The end of social security?

Alan Greenspan: “A government cannot become insolvent with respect to obligations in its own currency.”

Ben Bernanke: “The U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost.”

St. Louis Federal Reserve: “As the sole manufacturer of dollars, whose debt is denominated in dollars, the U.S. government can never become insolvent, i.e., unable to pay its bills.”

Thomas Edison: If the Nation can issue a dollar bond it can issue a dollar bill.  The element that makes the bond good makes the bill good also. . . . It is absurd to say our Country can issue bonds and cannot issue currency.

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Do you believe Social Security is running short of dollars and, without a tax increase or benefits decrease, in the future will be unable to continue paying benefits?

If so that is exactly what the very rich, who direct American politics, want you to believe.

The very rich want you to accept the notion that Social Security is going bankrupt, the Social Security “trust fund” is running short of dollars, and your benefits must be reduced to “save” the program.

Why do they want you to believe that? Because of Gap Psychology.

Gap Psychology is the desire to distance oneself from those “below” you on any arbitrary measure, and to approach those above you. You wish to disassociate with the poorer and less powerful than you, and to associate with those wealthier and more powerful.

Gap Psychology is an evolutionary attempt to increase one’s relative power and thus, safety.

The “associate/disassociate” concept can relate to income, wealth, power, housing, clothing, neighborhood, college attendance, choice of restaurant, mode of travel — anything that confers relative prestige on the user.

Driving an expensive car is an attempt to associate with the rich and to disassociate from those who cannot afford an expensive car. Like everything associated with the Gap, “expensive” is a relative term.  A car you might consider expensive, would not be expensive for a billionaire.

The word “relative” is key. “Rich,” “powerful,” “influential,” etc. are not absolutes. They are comparatives.

If you had $1 thousand, while everyone else had $10, you would be rich. But if you had that same $1 thousand, while everyone else had $1 million, you would be poor.

The U.S. government is Monetarily Sovereign. It has the unlimited money-creation capabilities described (above) by Alan Greenspan, Ben Bernanke, and the St. Louis Federal Reserve.

Thus, the U.S. government can be viewed as infinitely rich. It can create infinite dollars. It’s purchasing ability is infinite. It has the infinite ability to fund its agencies, which functionally makes U.S. agencies as rich as Congress and the President wish them to be.

If such federal agencies as Social Security, Medicare, the Army, the Supreme Court, et al were to run short of dollars, the reason would not be that the U.S. government has run short of money (which is impossible).

The reason would be that Congress and the President arbitrarily had chosen to provide insufficient dollars to these agencies.

FICA is the tax incorrectly said to fund Social Security and Medicare. But they are federal agencies, so even if FICA collections were $ zero, the federal government could continue to pay Social Security and Medicare benefits, forever.

FICA is irrelevant to the real financial well-being of Social Security and Medicare. FICA is an excuse for cutting benefits.

Congress and the President, at the behest of rich donors, who are influenced by Gap Psychology, pretend Social Security and Medicare can run short of dollars. It all is a charade for the benefit of the rich.

In that vein, here are excerpts from a recent, online article in Money & Career CheatSheet, titled:

9 Lies You’ve Been Told About Social Security
By Megan Elliott May 28, 2018
(Megan is a Money & Career, Health & Fitness, and Culture Writer at The Cheat Sheet. She has a bachelor’s degree in cultural studies from Macalester College and a master’s degree in media studies from the New School University. Her writing has appeared in the Journal of Financial Planning and other publications.)

Social Security is the linchpin of the American retirement system. Nearly 40 million retired Americans receive an average of $1,335 a month from the program. For 64% of retirees, the check they receive makes up more than half of their total income. Without this retirement benefit, many of the oldest Americans would be destitute.

Yet for all its importance, Social Security remains a program that is shrouded in confusion and mystery. When Massachusetts Mutual Life Insurance Company quizzed people in 2015 on some basic facts about Social Security, only 28% received a passing grade.

Being misinformed about how Social Security works is costing retirees. “Americans who lack the proper knowledge and information about Social Security may be putting their retirement planning in jeopardy,” Phil Michalowski, the vice president at U.S. Insurance Group, MassMutual, said in a statement.

“In fact, many may be leaving Social Security retirement benefits they’re entitled to on the table, or incorrectly assuming what benefits may be available in retirement.”

Michalowski was referring to ignorance about Social Security law costing retirees. But there is a deeper, more important ignorance about Social Security, that costs Americans much more.

Unlike state and local governments, and unlike business and individual people, all of which are monetarily non-sovereign, the U.S. government is Monetarily Sovereign.  It never can run short of dollars.

