It takes only two things to keep people in chains:
The ignorance of the oppressed and the treachery of their leaders
The Peter G. Peterson Foundation is a self-described “nonpartisan” mouthpiece for the right wing.
Its “nonpartisan” leanings include advocating:
- cuts to federal support for Social Security
- cuts to federal support for Medicare
- increases to Social Security and Medicare taxes (FICA).
- increases to taxes on the middle-income groups.
- cuts to taxes for the rich
- cuts to the federal deficit spending that grows the economy
The Foundation continually publishes articles that falsely claim our Monetarily Sovereign nation somehow can run short of its own sovereign currency, and thus, Social Security, Medicare, and other federal “trust funds” are running short of dollars — all untrue.
It is 100% impossible for a Monetarily Sovereign entity to run short of its own sovereign currency. Similarly, it is 100% impossible for any agency of a Monetarily Sovereign entity to run short of the sovereign currency, unless that is what the entity wants.
Neither the U.S., nor Social Security, can run short of U.S. dollars, unless that is what Congress wants. Period.
So it was with amazement that I read these excerpts from an article published by the Peterson Foundation:
WHAT ARE FEDERAL TRUST FUNDS?
Sep 20, 2016, Peter G. Peterson Foundation
A federal trust fund is an accounting mechanism used by the federal government to track earmarked receipts (money designated for a specific purpose or program) and corresponding expenditures.
The largest and best-known funds finance Social Security, Medicare, highways and mass transit, and pensions for government employees.
Federal trust funds bear little resemblance to their private-sector counterparts.
In private-sector trust funds, receipts are deposited and assets are held and invested by trustees on behalf of the stated beneficiaries.
In federal trust funds, the federal government does not set aside the receipts or invest them in private assets.
Rather, the receipts are recorded as accounting credits in the trust funds, and the receipts themselves are comingled with other receipts that Treasury collects and spends.
This is all correct. Federal so-called “trust funds” are nothing like state and local government trust funds and nothing like private trust funds.
All private sector financing is constrained by one simple fact: The private sector is monetarily non-sovereign.
It does not have the unlimited ability to create its own sovereign currency, for the simple fact that it has no sovereign currency.
The U.S. private sector (which includes state and local governments) uses the sovereign currency of the federal government.
And then, having admitted that federal “trust fund” receipts are comingled with other Treasury receipts, the article promptly forgets what it said:
Further, the federal government owns the accounts and can, by changing the law, unilaterally alter the purposes of the accounts and raise or lower collections and expenditures.
No need to raise or lower collections. The correct statement would be:
The federal government owns the accounts and can, by changing the law, unilaterally alter the purposes of the accounts and/or provide additional funding.
In the late 1770s, the federal government created the original U.S. dollars from nothing, and today it continues to create dollars at will.
Neither the federal government nor the misnamed “Social Security Trust Fund” (or any other federal trust fund) can run short of dollars unless Congress wants it to.
The Peterson Foundation, and far too many others, including those in the federal government, have been pretending that to save Social Security taxes must be increased or spending must be cut. It simply is not true.
The article continues:
What happens when a federal trust fund runs a deficit?
Treasury must finance trust fund interest payments and the redemption of trust fund securities through additional borrowing from the public (unless policymakers raise taxes or cut spending).
The above is wrong. Not only is it wrong about the supposed need for raising taxes and cutting spending, but it also is wrong about borrowing.
Unlike you and me and all other monetarily non-sovereign entities, our Monetarily Sovereign federal government creates unlimited dollars ad hoc, by paying creditors.
Thus, the federal government has no need for any kind of income. It has no need for tax income. It has no need to cut spending. And it has no need for borrowing.
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.”
The federal government has several trust funds. The three most important trust funds are for Social Security, Medicare, and transportation projects.
Social Security Trust Funds
In 2034, unless reforms are enacted, the Social Security trust funds are projected to be fully exhausted. At that point, Social Security’s receipts will only be sufficient to cover 79 percent of benefits.
Benefits will then have to be cut by 21 percent to continue making payments to all beneficiaries.
