Why do you believe what you believe?

The U.S. federal government (unlike you and me, and unlike state and local governments), is Monetarily Sovereign.  As such, it has the unlimited ability to create its own sovereign currency, the U.S. dollar.

It created the very first dollar 240 years ago, by creating laws from thin air, and since then these laws have created many billions of dollars, also from thin air. 

The federal government never, unintentionally, can run short of dollars.

For the same reason, no agency of the U.S. government can run short of dollars, unless Congress and the President want that to happen. Social Security is an agency of the U.S. government.

Congress has no “insolvency issues.” Even if all federal tax collections fell to $0, the federal government could continue spending unlimited amounts, forever.

So, even if the FICA tax were $0, the federal government could fund Social Security and Medicare, too, for every man, woman, and child in America — forever.

The article continues:

The problems with this entitlement aren’t unique. Obamacare is also a mess, while cumulative government spending on Medicare and Medicaid is growing at a faster rate than Social Security is, and eventually will consume a larger share of the economy.

Obamacare indeed is “a mess,” but not because it is short of money. It is a mess because it is based on the lie that it is limited by federal tax collections.

Obamacare (and Medicare and Medicaid and all other similar programs) should be replaced by a federally funded Medicare for every man, woman, and child in America.

Federal spending for Obamacare, Medicare, Medicaid, and any other program does not “consume” a share of the economy. Federal spending adds growth dollars to the economy.

Gross Domestic Product = Federal Spending + Non-federal Spending + Net Exports

The more the government spends, the more dollars become available to you, me, and the rest of the economy.

But that’s no reason to ignore the serious fiscal issues with America’s main retirement program. Since 2010, it has been running a cash-flow deficit—meaning that the Social Security payroll taxes the government collects aren’t enough to cover the benefits it’s obliged to pay out.

To get by, the program started tapping into the assets set aside beginning in the 1980s for rainy days.

Prior to 2010, the program collected more in payroll taxes than was needed to pay the benefits due at the time. The leftovers were “invested” into Treasury bonds through the so-called Old Age Trust Fund, which is now being drawn down.

Ms. de Rugy, seems not to understand the differences between a Monetarily Sovereign entity (the U.S. government) and a monetarily non-sovereign entity (you, me, businesses, cities, counties, states, euro nations.)

Payroll taxes do not “cover” benefits. Payroll taxes aren’t used for benefits. When your federal tax dollars reach the Treasury, they cease to be part of any money supply measure (M1, M2, M3, L, etc.)

In other words, your tax dollars are destroyed upon receipt.

To pay its financial obligations, the federal government creates brand new dollars, ad hoc. It sends instructions (not dollars) to each creditor’s bank, telling the bank to increase the creditors checking account numbers.

When the bank does as it is instructed, new dollars are added to the nation’s money supply. That is the method by which the federal government creates dollars.

In fact, the Treasury bonds are nothing but IOUs.

When you so-called “lend” to the federal government, you take dollars from your checking account and deposit them into your Treasury bond (or Treasury bill or Treasury note) account, which is quite similar to an interest-paying bank savings account.

There, your dollars remain, until the bond matures. Meanwhile, the dollars never are removed from your account to pay bills or for any other purpose. 

Upon maturity, the Treasury pays you back by transferring the dollars that still exist in your Treasury bond account back to your checking account. No new dollars required.

When it’s time to disburse benefits they can’t afford, Social Security administrators turn in those paper promises in exchange for hard cash from the Treasury Department.

Very few Treasury bonds are represented by paper, and there is no such thing, in all the world, as “hard cash.” A dollar bill is not cash.

A dollar is a balance sheet number, having no physical existence. A dollar bill is a title to a dollar, but in of itself is not a dollar, just as a car title is not a car and a house title is not a house.

The federal government can “afford” any payment, no matter how large.

But Treasury also doesn’t have the money: It has already spent it on wars, roads, education, domestic spying, and much more.

So when Social Security shows up with its IOUs, Treasury has to borrow to pay the bonds back. That adds to the debt that future generations will be on the hook for via higher taxes.

The federal government cannot run short of dollars, so the phrase “already spent it . . . ” makes no sense, whatsoever.

Further, the government has no need to borrow, and indeed, does not borrow. It simply accepts deposits, the purpose of which are not to fund government spending. (They help control inflation, provide a basis for safe worldwide investment, and secure the dollar’s position as a world reserve currency.)

 Past generations of workers paid extra payroll taxes to bulk up the Social Security system.

But the government spent that additional revenue on non-retirement activities, so now your children and grandchildren will also have to pay more in taxes to reimburse the program.

Totally false. Payroll taxes do not “bulk up” anything. They are destroyed upon receipt. The federal government never can run short of its own sovereign currency. That is what “sovereign” means. The federal government has infinite “bulk.”