Sadly, the American public has been brainwashed by the rich into believing the “Big Lie,” that the U.S. federal government can run short of dollars. The rich bribe three main information sources to promulgate the Big Lie:

1. The media, who are bribed via advertising revenues and media ownership
2. The politicians, who are bribed via campaign contributions and promises of lucrative employment later
3. The economists, who are bribed via university contributions and employment in “think tanks.”

Continuing with excerpts from Ms. Elliott’s article:

Confusion about how benefits are earned, how much you can get, and the best time to retire abounds. Politicians and the media add to the confusion when they make dramatic — and sometimes false — statements about the future health of Social Security. In some cases, believing the lies you hear about Social Security could cause you to make planning mistakes that jeopardize your future financial security.

Here are nine of the biggest whoppers you’ll hear about Social Security.

1. You have a personal Social Security “account”

Roughly one-third of Americans think the money they pay into Social goes into a personal account. Instead, the money goes into a general trust fund, and is then used to pay benefits to current and future retirees.

When you retire, the money you receive will come from contributions of those currently working.

“Social Security isn’t like a 401(k) or even a traditional funded pension plan. Your contributions are immediately paid out to current beneficiaries,” Erik Carter of Financial Finesse explained in an article for Forbes.

This is completely false. There is no “general trust fund.” It is an accounting fiction. Think about it: Why would a Monetarily Sovereign entity, that has the unlimited ability to create its sovereign currency, in any amount at any time — why would that entity have any use for a “trust fund.”

The concept makes no sense.

When your FICA tax dollars are received by the federal government, they cease to be part of any money supply measure. In actual effect, your dollars are destroyed upon receipt.

Then, when the federal government pays benefits, it sends instructions to you (via a check) or to your bank (via a wire). Those instructions tell the bank to increase the balance in your checking account.

At the instant the bank obeys those instructions, brand new dollars are created and added to the money supply (called “M1”).

Our Monetarily Sovereign government, having the unlimited ability to create dollars, neither needs nor uses tax dollars for any purpose. (Review the statements by Greenspan, Bernanke, and the St. Louis Fed.)

2. Private accounts are a better alternative to the current Social Security system

Privatizing Social Security is periodically floated as a way to save what some see as a failing system. Former President George W. Bush was a big supporter of such a plan.

Bush’s proposal was controversial and ultimately didn’t go anywhere. But some still argue that letting people invest all or a portion of their Social Security would increase people’s savings and lead to a more secure retirement.

Others argue that such a strategy is just too risky given stock market volatility and how bad many Americans are at managing money.

The proposal is based on the Big Lie that the federal government cannot afford to fund Social Security and that it must take dollars from the public in order to pay for benefits. Absolutely untrue.

3. Younger workers won’t get a dime

Doomsayers sometimes claim Social Security is on the verge of going broke. Younger workers may never get their benefits, they warn, and future retirees could see their checks cut off. But the future of Social Security, while not exactly rosy-looking, isn’t quite so dire.

“The idea that the program is going to ‘run out of money’ or is ‘going broke’ is a zombie lie, one that deserves to have its head lopped off with a quick slice of Michonne’s katana,” Paul Waldman of The American Prospect wrote in The Washington Post.

So far, #3 is spot on. But then, the wrongheadedness returns:

It’s true current workers are paying less into the Social Security trust fund than is being paid out to retirees. By 2035, the reserves in the trust fund are projected to run dry.

At that point, Social Security could pay about 77% of projected benefits to retirees from the income it receives from people currently working. Obviously, that’s not a great situation, but future retirees will still get some money — just as not as much as they were promised.

So-called “trust fund” reserves are completely irrelevant. The federal government needs no “trust fund” to pay the President’s expenses, Congress’s expenses, or the Supreme Court’s expenses. Why would it need a trust fund to pay for Social Security?

President Roosevelt, the founder of Social Security knew this. But he insisted on collecting FICA taxes so as to give recipients a “moral right” to benefits, that Congress could not take away.

It hasn’t worked, however, as benefits have been decreased, for no reason at all. Social Security does not pay benefits from income. Period.

4. You have to be a citizen to get benefits

Provided you’ve worked for at least 10 years, are lawfully in the U.S., and meet all the other requirements, you can claim Social Security benefits when you retire, whether you’re a citizen or not. Even non-working spouses of non-citizens may be able to get benefits.

Correct. Since non-workers don’t pay FICA, there goes the Big Lie that FICA funds Social Security.

5. The retirement age is 65

For people born in 1937 or earlier, full retirement age is 65. If you were born between 1938 and 1959, full retirement age varies between 65 and 2 months and 66 and 10 months. For everyone born after 1960, full retirement is at 67.

