The “Big Lie” in economics goes something like this:
“Federal finances are like personal finances. Just as you can run short of money, and need income in order to pay your bills, so can the federal government run short of money. It too needs income to pay its bills.
“For that reason, the federal government should run a balanced budget and live within its means.”
If you are not initiated in economics, it may all sound plausible, but in fact, it all is a big, fat lie.
The U.S. Federal government is unlike you, and me, and state/local governments, and businesses.
It uniquely is Monetarily Sovereign. It is sovereign over its sovereign currency, the U.S. dollar.
It never can run short of dollars; it has the unlimited ability to create them. It has no “means to live within.”
And running a balanced budget would create a recession or depression because an economy needs a growing supply of money to survive even the most minimal amount of inflation.
If this sounds wrong to you, it’s only because you have been told The Big Lie so often, you have been brainwashed.
One example of many: President Obama: “Washington Has to Live within its Means”
Trump Using COVID-19 As A Cover To Gut Social Security And Medicare, Critics Charge
HuffPost, Mary Papenfuss, August 8, 2020
Critics erupted Saturday after President Donald Trump signed four executive actions that included deferring payroll taxes that provide funding for both Social Security and Medicare.
While Trump characterized the move as a financial boost for Americans struggling amid the COVID-19 crisis, critics blasted it as a cynical ploy to do what Trump has long intended to do: Gut the vitally important social service programs just as Americans need them more than ever during the pandemic.
“The American people desperately need relief,” noted Rep. Val Demings (D-Fla.). “Instead, the president decided to defund Social Security and Medicare.”
No, Trump is not defunding Social Security and Medicare. Even if all payroll taxes (FICA) were completely eliminated, as they should be, Social Security and Medicare could continue paying benefits, forever.
And not just paying benefits forever, but paying double or triple benefits forever.
We quite literally could have Medicare for All and Social Security for All without collecting a single penny in federal taxes.
Presumptive Democratic presidential candidate Joe Biden called Trump’s action a “reckless war on Social Security.” He’s “laying out his road map” to cut the program, he warned in a statement.
House Ways and Means Chair Richard Neal (D-Mass.) called the move “a poorly disguised first step in an effort to fully dismantle these vital programs by executive fiat.”
Trump very well might be laying out a road map to cut Social Security, by falsely telling the public that the program is supported by taxes.
But the truth is that FICA does not fund Social Security, and the so-called Social Security “trust fund” is an accounting fiction.
Even the Social Security Administration lies to you about where they get their funding:
Although some observers view the trust fund reserves and interest income as accounting fictions, a careful tracing of the cash flows reveals that the reserves and their interest earnings are, for all practical purposes, as real as those of any bank account.
In addition, an examination of the long-term constraints facing the trust funds and the federal budget clarifies that under the Social Security system’s self-financing framework, an improvement in trust fund finances will not relieve the accumulated debt commitments of the rest of the federal government.
The “some observers” are correct, and the trust fund is not as real as “any bank account.”
“Bank accounts” in the private sector receive their deposits from monetarily NON-sovereign depositors, whose money supply is limited.
The fictional SS trust fund received deposits from the Monetarily Sovereign federal government, which cannot run short of dollars.
Therefore, to claim the “trust fund” is running short of dollars is an outright lie, because the government, at no cost to anyone, can replenish the fund, instantly and infinitely.
And, in fact, it isn’t even a “trust fund.”
A trust fund is a financial tool that holds and administers assets for the benefit of another person or organization, called a beneficiary.
The initial assets for the fund are provided by a grantor or donor, and a trustee or team of trustees manages the funds according to that person’s instructions.
If you are paying FICA taxes, which supposedly fund the fictional “trust fund,” that makes you and your employer the grantor or donor.
But the fictional SS trust fund is not managed according to your instructions.
Quite the opposite. You and your employer are required to put money in, and then the “trustees” do whatever Congress wants them to do with your money.
You are the beneficiary, and your employer is what? The victim?
You can’t take money out when you want, and you even are taxed on your own money, when you are allowed to take your money out.
Some “trust fund” that is!
For the SSA to claim it is a “bank account” or a “trust fund” is very simply a lie.
Even the founder of Social Security, President Franklin D. Roosevelt, knew FICA didn’t fund Social Security.
Excerpts from a Luther Gulick memo:
I raised the question of the ultimate abandonment of the pay roll taxes in connection with old age security and unemployment relief in the event of another period of depression.
