Bernie Sanders is a “friend” to the extent that he wishes to expand Social Security (and Medicare).
He once had Modern Monetary Theory’s Stephanie Kelton as his chief economic adviser during his 2016 presidential campaign.
Kelton tried and seemingly failed to educate Sanders about the facts of federal economics, the key one being that a Monetarily Sovereign government cannot run short of its own sovereign currency.
It neither needs nor uses tax receipts, which are destroyed upon receipt.
(When you pay taxes to the federal government, money is removed from the private sector [aka “the economy”] and flows to the U.S. Treasury. Because the Treasury has infinite money, your tax dollars effectively are destroyed. (Infinity + any number = infinity. No change.)
Perhaps Sanders is playing politics because he continues to mouth the absurdity that the federal government and its agencies unintentionally can run short of U.S. dollars.
‘Time to Scrap the Cap’: Sanders, Warren Bill Targets Rich to Expand Social Security
Posted on June 10, 2022 by Yves Smith, By Jake Johnson, a staff writer at Common Dreams. Originally published at Common Dreams
Yves here. It’s no secret that the assertions that Social Security is in dire financial straits are fabrications.
First, like so much of our Federal government funding, the device of having a trust fund is a convenient fiction.
So far, so good. Despite incessant allusions to the contrary, the so-called Medicare Trust Fund and Social Security Trust Fund are not trust funds. They merely are notations on a balance sheet.
Those numbers are completely controlled by the federal government. The federal government can change the numbers at will — quite different from a trust fund.
In reality, Social Security is a pay-as-you-go program.
She is correct if Susan Webber (aka Yves Smith) means that the federal government pays for Social Security by creating dollars, ad hoc.
Second, for those who nevertheless like the appearance that Social Security is paid for by payroll contributions, the most obvious fix has long been to raise or eliminate the cap on salaries subject to payroll taxes.
The fact that this problem has not been solved strongly suggests some influential parties don’t want it solved.
Those “influential parties” are the very rich, who wish to widen the Gap between them and those below them on any income/wealth/power scale. It’s known as “Gap Psychology.”
Unfortunately, most Americans believe the lie that Social Security is paid for by a trust fund. The solution to a lie is not to accept the lie, as Smith seems to advocate, but rather to tell the truth.
But, she doesn’t seem to advocate for the truth.
Sens. Bernie Sanders and Elizabeth Warren led a group of lawmakers Thursday in unveiling legislation that would expand Social Security’s modest annual benefits by $2,400 and ensure the program is fully funded for the next 75 years.
The benefit boost under the Social Security Expansion Act would be funded by lifting the cap on the maximum amount of income subject to the Social Security payroll tax.
This year the cap was $147,000—meaning millionaires stopped paying into the program in late February.
Lifting the cap would fund nothing because the Social Security payroll tax (FICA) funds nothing. The dollars are destroyed when they hit the Treasury.
President Roosevelt, the creator of Social Security, knew this, but he wanted the tax to make Social Security impossible to end.
He reportedly said, concerning FICA:
“I guess you’re right on the economics (that payroll taxes are unnecessary).
“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.”
All federal programs can end, and many do when an opposing party comes into power.
But if the voters believe they have contributed to a program, the opposing party will find it politically challenging to end the program.
If passed, the expansion bill would apply the payroll tax to all income, including capital gains, above $250,000 a year, a change that would only raise taxes on around 7% of U.S. households.
“At a time when half of older Americans have no retirement savings and millions of senior citizens are living in poverty, our job is not to cut Social Security,” Sanders (I-Vt.), head of the Senate Budget Committee and a co-chair of the Expand Social Security Caucus, said in a statement.
“Our job must be to expand Social Security so that every senior citizen in America can retire with the dignity they deserve and every person with a disability can live with the security they need,” the senator continued.
“And we will do that by demanding that the wealthiest people in America finally pay their fair share of taxes.
It is absurd that a billionaire in America today pays the same amount of Social Security taxes as someone making $147,000 a year.
It is time to scrap the cap, expand benefits, and fully fund Social Security.”
Does Sanders believe that? Does he think raising the $147,000 FICA salary cap will expand benefits and fully fund Social Security?
Or is his plan simply to make the rich pay so that it appears a Social Security increase will be fully funded? Is that his way of answering the question, “Who will pay for it?
Or does he have an even deeper plot?