As the article previously said, Social Security “receipts are comingled with other receipts that Treasury collects and spends.
This means the receipts cannot be “sufficient” to cover anything.
The dollars, once received by the Treasury and comingled, disappear from any money supply measure.
They effectively are destroyed upon receipt.
Asking how many dollars the Treasury has is akin to asking how many sentences you have. The Treasury creates its dollars as needed, and you create your sentences as needed.
Just as the Treasury is Monetarily Sovereign, you are “sentence sovereign.” You never have to ask anyone — via taxing or borrowing — for sentences, and you never can run short.
The Social Security Disability program is in worse condition. Its trust fund will be depleted in 2023, and unless its finances are addressed, its benefits will be cut by 11 percent.
The Social Security Disability benefits will be cut only if Congress wants them to be cut.
Medicare Trust Fund
In the Medicare program, payroll taxes are credited to the Medicare Hospital Insurance (HI) fund and premiums paid by Medicare beneficiaries are credited directly to Medicare’s Supplemental Medical Insurance (SMI) fund.
Unless reforms are enacted, Medicare’s Hospital Insurance Trust Fund is expected to be exhausted in 2028, which will precipitate a 13 percent cut in its payments to hospitals and other providers.
The SMI fund cannot be depleted — each year, general revenue contributions are set to cover whatever costs remain after beneficiary premiums are taken into account.
“The SMI fund cannot be depleted — each year, general revenue contributions cover whatever costs remain after beneficiary premiums are taken into account.”
SMI, which pays for Part B and Part D benefits, is funded by Congress. It doesn’t rely on a fake “trust fund.” Congress directly authorizes what funds are needed.
So you have the ridiculous situation in which, Medicare Part A supposedly runs short of funds, but Medicare Parts B and D do not. And you are expected to believe this??
Ask your Senator or Representative why all of Medicare and Social Security cannot be handled like SMI, with the federal government simply paying expenses.
That approach would end all talk of trust funds supposedly running short of dollars.
Highway Trust Fund
The Highway Trust Fund will be depleted by 2021. In this fund, taxes on gasoline and diesel fuel are credited directly to the Highway Trust Fund, but the fund’s income falls short of its spending.
This situation has already precipitated a slowdown of highway and other surface transportation projects as states prepare for a shortfall in federal funding.
The same fraudulent situation as with other phony federal “trust funds.” The result: Either infrastructure projects are delayed, not done at all, or are passed to the monetarily non-sovereign state and local governments.
Does it get any more outrageous than this? A Monetarily Sovereign government, which has an unlimited supply of dollars, claims poverty and passes spending responsibility to monetarily non-sovereign state and local governments, which are limited in their spending ability.
The article ends with these truths:
How do trust funds affect the overall budget?
Although many believe that the existence of trust funds guarantees the sustainability of programs in the future, trust funds are simply accounting mechanisms that are part of the way the federal government keeps its books.
The actual cash inflows and outflows of the programs are combined with all other federal programs and therefore contribute to federal surpluses and deficits.
If a program is in surplus, the federal government’s overall deficit balance improves because it uses the additional receipts from the program to fund costs of other programs.
In effect, the government is conducting transactions with itself but keeping track of inflows and outflows of funds through trust funds.
Ultimately, trust fund income and outlays are not separate from the rest of the federal budget, and the sustainability of trust fund programs, like Social Security, depends on the overall sustainability of the federal government.
That last sentence completely destroys any notion that the fake Social Security “trust fund” is running short of dollars and so, taxes must be increased and/or benefits decreased.
The U.S. federal government can “sustain” (i.e. pay for) any amount of expenses because it has the unlimited ability to create dollars. It never can run short.
Unlike you and me, and the states, and businesses, and the euro nations, the U.S government is Monetarily Sovereign.
Remember this whenever you hear that Social Security, Medicare and any other federal program will run short of money or become “insolvent.”
It is a lie designed by the very rich, to make you believe you must settle for fewer federal benefits or higher taxes.
Rodger Malcolm Mitchell
Twitter: @rodgermitchell; Search #monetarysovereignty
Facebook: Rodger Malcolm Mitchell
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.