The following story appeared today online. It purports to tell you why you’ll have a benefit cut if Social Security benefits are not taxed.
That’s right. The article claims that either you allow the government to take away part of your benefits via taxes, or it will take away part of your benefits via benefit cuts.
This Hobson’s choice is brought to you by the rich, who want to widen the income/wealth/power Gap between them and you.
Spoiler alert: Here’s the “why” mentioned in the headline of this post: The lies of the rich and the ignorance of the populace.
“If you dare to ask for more, I’ll give you lesss. So shut up and be grateful for what you get. I have rich people to take care of. “
Trump-backed tax plan may slash Social Security benefits by 33%, raising solvency concerns /
Retirees across the United States may soon face a daunting financial challenge. A proposed tax plan, supported by President Trump and several legislators, aims to eliminate federal income taxes on Social Security benefits, tips, and overtime.
While this might initially seem beneficial, experts warn it could lead to a significant reduction in Social Security benefits, potentially cutting them by 33% by 2035.
Proposed tax plan details
The tax proposal suggests removing federal income taxes on Social Security benefits, a move that could eliminate a crucial revenue stream for the program.
Currently, Social Security is funded primarily through payroll taxes (91%), with a smaller portion coming from taxes on benefits (4%) and interest from trust fund assets (5%). The elimination of these taxes could severely impact the program’s financial health.
Not one word of the above paragraph is true. All federal spending, including spending for the Supreme Court, for Congress, for the Senate, for the House, for the military — ALL federal spending — is funded the same way: By federal new money creation.
Congress and the President vote for spending, and the money is automatically created. No fake “trust funds”are involved.
The federal government, being Monetarily Sovereign, cannot run short of dollars, nor can any agency of the federal government run short unless Congress and the President want it to.
The financial helplessness implied in the article is a lie. The federal government has ownership and control over the Social Security agency, and so can add as many dollars as it wishes at any time it wishes.
Social Security faces financial challenges due to a growing retiree population and a slower-growing workforce.
The Congressional Budget Office (CBO) estimates that under current law, the Social Security Trust Fund will be depleted by 2034. If this occurs, benefits would need to be reduced to about 77% of scheduled payments, equating to a 23% cut.
The Social Security “trust fund” is not a trust fund. It is merely a record of payments.
As a record, and only a record, it “has” no money. It’s just a balance sheet for informational purposes. The purpose of FICA taxes (according to the SS founder, President Franklin D. Roosevelt) is to give you the illusion of ownership, so you will protest against cuts.
FICA does not fund SS benefits. It actually limitsbenefits as practiced by Congress.
Impact of eliminating benefit taxesRemoving taxes on Social Security benefits would eliminate a revenue source expected to contribute $1.1 trillion over the next decade.
False. The “revenue” source is not FICA taxes. The revenue source is the federal government, which has the unlimited power to credit those taxes to Social Security — or not — or to credit some other figure.
The amount of FICA does not control how much Social Security is allowed to spend. Congress and the President do.
If Congress and the President wished, they could pass a law saying, for instance, that every person living in America receives double the current level of SS benefits. That law would be funded by Congressional fiat just as taxing benefits now is reverse funded by fiat.
This would exacerbate the program’s deficit, potentially depleting the trust fund sooner. The Committee for a Responsible Federal Budget (CRFB) estimates that eliminating these taxes could advance the fund’s depletion by one year, while Penn Wharton suggests it could be two years.
The CRFB is a libertarian-leaning mouthpiece that likes to express shock at how many growth dollars the federal government pumps into the economy. Their solution to the non-problem invariably tends toward cutting benefits to the middle- and lower-income groups, but seldom suggests cutting tax loopholes enjoyed by the rich.
How much you need to save in order to retire
If taxes on Social Security, tips, and overtime are all eliminated, as proposed by President Trump, the CRFB estimates the trust fund could be depleted three years earlier.
This scenario could lead to benefit cuts as early as 2032, rather than 2035, putting additional financial strain on retirees.
Again, the above is a lie or ignorance, hoping that you will believe the lie or share the ignorance. The bottom line: The author claims that any increase in your benefits will result in a decrease in your benefits, so shut up and accept your losses.
Magnitude of potential benefit cutsThe proposed tax eliminations could reduce Social Security revenues by up to $2 trillion over the next decade.
