I mailed the following letter on October 18, 2016:
Robert Love
Editor in Chief
AARP The Magazine
601 E St. NW
Washington, DC 20049
Dear Mr. Love:
It is only proper that you and your magazine call for not just the survival, but the strengthening of Social Security, a call you have made many times over the years.
Ironically, in making that call you strengthen the myth that has been the cause of attacks on Social Security benefits and the increases in qualifying ages.
In your editorial titled, “Let’s Strengthen Social Security” (August/September edition), you say among other things:
“. . . preserve Social Security, not only for those of us who have paid into the system for decades but also for our kids and grandkids.
“ . . . fiscal and demographic challenges are bearing down on the program. Every day, 10,000 Americans turn 65, a surge that will continue for years.
“Unless something is done, Social Security benefits could be automatically reduced in less than two decades.
“That’s why AARP launched a Take a Stand – a national campaign to press the presidential candidates to tell voters how they’ll keep Social Security strong and solvent.
“ . . .If our nation’s leaders don’t act, future retirees could lose nearly 25 percent of their benefits. . . the sooner the problem is fixed, the less drastic the fix will have to be.”
I emphasized the words “strong and solvent,” because they symbolize the myth that FICA funds Social Security.
The United States government is Monetarily Sovereign. It is sovereign over the U.S. dollar. The U.S. federal government never can run short of its own sovereign currency, the dollar.
The federal government creates dollars by paying bills. Every time SS pays a benefit, it sends instructions to the benefit recipient’s bank, instructing the bank to increase the balance in the recipient’s checking account. When the bank does as instructed, new dollars are created.
This has nothing to do with FICA or any other tax. Even if FICA collections were $0, and the U.S. population tripled, the federal government could continue paying SS benefits forever.
State and local governments, and you, and I are monetarily NON-sovereign. We all can run short of dollars. We can become insolvent. But, the U.S. government cannot become insolvent.
No only is the U.S. government 100% immune from insolvency, but all federal agencies are similarly immune.
There is no FICA for the White House, no FICA for Congress, no FICA for the Supreme court – all federal agencies – yet they cannot become insolvent. No federal agency can become insolvent unless Congress and the President will it.
Social Security and Medicare are federal agencies. They cannot run short of dollars unless the politicians want to reduce benefits.
And now you can see the real purpose of FICA. The real purpose is not to fund Social Security (and Medicare). The real purpose of FICA is to limit Social Security and Medicare.
The real purpose is to make Americans believe SS and Medicare are, or soon will be, short of dollars, so benefits must be reduced.
The real purpose is to widen the income/wealth/power gap between the rich and the rest.
Take just 15 minutes to read more on this subject at: “Monetary Sovereignty: The key to understanding economics” and at “I just thought you should know. Lunch really can be free”
I urge you, beg you, to please read those two short papers, familiarize yourself with Monetary Sovereignty, and tell your members the facts about Social Security: FICA can be reduced; benefits can be increased;
Only then will you be able to fulfill the generally understood purpose of AARP.
Sincerely,
Rodger Malcolm Mitchell
P.S. If you would like some “Washington-based” affirmation of what I have told you, contact Professor Stephanie Kelton. She not only is the Chair of the Economics Department at UMKC, but she is the Chief Economist for the Democratic Minority Staff of the Senate Budget Committee.
===================================================================================
The single most important problems in economics involve the excessive income/wealth/power Gaps between the rich and the rest.
Wide Gaps negatively affect poverty, health and longevity, education, housing, law and crime, war, leadership, ownership, bigotry, supply and demand, taxation, GDP, international relations, scientific advancement, the environment, human motivation and well-being, and virtually every other issue in economics.
Implementation of The Ten Steps To Prosperity can narrow the Gaps:
Ten Steps To Prosperity:
1. ELIMINATE FICA (Ten Reasons to Eliminate FICA )
Although the article lists 10 reasons to eliminate FICA, there are two fundamental reasons:
*FICA is the most regressive tax in American history, widening the Gap by punishing the low and middle-income groups, while leaving the rich untouched, and
*The federal government, being Monetarily Sovereign, neither needs nor uses FICA to support Social Security and Medicare.