The federal government does not spend tax dollars. It creates brand new dollars, ad hoc, every time it spends. So your children and grandchildren will not “reimburse” the program.

You may be tempted to wave away this problem. After all, there’s more than $2.3 trillion left in the trust fund.

The so-called “trust fund” is a fiction. Of what meaning is a “trust fund” for an entity that has the unlimited ability to create its sovereign currency? Answer: None.

The Social Security trustees have calculated that the cash-flow deficit over the next 80 years will amount to a staggering $44.2 trillion, and that’s after adjusting for inflation.

Under current projections, the make-believe assets in the fund will only be enough to pay full benefits until 2034.At that point, the system will have to revert to paying out only the amount taken in through annual taxes.

And that means benefit cuts across the board of 25 percent.

The federal government’s “deficit” is the economy’s income. The $44.2 trillion projected deficit (if correct) simply means $44.2 trillion in stimulus dollars added to the economy.

That is the way the economy grows. It’s a good thing, not a bad thing.

It will be especially hard on lower-income Americans, who are more likely to depend entirely on the program during their later years.

Yes, it will be hard on lower-income (and middle-income) Americans, and that is exactly what upper-income Americans, the rich who run America, want.

The goal of the rich is to become richer. This requires widening the Gap between the rich and the rest. Without the Gap, no one would be rich (We all would be the same.) And the wider the Gap, the richer they are.

To widen the Gap, the rich need to gain more for themselves and/or to take from the rest. Either will do.

That is the reason the rich employ people like Ms. de Rugy to spread the Big Lie, that the federal government needs tax dollars to pay its bills, and so can’t afford to support social programs.

Options for reform at that point will be limited. With the national debt projected to be 105 percent of GDP, or $39.1 trillion, in 2034—and with Medicare and Medicaid facing even bigger long-term problems—Congress will be too broke to restore full benefits for all.

The ratio of federal “debt” (i.e. deposits in T-security accounts) to Gross Domestic Product is meaningless. Contrary to popular myth, the ratio is supposed to indicate the “affordability” of debt. Utter nonsense.

The so-called “debt” is not paid off with Gross Domestic Product. Japan’s ratio is about 250%. Haiti’s is about 15%. Which economy would you prefer?

The most likely scenario is that higher-income earners will see their benefits disproportionately reduced, their taxes disproportionately hiked, or both. To them I have but one piece of advice: Start saving now.

No, the most likely scenario is that the Gap between the rich and the rest will widen, particularly with a conservative government.

Given this predicament, Congress should make it easier for all Americans to save. One way to do that is through the creation of Universal Savings Accounts, or vehicles that allow people to invest money without all the complicated rules that now apply to IRAs and 401(k)s.

In addition, Congress should boost the maximum contributions people can make to Health Savings Accounts, so that more Americans can afford the medical expenses most of us inevitably incur in our old age.

More broadly, Congress should shift away from Social Security into a “funded” system based on real savings, much as Australia and others have done. The libertarian economist Daniel J. Mitchell notes that, starting in the ’80s and ’90s, that country has required workers to put 9.5 percent of their income into a personal retirement account.

As a safety net—but not as a default—Australians with limited savings are guaranteed a basic pension.

Reason Magazine is Libertarian. Libertarians, who are kissing cousins to anarchists, have little credibility when discussing government spending. To libertarians, any government spending seems to be too much.

Congress should not ask people to pay for their health care, their retirement, their children’s education, etc., thus reducing what people have, today.

The federal government should do it, via the Ten Steps to Prosperity (below).

Summary: The title question, “Why do you believe what you believe?”  leaves open the question, why does “The Mercatus Center of George Mason University, promulgate such false information?”

We find it difficult to imagine that Ms. de Rugy really doesn’t understand the facts.  We are left only to speculate, and perhaps this article provides a clue:

George Mason Students Sue For Records On Koch Donations
By David Halperin

Today, students at George Mason University sued their school and a private foundation tied to the school in a Virginia state court, seeking records related to donations from the billionaire Koch brothers.

The students are concerned that Koch donations to GMU, a state university, come with inappropriate conditions; they launched their campaign on this issue in 2014 after learning that the Charles Koch Foundation, GMU’s biggest donor, had sought influence over faculty hiring and teaching curriculum, for example through a grant agreement with Florida State University.

Charles and David Koch, heirs to the $100 billion energy and chemicals corporation Koch Industries, have for decades sought to push a conservative agenda, seeking to influence politics but also investing heavily in academic programs that conform nicely with the brothers’ financial interests.

The rich want to widen the Gap by taking from the poor and middle classes and giving to themselves. They to promulgate the false notion of federal insolvency by:

1. Bribing politicians via campaign contributions and promises of lucrative employment, later
2. Bribing media via advertising dollars and media ownership
3. Bribing university economists via donations to schools, and lucrative employment at think tanks.

Draw your own conclusions.