I suggested that it had been a mistake to levy these taxes in the 1930’s when the social security program was originally adopted.
FDR said, “I guess you’re right on the economics. They are politics all the way through.
“We put those payroll contributions there so as to give the contributors a legal, moral, and political right to collect their pensions and their unemployment benefits.
“With those taxes in there, no damn politician can ever scrap my social security program. Those taxes aren’t a matter of economics, they’re straight politics.”
FDR also mentioned the psychological effect of contributions in destroying the “relief attitude.”
Little did Roosevelt anticipate that Congress and a long line of Presidents would use those contributions to do exactly the opposite of what he had hoped, i.e to limit the benefits to some mythical contribution level, and even to tax them!
This only proves no one can create a law that politicians can’t squirm out of, simply by “misinterpreting” it. (The U.S. Supreme Court is notorious for such “misinterpretations.”)
As you now have learned, Social Security benefits (and Medicare benefits) are not limited by taxes or phony “trust funds.”
Since there is no financial reason why the federal government does not fund Social Security for All, Medicare for All, College for All, and the myriad other benefits that the poor are forced to do without, what is the real reason?
That question takes us to Gap Psychology, the desire to distance oneself from those below on any social scale.
“Rich” is a comparative. It means just having “much more,” not any specific amount.
The key is “more,” and the greater the distance (the “Gap”) one is from those who have “less,” the richer one is.
So, to become even richer (which the rich always seem to want), one does not need to increase one’s wealth. All one needs do is increase the Gap, and that can be done by holding down those who have less.
And that is the purpose of the Big Lie: To hold you, who are not rich, down.
If the populace understood the Federal government to be Monetarily Sovereign, and not limited in its spending, the people would demand more benefits, such as those described in the Ten Steps to Prosperity (below).
But giving the populace those benefits, which the government easily could do, would narrow the Gap, and so, make the rich less rich.
The purveyors of the Big Lie tell you the government has to “live within its means,” and “can’t afford” certain benefits, and it is “prudent” to spend less, and the “debt is unsustainable,” and spending is “socialism,” and spending causes inflation — all of which are untrue.
But you hear the Big Lie from so many mouths, and in so many different ways, again, again, again, until it has become gospel. That is the very definition of brainwashing.
Even most of you, who are not among the rich, and would gain so much from increased federal spending on many wonderful benefits — even you jeer at the notion of free health care, free college, free food for the poor, free financial support, and the elimination of many taxes.
You have been brainwashed into believing “there is no such thing as a free lunch,” when in fact, U.S. dollars themselves are a free creation, from thin air, by the U.S. government (which itself was created from thin air).
So as you struggle for the necessities, and perhaps a few extras, the rich laugh at your feeble flailing, while they own the government that creates dollars and benefits from thin air.
One last example:
Trump also signed an order providing $400 a week in enhanced unemployment benefits — down from the $600 weekly benefit that expired last month.
Wanting to appear benevolent, without actually being benevolent, Trump rides in on a white stallion, to save the impoverished by allowing them a bare pittance.
It is a dribble, even was too much for the inhumane GOP, which at our borders, already has proved that starving children is no problem.
And you are supposed to grovel in gratitude at the generosity that allows you an insufficient amount to lead a decent life.
Then, when jobs become available, will you be so desperate, you will accept horrible working conditions at low wages, while the rich business leaders vacation on yachts?
Tomorrow, will you sneer again at so-called “socialism,” and perhaps, in part, your sneering rather than demanding, will be why you allow the rich to make you and your family suffer.
There are penalties for ignorance.
Why aren’t you contacting your Washington politicians and making demands? It takes many voices; yours should be one of them.
Rodger Malcolm Mitchell
Monetary Sovereignty Twitter: @rodgermitchell Search #monetarysovereignty Facebook: Rodger Malcolm Mitchell …………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………..
THE SOLE PURPOSE OF GOVERNMENT IS TO IMPROVE AND PROTECT THE LIVES OF THE PEOPLE.
The most important problems in economics involve:
- Monetary Sovereignty describes money creation and destruction.
- Gap Psychology describes the common desire to distance oneself from those “below” in any socio-economic ranking, and to come nearer those “above.” The socio-economic distance is referred to as “The Gap.”
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 Monetary Sovereignty and The Ten Steps To Prosperity can grow the economy and narrow the Gaps:
Ten Steps To Prosperity:
The Ten Steps will grow the economy and narrow the income/wealth/power Gap between the rich and the rest.