2. FEDERALLY FUNDED MEDICARE — PARTS A, B & D, PLUS LONG TERM CARE — FOR EVERYONE (H.R. 676, Medicare for All )
This article addresses the questions:
*Does the economy benefit when the rich afford better health care than the rest of Americans?
*Aside from improved health care, what are the other economic effects of “Medicare for everyone?”
*How much would it cost taxpayers?
*Who opposes it?”
3. PROVIDE AN ANNUAL ECONOMIC BONUS TO EVERY MAN, WOMAN AND CHILD IN AMERICA, AND/OR EVERY STATE, A PER CAPITA ECONOMIC BONUS (The JG (Jobs Guarantee) vs the GI (Guaranteed Income) vs the EB) Or institute a reverse income tax.
This article is the fifth in a series about direct financial assistance to Americans:
Why Modern Monetary Theory’s Employer of Last Resort is a bad idea. Sunday, Jan 1 2012
MMT’s Job Guarantee (JG) — “Another crazy, rightwing, Austrian nutjob?” Thursday, Jan 12 2012
Why Modern Monetary Theory’s Jobs Guarantee is like the EU’s euro: A beloved solution to the wrong problem. Tuesday, May 29 2012
“You can’t fire me. I’m on JG” Saturday, Jun 2 2012
Economic growth should include the “bottom” 99.9%, not just the .1%, the only question being, how best to accomplish that. Modern Monetary Theory (MMT) favors giving everyone a job. Monetary Sovereignty (MS) favors giving everyone money. The five articles describe the pros and cons of each approach.
4. FREE EDUCATION (INCLUDING POST-GRAD) FOR EVERYONEFive reasons why we should eliminate school loans
Monetarily non-sovereign State and local governments, despite their limited finances, support grades K-12. That level of education may have been sufficient for a largely agrarian economy, but not for our currently more technical economy that demands greater numbers of highly educated workers.
Because state and local funding is so limited, grades K-12 receive short shrift, especially those schools whose populations come from the lowest economic groups. And college is too costly for most families.
An educated populace benefits a nation, and benefiting the nation is the purpose of the federal government, which has the unlimited ability to pay for K-16 and beyond.
5. SALARY FOR ATTENDING SCHOOL
Even were schooling to be completely free, many young people cannot attend, because they and their families cannot afford to support non-workers. In a foundering boat, everyone needs to bail, and no one can take time off for study.
If a young person’s “job” is to learn and be productive, he/she should be paid to do that job, especially since that job is one of America’s most important.
6. ELIMINATE CORPORATE TAXES
Corporations themselves exist only as legalities. They don’t pay taxes or pay for anything else. They are dollar-transferring machines. They transfer dollars from customers to employees, suppliers, shareholders and the government (the later having no use for those dollars).
Any tax on corporations reduces the amount going to employees, suppliers and shareholders, which diminishes the economy. Ultimately, all corporate taxes come around and reappear as deductions from your personal income.
7. INCREASE THE STANDARD INCOME TAX DEDUCTION, ANNUALLY. (Refer to this.) Federal taxes punish taxpayers and harm the economy. The federal government has no need for those punishing and harmful tax dollars. There are several ways to reduce taxes, and we should evaluate and choose the most progressive approaches.
Cutting FICA and corporate taxes would be a good early step, as both dramatically affect the 99%. Annual increases in the standard income tax deduction, and a reverse income tax also would provide benefits from the bottom up. Both would narrow the Gap.
8. TAX THE VERY RICH (THE “.1%) MORE, WITH HIGHER PROGRESSIVE TAX RATES ON ALL FORMS OF INCOME. (TROPHIC CASCADE)
There was a time when I argued against increasing anyone’s federal taxes. After all, the federal government has no need for tax dollars, and all taxes reduce Gross Domestic Product, thereby negatively affecting the entire economy, including the 99.9%.
But I have come to realize that narrowing the Gap requires trimming the top. It simply would not be possible to provide the 99.9% with enough benefits to narrow the Gap in any meaningful way. Bill Gates reportedly owns $70 billion. To get to that level, he must have been earning $10 billion a year. Pick any acceptable Gap (1000 to 1?), and the lowest paid American would have to receive $10 million a year. Unreasonable.
