit the fundamental differences between a Monetarily Sovereign government and a monetarily non-sovereign entity.
The former creates its sovereign currency, in this case dollars, ad hoc, simply by the very act of paying bills. The federal government, being Monetarily Sovereign, neither uses nor needs FICA. It does not need income because it creates dollars.
The latter is like you and me (and the states, counties and cities), which have no sovereign currency and do indeed rely on income or tax dollars to pay their bills.
State and local taxpayers do pay for state and local spending. Federal taxpayers do not pay for federal spending. It’s that simple.
How can an economics writer for a significant publication not understand the difference? How can the publishers of that significant publication not know the difference?
Beyond belief. And in fact, I don’t believe it. I do believe they know exactly what they are doing: Widening the Gap between the rich and the rest..
Then Megan goes on and on about where to get the tax dollars to pay increased Social Security benefits, and that it certainly should not come from rich people (like her employers)
She continually and conveniently ignores the fact that TAX DOLLARS DO NOT PAY FOR FEDERAL SPENDING. TAX DOLLARS DO NOT PAY FOR SOCIAL SECURITY BENEFITS.
And just when you thought Bloomberg couldn’t be more misleading, we come to the the following article:
Elizabeth Warren Is Delusional About Social Security
11 APR 8, 2015 By Ramesh Ponnuru, a Bloomberg View columnist, (and) a senior editor for National Review, where he covers national politics.
Social Security has a long-term funding gap that just keeps growing. Neither political party has a plan to pay for the promises we’ve already made to people contributing to the system. But Democrats are bringing a new idea to the table: make even more promises.
Liberals are exulting that (Massachusetts’s Elizabeth) Warren has shifted the politics of Social Security to the left: Where once we were debating cutbacks to the program, now we’re debating benefit increases.
Too bad that also means the debate is shifting further away from fiscal reality.
Yes, too bad indeed, for the fiscal reality is that the U.S. federal government has the unlimited ability to pay any debt denominated in its own sovereign currency, the dollar.
Sadly, Ponnuru either is intentionally or unintentionally ignorant about that basic fact in economics.
To them it is horrible that we’re not talking about cutting Social Security benefits, but rather we’re talking about (gasp) increasing benefits to our elderly. How awful!
Social Security is becoming a worse deal for each generation. Those now joining the workforce are expected to pay more into the system than they get out of it.
Of course, the U.S. federal government never needs to ask anyone for its own sovereign currency, so those above-mentioned expectations are on the part of those who don’t understand federal financing.
Warren’s plan is to shower more money on the current generation of retirees, but without increasing the deficit over the next 10 years.
If her real plan is not to increase the deficit, one must ask, “Why?” The midleadingly termed deficit” is, in actuality, a surplus to the economy. Because the economy, as a whole, is monetarily non-sovereign, and the federal government is Monetarily Sovereign, the economy needs continual inputs of money (aka “deficit spending”) from the federal government.
It may be that Sen. Warren, realizing that the public neither understands, nor would believe, the facts of Monetary Sovereignty, has decided not to tilt windmills, but just go along with popular myth — so long as she can accomplish the Social Security benefits.
Sad, but possibly true.
Social Security has always been a combination of forced savings and redistribution.
Wrong. FICA is not savings, and Social Security benefits are not redistribution. FICA is taking and SS benefits are giving. There is no connection between the two.
FICA could be collected without providing benefits (as with a person who dies too young), and benefits could be paid without FICA.
And now comes the pitch for the rich:
People joining the workforce now should be promised a flat universal retirement benefit set at a level that keeps all seniors out of poverty.
At the same time, they should be auto-enrolled in retirement savings accounts that would include an option to invest in index funds, with the mix of investments shifting from stocks to bonds as workers approached retirement.
And there you have it: The stock and commodity brokers’ and bankers’ college tuition and retirement fund.
All those delicious dollars just waiting to be handed over to your greedy banker or broker, so he can invest for you (with commissions, of course).
This has been the mantra of the rich for years, now. Bush II tried it, but things got a bit dicey when the stock market went south. And now, here we are again, with the same old story:
Just give us rich your retirement money, and after we deduct our fees and commissions, we’ll give some of your money back to you. Maybe.
(My relative of mine tried that with the Illinois college savings plan. When the recession came, she lost half her money.)
Megan, Ramesh and Bloomberg, oh my! Keep your hand on your wallet at all times.
By the way, if you sense that all this makes me angry, you’re right. I’m angry that the multi-billionaire owner of Bloomberg hires sycophants like McArdle, Ponnuru et al to brainwash the populace into supporting programs that will do nothing but widen the Gap between the rich and the rest.
My god, man, don’t you have enough money? Can’t you, at long last, help narrow that Gap?
Is greed all you have?
Rodger Malcolm Mitchell
The 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. Federally funded, 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)
Initiating The Ten Steps sequentially 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.
THE RECESSION CLOCK
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.