No matter when you were born, you can start claiming early benefits at age 62. But if you claim early, your monthly benefit is reduced by 20% to 30%. If you wait until age 70 to claim Social Security, you could increase your monthly benefit by more than 30%.

This entire rigamarole is based on the myth that FICA funds SS. Without that myth, there would be no reason ever to reduce benefits.

6. You can’t get benefits if you’ve never worked

Even if you’ve never worked a day in your life, you may still be able to get benefits from Social Security. Non-working spouses may receive up to 50% of their husband or wife’s benefit amount.

In 2010, the Social Security Administration (SSA) estimated only 4% of people between 62 and 84 would never receive benefits.

Point #6, once again, demonstrates that people don’t pay for Social Security. The federal government merely makes up rules to suit its Big Lie.

Imagine if a life insurance company told its insureds,  “We’re going to cut your benefits because we want to pay people who never bought insurance.”

7. You should claim Social Security as soon as you can

If you can afford to delay taking benefits until 65 or even 70, you’ll get a bigger check every month. Given that people are generally living longer, holding off on requesting benefits is often a wise move.

It would be a “wise move” only if the federal government needed to ration dollars. Otherwise, forcing people to guess how long they will live is a terrible idea.

8. You can work and collect full Social Security benefits

You may not get your full benefit if you’re drawing a paycheck. “If you are younger than full retirement age and make more than the yearly earnings limit, we will reduce your benefit,” the SSA explained.

Reducing benefits is absolutely unnecessary.

9. Social Security is a Ponzi scheme

You’ll sometimes hear people dismiss Social Security as a Ponzi scheme. They’re comparing the program to the famous investment fraud perpetrated by Charles Ponzi in 1920.

In a ponzi scheme, investors are lured in with promises of big returns with little risk. In reality, no investment exists.

Instead, the first group of investors are paid with money gathered from a second group of investors, and so on down the line.

Once the pool of investors dries up, the scheme collapses.

On the surface, Social Security does share some resemblance with a Ponzi scheme, since the earnings of today’s workers are used to pay benefits to those who are already retired.

But there are important differences between the two. For one, no one is in the dark about the nature of Social Security. The program is transparent about the way it is funded and the state of its finances.

A Ponzi scheme depends on the ignorance of investors to survive.

Plus, as long as the government can require people to pay taxes, there will still be a source of new income, though it may not be enough to meet the promised payouts. With a Ponzi scheme, people will eventually wise up and stop investing, which causes everything to fall apart.

“What makes a Ponzi scheme a Ponzi scheme is that it’s a giant fraud. People think they’re investing in postal stamps. Their money is actually being invested in nothing. In Social Security, conversely, it’s perfectly clear what is going on,” Ezra Klein wrote in an article for the Washington Post.

If we were to believe the Big Lie about the government’s supposed inability to pay benefits, Social Security would, in fact, be a Ponzi scheme.

Here are some classic symptoms of the Social Security “Ponzi scheme”:

1. Payouts arbitrarily can and have been reduced.
2. The operator provides fabricated reports claiming there are dollars in a “trust fund.”
3. The operator says the benefits it pays to older members from new members.
4. The money is invested in nothing.
5. The scheme depends on the ignorance of the investors regarding exactly how benefits are calculated.

If Bernard Madoff had legally been allowed to cut benefits whenever he wished, he still would be in business.

However, Social Security is not a true Ponzi scheme: Unlike the usual Ponzi scheme, the operator — the U.S. government — never can run short of dollars to pay benefits.

In Summary:

The FICA tax, being an unnecessary and regressive imposition on the middle and lower income groups, should be eliminated (See Step #1 of the Ten Steps to Prosperity).

The federal government can and should provide Social Security payments to every man, woman, and child in America. (See Step #3 of the Ten Steps to Prosperity)

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

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The single most important problems in economics involve the excessive income/wealth/power Gaps between the have-mores and the have-less.

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 can afford better health care than can 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 A MONTHLY ECONOMIC BONUS TO EVERY MAN, WOMAN AND CHILD IN AMERICA (similar to Social Security for All) (The JG (Jobs Guarantee) vs the GI (Guaranteed Income) vs the EB (Guaranteed Income)) 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 EVERYONE Five 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 benefitting 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 FEDERAL TAXES ON BUSINESS
Businesses are dollar-transferring machines. They transfer dollars from customers to employees, suppliers, shareholders and the federal government (the later having no use for those dollars). Any tax on businesses reduces the amount going to employees, suppliers and shareholders, which diminishes the economy. Ultimately, all business taxes reduce 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 business 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