9. FEDERAL OWNERSHIP OF ALL BANKS (Click The end of private banking and How should America decide “who-gets-money”?)
Banks have created all the dollars that exist. Even dollars created at the direction of the federal government, actually come into being when banks increase the numbers in checking accounts. This gives the banks enormous financial power, and as we all know, power corrupts — especially when multiplied by a profit motive.
Although the federal government also is powerful and corrupted, it does not suffer from a profit motive, the world’s most corrupting influence.
10. INCREASE FEDERAL SPENDING ON THE MYRIAD INITIATIVES THAT BENEFIT AMERICA’S 99.9% (Federal agencies)Browse the agencies. See how many agencies benefit the lower- and middle-income/wealth/ power groups, by adding dollars to the economy and/or by actions more beneficial to the 99.9% than to the .1%.
Save this reference as your primer to current economics. Sadly, much of the material is not being taught in American schools, which is all the more reason for you to use it.
The Ten Steps will grow the economy, and narrow the income/wealth/power Gap between the rich and you.
MONETARY SOVEREIGNTY
#Monetary Sovereignty - Mitchell 
Go get ’em, Roger! Keep up the good work.
LikeLike
Question: Does AARP give a fig about SS and Medicare, or is it really just an insurance brokerage?
LikeLike
In 1958 Leonard Davis (founder of the Colonial Penn Group insurance companies) and Ethel Andrus (a retired educator from California) created AARP as a marketing gimmick for Colonial Penn insurance.
Over time, AARP branched out to include many additional companies. It is a lobby for the private insurance giants that masquerades as an advocacy group for seniors.
AARP favors cuts in Social Security, and opposes single payer insurance, since this will boost the profits of the insurance giants. The CEO of AARP, Addison Rand, collects $1.7 million per year in salary and benefits.
The TV show “60 Minutes” exposed all this in 1978, but AARP’s 38 million members never caught on.
LikeLike
They will refuse to understand Rodger. As you well know the prevailing mindset is impervious to new facts. But fingers crossed!
PS, I believe now that “Government Debt” money is actually “spent”. It is used in intragovernmental accounts, to balance the books etc. However it’s also true that the deposits are not spent, because they are not money, just numbers. If in some accounts the deposit numbers go down then the numbers can be adjusted up whenever necessary. at maturity for example. So there’s no consequences and any shortfall is easily corrected. Something like that. They make it unnecessarily complicated!
LikeLike
Balancing the books is necessary. Congress determines how much each agency can spend. To determine those limits, each agency keeps books.
The rules of accounting dictate that there has to be a source for dollars spent. Following those rules gives the illusion that federal finance is like personal finance, in which you need income to fund your outgo..
LikeLike
Smoke and mirrors, wouldn’t you agree?
LikeLike
In understanding “government debt,” let us first understand the difference between regular money and reserves.
Regular money can be spent, saved, invested, or otherwise exchanged in routine transactions.
Reserves are money, but reserves cannot be spent until they are first converted to regular money.
When you buy a T-security, your purchase money is credited to a Fed savings account. Your purchase money now becomes reserves (hence the “Federal Reserve Bank”). It is money, but it cannot be spent. For example, you cannot use a T-security to buy groceries. When your T-security matures, the reserve money is credited back to your checking account (plus interest) thereby becoming regular (spendable) money again.
The other way to convert your reserve money to regular money is to sell your T-security to someone else at a discount. The money you are paid is regular money, but now someone else owns the reserve money.
Therefore the $20 trillion so-called “national debt” is actually $20 trillion in federal bank reserves.
The purpose of reserves is to back-up for the regular money system. $20 trillion in bank reserves also steadies the financial system.
Reserves and regular money are strictly mental concepts. They have no physical existence. (Neither does the number “one.”) Therefore dollars are infinite.
The mass refusal to understand this is one reason why we have severe inequality. Most people think of dollars as physical and limited.
LikeLike
That’s what we are saying. If it’s in the Government’s clutches the publicly owned Treasuries etc are not money. Nothing in the Government is money. But do they get “spent” i,e, shifted to other accounts? Whatever the answer it doesn’t matter because the missing “money” -numbers – can be written back into the Reserves when ever needed.
It’s very difficult to explain all this in a watertight way!