Translation: The proposed tax eliminations could increase Social Security benefits by up to $2 trillion over the next decade, while also increasing the number of growth dollars added to the economy by those same $2 trillion.
This would necessitate deeper benefit cuts than currently projected. The CRFB estimates that benefits could be reduced by 33% by 2035, compared to the 23% cut projected by the CBO under existing law.
The same old lie: “Don’t you dare ask for more or we’ll give you even less than you currently receive. And by the way, we’re giving the rich another tax break, but that doesn’t count.”
Experts like Nancy Altman, President of Social Security Works, caution against the proposed tax eliminations. Altman argues that while eliminating taxes might increase benefits for some, the overall impact would be detrimental, leading to drastic benefit reductions. She describes the proposal as “not honest,” highlighting the potential long-term harm to retirees.
Ms. Altman, with all your experience, you should know better. Eliminating taxes would not “lead to benefit reductions” if you told America that the federal government can easily fund SS forever.
The proposed tax plan, while seemingly beneficial in the short term, poses significant risks to the financial stability of Social Security. Retirees could face earlier and more severe benefit cuts, underscoring the need for careful consideration of the plan’s long-term implications.
As the debate continues, stakeholders must weigh the immediate benefits against the potential for substantial future losses.
If ever the stakeholders, i.e. SS current and future recipients, ever begin to understand the truth, there will be an uprising and (gasp!) the income/wealth/power Gap between the rich and the rest will narrow.
MAGAs, it may come as a great surprise to you that white, Christian American citizens who are born here to American citizens are not the only smart, hardworking, honest, taxpaying people in the world.
Yes, really.
There actually are very smart, hardworking, honest, taxpaying, valuable to America, black, brown, yellow, red, South American, Canadian, Mexican, Central American, Australian, European, Asian, African, Caribbean, other island, Jewish, Muslim, Buddhist, people of other religions, and citizens of all other nations.
If you are a MAGA, you probably didn’t know that, because your unquestioned leader wants to deport all those people from our walled-in, frightened nation.
Why? Many reasons are given, mostly regarding jobs, taxes, and crime. But those given reasons have been disproven by (gasp) actual data.
No, they are phony, convenient excuses, not the real reason you want those people, and even their children born here, deported.
C’mon, you know the real reason. Fess up now. It’s bigotry, pure and simple, promulgated by your cult leader.
It’s pretty good, but I’m still afraid of them. Can you make it bigger?
You MAGAs fear and hate them because they are not your kindof people, i.e. not white, Christian, hatemongering, native-born to citizens who look and act just like you.
In other words, you want to limit America to people who don’t threaten you by outthinking you and outworking you, while outdefending our American democracy from bigots, dictators, and others just like you.
That is why you want to hide behind a high wall and toss all those “others” over it.
If you are a MAGA, don’t bother to read the following excerpts from an article in Scientific American, March 2025 issue. First, it’s in a science magazine, which deals in (horrors!) scientific facts.
And second, your God, Donald Trump, hasn’t told you to believe it.
But if you’re not a brain-dead MAGA, you will find the following informative:
Mass deportation is a stain on American morals, and it is economically senseless. Immigrants pay taxes, are less likely to commit crimes than native-born Americans, and are valuable workers and consumers in the American economy.
U.S. will need more than one million STEM workers in the next 10 years to stay competitive. Immigrants are critical to that future
In late December 2024 a social media storm erupted after entrepreneur Elon Musk blasted out support for the iconic H-1B visa.
The temporary work visa has long served as a ticket to jobs in the U.S. high-tech industry for skilled foreign-born scientists and engineers.
In response, President Donald Trump’s nativist backers pushed back immediately. Former Trump adviser Steve Bannon characterized Musk’s position as a ploy by tech oligarchs to take jobs from Americans.
The fact: America is woefully short of scientists and engineers. They are much in demand and have no difficulty finding jobs in America. Bannon is lying.
Headlines proclaimed the outbreak of a MAGA civil war. Musk’s remarks might seem self-serving, but he is right in highlighting the need for more engineering talent from overseas.
Foreign-born tech workers are essential to fuel America’s powerhouse economy, one that captures an outsized percentage of global gross domestic product compared with its population.
And they will be key for hiring the more than one million additional STEM workersthat will be needed in 2033 compared with 2023, according to the U.S. Bureau of Labor Statistics.