The legislation comes a week after the annual Social Security trustees report showed that—contrary to Republicans’ claims that it is barreling toward insolvency—the program is positioned to fully fund benefits until 2035.
Thereafter, even if Congress takes no action, the program is projected to be 90% funded for the next 25 years and 81% funded for the next 75 years.
Social Security is fully funded, not by any fake trust fund but by the full faith and credit of the United States government. Neither the U.S. government nor any government agency can run short of dollars unless Congress and the President want it to.
What is their real plan assuming Sanders and Warren are intelligent and well-informed?
“Social Security is an economic lifeline for millions of Americans, but many seniors are struggling with rising costs,” said Warren (D-Mass.).
“As Republicans try to phase out Social Security and raise taxes on more than 70 million hardworking Americans, I’m working with Senator Sanders to expand Social Security and extend its solvency by making the wealthy pay their fair share, so everyone can retire with dignity.”
That “fair share” hints at the real purpose of Sanders’ plan.
Sanders announced the new bill Thursday during a Senate Budget Committee hearing, at which Republicans—including Sen. Mitt Romney (R-Utah), who has previously voiced support for privatizing Social Security—made clear they would oppose the legislation, which has been endorsed by more than 50 advocacy organizations and labor unions.
The Republicans’ ostensible purpose for privatizing Social Security is the claim that stock market investments will grow enough to safeguard Social Security growth. The claim is false for at least two reasons.
- Social Security is funded by the federal government’s money creation, not taxes or any other outside mechanism.
- The stock market is not a secure growth mechanism, and if somehow it were made to fund Social Security, the current S&P drop demonstrates the folly of relying on private markets.
The true purpose of Romney’s and other Republicans repeated drumbeat for privatization is simple: To provide another lucrative money-making opportunity for wealthy investment firms.
In addition to increasing annual benefits and lifting the tax cap, the Social Security Expansion Act would also boost the program’s cost-of-living adjustments by switching to a more accurate measure of inflation.
According to the Social Security Administration, the average monthly Social Security benefit payment was around $1,540 as of April 2022.
“With the cost of living at an all-time high, Social Security has never been more important, yet congressional Republicans continue to play games with its funding,” said Rep. Peter DeFazio (D-Ore.), the lead sponsor of a companion bill in the House.
“This legislation would ensure that the Social Security Trust Fund remains solvent for another 75 years, increase monthly benefits for most recipients by $200, and alter the cost-of-living-adjustment formula to meet the everyday needs of our nation’s seniors,” DeFazio added.
Lifting the tax cap won’t accomplish any of those stated purposes. So, what may be the fundamental purpose? Could it be Sanders’ and Warren’s secret plan to narrow the income/wealth/power Gap between the rich and the rest? Is this their Gap Psychology plan?
(Gap Psychology describes the common desire to distance oneself from those below, on any socioeconomic scale, and to come closer to those above.)
The plan implies to those who believe FICA funds Social Security, a direct money transfer from the richer to the poorer, from those whose salary exceeds $147,000 to those whose salary is lower.
Since there are more voters in the latter position than in the former, it’s a pretty good Gap Psychology election ploy.
Because the plan would, though by a minimal amount, help narrow the Gap, I wish I could be in favor. But I simply can’t support the idea of ratifying the Big Lie that federal taxes fund federal spending.
So long as the populace believes the Big Lie, the myth that the U.S. is as financially hamstrung as the states, counties, cities, and euro nations.
We must free ourselves of that myth to have control over our economic future.
The honest plan would be to tell the world that the federal government can’t run short of dollars, federal taxes don’t fund federal spending, and federal spending doesn’t cause inflation.
The rich will continue to rule until those truths are exposed and understood.
(Every federal spending cut demanded by conservatives is designed to widen the income/wealth/power Gap between the rich and the rest, while the few federal spending increases backed by the conservatives are designed to reward and protect the rich.)
Rodger Malcolm Mitchell
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:
- Eliminate FICA
- Federally funded Medicare — parts A, B & D, plus long-term care — for everyone
- Social Security for all
- Free education (including post-grad) for everyone
- Salary for attending school
- Eliminate federal taxes on business
- Increase the standard income tax deduction, annually.
- Tax the very rich (the “.1%”) more, with higher progressive tax rates on all forms of income.
- Federal ownership of all banks
- Increase federal spending on the myriad initiatives that benefit America’s 99.9%
The Ten Steps will grow the economy and narrow the income/wealth/power Gap between the rich and the rest.