Marshall McCluhan put it well saying “only the small secrets need to be protected. The big ones are protected by public incredulity”
LikeLike
>>“If it’s in the Government’s clutches the publicly owned Treasuries etc. are not money.”
The Fed has money, in the form of reserves. At least 40% of the federal reserves are created by U.S. government agencies, since they buy at least 40% of available T-securities.
>>“Nothing in the government is money.”
Technically the U.S. government “has money” in that it has authority over special bank accounts. However in a deeper sense the U.S. government has no money. Instead, the U.S. government CREATES money by crediting bank accounts. As Rodger puts it, dollars only exist outside the federal government.
>>“It’s very difficult to explain all this in a watertight way!”
Once people believe in the emperor’s new clothes, it is not possible to awaken them, no matter how watertight your exposition. People can only awaken themselves. Your mission is to provide them with facts that they will continually reject until the day that everything you have told them suddenly falls in place for them.
For example, it is common for people to say, “I would agree with what you say, Rodger, if the U.S. government had monetary sovereignty, but the fact is, all money is created by banks as loans. Therefore the Fed has MS, not the U.S. government.”
At that point, if they smugly switch off, they will never awaken and realize their error.
However, if they continue to think about these matters every day, they will eventually realize that they were wrong, and Rodger was right.
LikeLike
When we say money it can be confusing. RMM says the government “has and does not have money” Money in the Fed is non government money. It’s investor deposits. So the Fed has lots of money on its books but none of it belongs to the Fed.
IMO, Banks don’t create money so much as credit. This credit can then become government accepted money, when it’s spent, as the Constitution only allows the government this privilege. There are no laws or statutes that say banks can create money. It’s just happened.
LikeLike
“IMO, Banks don’t create money so much as credit.”
[1] All money is both credit and debt.
[2] For every debt there is a credit, and vice-versa.
[3] Some debts and credits are connected with loans. Some are not. If you have a dollar, then you have a dollar’s worth of the full faith and credit of the USA. Who is in debt to you? Everyone who agrees that your dollar is worth a dollar.
[4] A credit is a claim to ownership of something, whereas a debt is an acknowledgement of such a claim to ownership. If a bank creates a $100k mortgage for you, then the bank has a claim to $100k from you, to be paid back with interest. If you agree to this, then you are in debt to the bank. In a different scenario, if a parking valet gives you a ticket to reclaim your car, then the ticket is a credit. It is your claim to ownership of the car. The parking valet is in debt to you for one car, and must surrender your car when you present the ticket.
LikeLike
You missed my point. How to reconcile bank created money with federal created money.
LikeLike
I don’t know what you mean by “reconcile?” Dollars are created by lending, or by federal spending. These are two different things.
Personally I don’t believe that any banks should be privately owned. Same with utilities, police departments, fire departments, and militaries.
LikeLike
Post that comment on a Youtube video and all hell will reign on you, believe me, I know.
LikeLike
The intentionally ignorant get angry when confronted with fact. That is why they stay ignorant.
LikeLike
They wont refuse to believe.
They will read this letter and think “this person is either insane or a charlatan, anyone with second grade math knowd that money creation of any form is the same as a tax. The moron who wrote this garbage wants no taxes yet he wants more taxes. This man needs to be in an assylum.”
LikeLike
OFF TOPIC
In November, Colorado will vote on Amendment 69, a citizen-initiated measure that would establish a statewide program (“ColoradoCare”) to provide universal healthcare coverage for all residents.
Bernie Sanders is now in Colorado to campaign for it.
Even if by some miracle the measure passes, it will fail. It will bankrupt Colorado. It will force austerity in many state departments, and it will cause much political intrigue.
And when it inevitably fails, the right-wingers will say, “See? Single payer doesn’t work!”
And indeed it cannot work at the state level. It’s not possible. Vermont tried to get a single payer system going, but failed. It wasn’t fiscally viable.
The only way a single payer system can work is if it is run by a monetarily sovereign entity such as the U.S. federal government.
Every failed experiment like Colorado’s moves us farther away from this truth.
LikeLike
You are correct.
Conceivably it could work if a state had a great deal of income, for instance from oil or tourism.
But, you are absolutely right that this plan is doomed.
Makes me wonder whether it is being pushed by groups that want an example of failure. Are any of the health insurance companies behind this?
LikeLike
“Makes me wonder whether it is being pushed by groups that want an example of failure. Are any of the health insurance companies behind this?” ~ RMM
I suspect that health insurance companies are behind it, and that they pay people to falsely claim that the insurance companies oppose it.
Local newspapers like the Denver Post favor the measure, since they know it will fail regardless of the vote outcome.
Colorado Governor John Hickenlooper opposes the measure, saying it will cost too much. His stance is causing friction with his fellow Democrats.
The bickering and intrigues have already begun, based on the question, “How will you pay for it?”
The measure would be paid for by new taxes on employees and employers. (People could keep private insurance, but they would still have to pay the taxes.)
Some progressive groups in Colorado favor the measure. Other progressives oppose it, saying it will bankrupt other social programs.
As they angrily shout at each other, the private insurance industry enjoys the show, knowing they will win no matter what happens.
Then the insurance companies and their puppet politicians will say, “Colorado proved that single payer doesn’t work!”
And the masses will believe it, even at the federal level.
As a result, their insurance premiums will continue to skyrocket, while their coverage continues to be reduced.
“The penalty for ignorance is slavery.” ~ RMM
LikeLike
Jesus, not even all the damn weed is bringing enough income?
LikeLike
OFF TOPIC
Here’s an item that is chock full of errors.
It’s by Linda J. Bilmes of Harvard University.
Ms. Bilmes is a former Assistant Secretary of Commerce, and co-author (with Joseph Stiglitz) of “The Three Trillion Dollar War: The True Cost of the Iraq Conflict.”
She says the U.S. war in Afghanistan has cost $5 trillion, all of which has been borrowed from the purchasers of T-securities, “leaving our children to pick up the tab.”
WRONG.
That $5 trillion was not borrowed from anyone. It was created out of thin air when the U.S. government credited it to the bank accounts of whoever received the money.
The author then claims that the U.S. government paid for earlier wars by raising taxes and selling bonds.
WRONG AGAIN.
The U.S. government creates its spending money out of thin air. During the world wars, everyone had a job, and was flush with cash, but consumer goods were scarce. This created the threat of price inflation. The U.S. government controlled inflation by selling bonds, in order to temporarily remove money from the economy.
In order to get people to buy bonds, the government lied, saying the bonds were necessary to “fund the war effort.” This lie still persists today.
The author then says that federal taxes should be increased to “pay for the wars,” so that people would be more sensitive to the wars.
WRONG AGAIN.
Federal taxes do not pay for federal operations, including war.
I hate imperialistic war as much as anybody, but falsehoods like these are not helpful.
SOURCE: The Boston Globe
https://www.bostonglobe.com/opinion/2016/10/17/the-trillion-wars/uPVfSuDutnTZl5fIQ7YllK/story.html
LikeLike
“with Joseph Stiglitz” That says it all.
LikeLike
Ms Linda J. Bilmes—is out in Left Field—tell her to move over Center Field
Until 1935, FRB from time to time purchased short-term securities directly from the U.S. Treasury to
Facilitate Treasury cash management operations. The authority to undertake such purchases provided a safety net
That ensured Treasury could meet its obligations even in the event of an unforeseen depletion of its cash balances.
Congress prohibited direct purchases in 1935, but subsequently provided a limited wartime exemption in 1942.The
Exemption was allowed to expire in 1981.
The first sentence of Section 14 of the Federal Reserve Act,signed December 23,1913 provided that “any Federal
Reserve bank may,under the rules and regulations prescribed by the Federal Reserve Board,purchase and sell in the open market….cable transfers and bankers acceptances and bills of exchange of the kinds and maturities by this Act made eligible for rediscount…..Subsection (b) further provided that every Reserve Bank was authorized “to buy and
Sell, at home or abroad,bonds and notes of the United States.
The First use of the direct purchase authority cam in March 1917,the country being on the verge of war (President Wilson signed a declaration of war on April 6) Reserve Banks bought $50 million of certificates of indebtedness directly from the Treasury.
The 1935 Prohibition of the Banking Act August 23,1935, added a significant proviso to the Federal Reserve Act:
Federal Reserve Banks could only purchase bonds,notes or other obligations only in the open market.-It explicitly prohibited direct purchases of Treasury securities by the Federal Reserve Banks.
Relaxing the Prohibition in 1942 the U.S was at War with Germany as well as Japan.Congress raised the debt ceiling from
$65 billion to $125 billion.The initial proposal relaxing the prohibition was simply to delete the words “but only in the open market” in the Banking Act of August 23,1935.—This proviso expire in 1981
LikeLike
“The federal government creates dollars by paying bills. Every time SS pays a benefit, it sends instructions to the benefit recipient’s bank, instructing the bank to increase the balance in the recipient’s checking account. When the bank does as instructed, new dollars are created.”
1. Are there possible circumstances/scenarios when the bank would/could actually refuse to obey the instruction?
2. Following double-entry accounting rules, what particular account gets debited in this process?
Thanks.
LikeLike
1. Can’t think of one.
2. Liabilities. All deposits are owed to depositors, by the bank.
LikeLike
As a non-banker, I’m not sure I have a clear picture yet of #2.
If the beneficiary’s account increased by corresponding amount per instruction from SS, surely the bank must ask where will the money be drawn from.
Is there a standing account maintained by SS in every major banks from which funds are transferred to its beneficiary’s account?
Will the bank’s reserves at the Fed also increase following the transaction?
LikeLike
Zen,
You’re making this way too hard for yourself.
The bank handles the SS deposit exactly the same way it handles all deposits. It simply credits the depositor’s account and debits “Liabilities.”
Then the information is sent to the central bank for clearing.
Banks do not care where individual deposits are “drawn from.” It is the central bank, in the clearing process, that determines “where the money will be drawn from.”
Reserves are the bank’s deposits with the central bank. Customer deposits can be part of that, though much of reserves comes from the central bank.
LikeLike
I think I’m lost on the semantics of banking.
As a noun…
Debit is an entry recording an amount owed, listed on the left-hand side or column of an account.
As a verb…
Debit means remove (an amount of money) from a customer’s account, typically as payment for services or goods.
So when you said…“The bank simply credits the depositor’s account and debits “Liabilities”, I was wondering whose “liabilities” get debited? The bank’s?
Couldn’t possibly be, because you also said that every deposit is a bank liability and it that transaction the bank’s liability increased, not decreased.
Apologies for my confusion.
LikeLike
Deposits are on the Liability side of a bank’s balance sheet. Use any terminology that makes you comfortable in saying that Deposits are added to Liabilities.
LikeLike
“Banks do not care where individual deposits are “drawn from.” It is the central bank, in the clearing process, that determines “where the money will be drawn from.”
So where, exactly, will the central bank draw the money in its clearing process? The SS must have an account somewhere, right? Does it have an account at the central bank itself or at one of our private commercial banks?
LikeLike
Zen, all good questions.
Federal bookkeeping is an excessively complex system, that attempts to apply normal accounting systems to several, non-traditional factors, among which are:
1. The federal government is Monetarily Sovereign. It has the unlimited power to create dollars from thin air, simply by crediting accounts.
2. The federal government, prior to August 15, 1971, was less Monetarily Sovereign. (Yes, MS exists in degrees). It still created dollars from thin air, but was required to own a certain, arbitrary weight of gold as collateral for the dollars it created.
3. The federal government, despite being MS, still is required to live within a number of self-created rules about indebtedness to its own (i.e. “owned”) bank.
4. These rules require what misleadingly is known as “borrowing,” but more correctly is accepting deposits in T-security accounts at the above-mentioned bank.
So, although your questions are good ones, in that they are reasonable, they are economically meaningless.
The central bank, a financial proxy for the federal government, cannot run short of dollars. Ample evidence of that came when the bank added Quantitative Easing to its normal open market operations.
The fed spent more than $4 trillion (that’s “trillion” with a “T”) on federal securities, which had been issued by the Treasury.
So think about this: The FRB, an agency of the U.S. government created the dollars from thin air, to purchase from the U.S. Treasury, another agency of the U.S. government, debt that itself was created from thin air.
Get it? The government as a whole creates dollars from thin air, then circulates these dollars among its agencies in a way that appears similar to profits and losses by seemingly independent organizations.
But when all the smoke clears, the dollars simply have been created by agencies of the federal government.
The right hand creates and sends dollars to the left hand, and the left hand creates and sends dollars to the right hand, all of which satisfies the obsolete laws that both hands had created when circumstances were different. So, as I said, it’s meaningless to ask which hand did what
There is a simplified write-up here
(Ignore the comments at the end of the article.)
LikeLike
I like Perry’s description of Fed spending as a “Magic Check Book”.
Interesting to see how big are Fed profits. Yet putting them into Treasury sees them lost to the economy, apart from being recorded. Treasury only issues instructions. Am I reading this right?
LikeLike
Yes, the federal interest payments that would have gone to the private sector, instead went to the government. That is why QE, instead of being a stimulus, was a drag on the economy.
See: https://mythfighter.com/2013/02/24/how-the-feds-quantitative-easing-was-designed-to-trick-you-into-accepting-economic-suicide/
LikeLike
Rodger,
The reason I’m asking those questions is that I was recently involved in a discussion with a colleague regarding SS solvency. He kept on insisting that there’s a Social Security Fund collected from its members whereby payments to its beneficiaries are being drawn from and that it’s about to run out sometime in the very near future.
Just to check, I visited the Social Security website and searched for its financial statement and this what I found (so far) :
Click to access Fiscal%20Year%202015%20Summary%20of%20Performance%20and%20Financial%20Information%20Report.pdf
End of Fiscal Year 2015:
Total Assets – $2.856 trillion
Total Liabilities – $112.4 billion
Net Position – $2.744 trillion
LikeLike
Zen,
Yes, there is a “Social Security Trust Fund.” It is an accounting fiction.
Visualize you want to play a game of Monopoly, but when you open the box, you discover the board, the cards, and the tokens, but no paper money.
So to play the game, you create a balance sheet for each player and the bank, showing how many dollars each player and the bank has.
Where do the dollars come from? You create them out of thin air, simply by writing numbers in the balance sheets.
Then as the game proceeds, you use your pencil to add and subtract dollars from these balance sheets.
Suddenly, in the middle of the game, the bank’s balance sheet shows zero dollars.
But you want to keep playing. What will you do?
Simple: You will take out your pencil and add dollars to the bank’s balance sheet. You don’t let the bank run out of dollars.
Now, apply the same principal to a Monetarily Sovereign government, which is not constrained in its ability to create its own sovereign currency.
If any agency of the federal governments, runs short of U.S. dollars, the government simply gets out its “pencil,” and increases the total in the agency’s balance sheet;
The so-called “Social Security Trust Fund” is an accounting fiction, just as were the Monopoly players’ balance sheets. It’s just a way of keeping score.
The federal government cannot run short of dollars, nor can any agency of the federal government run short of dollars — unless Congress wills it.
That is why the White House (a federal agency) cannot run short of dollars. Nor can Congress (also a federal agency). Nor can the Supreme Court.
These agencies don’t even have a FICA to support them, yet have you ever heard any concerns about Congress or the White House going bankrupt?
No?
So where do the White house, Congress, and the Supreme Court get their money? The federal government merely creates it out of thin air, just as you did when you wrote numbers in the Monopoly bank’s balance sheet.
Ask your colleague if he understands the differences between state and local (monetarily non-sovereign) financing vs. federal (Monetarily Sovereign) financing. I’m sure he doesn’t.
State and local governments can run short of dollars. The U.S. federal government cannot.
FICA taxes do not fund Social Security. Even if all FICA collections fell to $0, the federal government could continue paying benefits, forever.
The federal government simply cannot run short of its own sovereign currency.
Yes, our elected officials and the Social Security Administration claim there is a “Trust Fund,” and that the mythical “Trust Fund” will run short of dollars, but that is part of the Big Lie, the lie that federal taxes support federal spending.
The politicians and media want you to believe that FICA pays for Social Security benefits, but in fact, the sole effect of FICA is to provide an excuse for limiting Social Security benefits.
The federal government is run by the rich, The rich want to widen the income/wealth/power Gap between the rich and the rest.
One way to do that is to increase FICA (our most regressive tax). and to decrease Social Security benefits.
Let your colleague read this, and afterward, I will be glad to answer his questions.
LikeLike