This increase marks a 10 percent growth rate, almost three times what is projected for any non-STEM industry during the same period. Immigrants are a big part of what has made America a global leader in science and technology;if Trump’s nativist faction prevails and restricts the entry of skilled workers, that will have profound effects on this leadership role, as well as on the U.S. economy.
Closing borders is a mistake. The tech elite know this. Musk, who was born in South Africa and now heads an advisory committee for the Trump administration called the Department of Government Efficiency, is one of many tech magnates who rely on the H-1B visa.
Musk’s Tesla company received approvals for 742 H-1B petitions for new hires during the 2024 federal fiscal year, more than double the number from a year earlier. Amazon (owned by Jeff Bezos) applied for nearly 3,900 H-1Bs in 2024.
Most of the 25 companies that made the most H-1B requests in 2024 are technology firms, including Microsoft, Infosys and Meta, the parent company of Facebook (run by Mark Zuckerberg). Cutting off the flow of foreign workers by rejecting H-1B applications can negatively impact local economies and even hurt U.S. workers.
Despite the claims from Bannon and other hard-right MAGA supporters that H-1Bs rob American citizens of skilled jobs, the pipeline for domestic talent alone is unlikely to fill looming employment gaps.
For 250 years, beginning with the Revolutionary War, Americans have fought and died to prevent this. Today, the Republican Party is making all that effort and lives lost for naught.
U.S. mathscores have dropped, and the educational infrastructure at the most basic level is often just not there: only half of U.S. high schools offer calculus, and 60 percent provide physics classes.
Both skills are critical for designing quantum computers and achieving innovations in artificial intelligence. According to study estimates, just 3 percent or so of America’s high school graduates join the ranks of STEM workers.
Prominent legislation to promote STEM education has not met its funding targets. The Biden administration’s CHIPS and Science Act set out to invest billions of dollars in STEM education, but the funding appropriated for the National Science Foundation has been hundreds of millions less than what was originally requested.
The MAGAs falsely believe our Monetarily Sovereign federal government should spend less. They think this will make the government more efficient and lower their taxes.
The facts: It will make the government less efficient and federal taxes do not fund federal spending. Unlike state and local governments, the federal government is Monetarily Sovereign.
The Federal government does not spend tax dollars. It creates new dollars, ad hoc, to pay all its bills.
(The purpose of federal taxes is to control the economy and to assure demand for the dollar, not to pay for anything.)
Even if the government collected zero dollars in taxes, it could continue spending, forever.
Within the next two years, MAGAs and the rest of us will feel the results of this misguided belief, as federal services decline and the private sector slides into recession.
In addition to industry jobs, the basic and applied research that takes place at the nation’s universities and tech hubs is highly reliant on overseas talent.
An August 2024 report from the National Academies of Sciences, Engineering and Medicine (NAS) notes that contributions from the large cadre of international students are critical to sustaining current levels of research in U.S. graduate programs.
Foreign-born employees make up 43 percent of U.S. STEM workers who hold doctoral degrees, and this number rises to nearly 60 percent in computer scienceand certain other fields.
In 2022 more than half of U.S. start-ups with valuations greater than $1 billion had at least one immigrant at their helm—and the value of foreign-born professionals in this country can be witnessed on the global stage at the highest levels of human achievement: 40 percent of American Nobel Prize winners in chemistry, medicine and physics in the past two decades have been immigrants.
And yet, America does everything it can to make immigration difficult and time-consuming. Unless you’re rich enough to pay for entry, you might wait years to become a citizen.
Under a Trump proposal, foreign investors would pay $5 millionto the U.S. government in exchange for permanent residency (green card privileges) and a pathway to citizenship.
This is not the government’s EB-5 program which requires a $1.05 million investment in a U.S. business, or $800,000 if investing in a Targeted Employment Area (TEA)— a rural area or one with high unemployment and a Job Creation Requirement to create or preserve at least 10 full-time jobs for U.S. workers within two years.
Why the $5 million payment? To keep the riff-raff out. (The “riff-raff” are the people at both ends of the labor spectrum– the people with advanced science degrees and the people who labor in the fields, in short, the people who will do the work America needs.)
Uncertainties about immigration for tech jobs—reflected by the internal strife in the Trump team and among its supporters—could result in fractured policymaking, with foreign-born STEM workers getting placed under the same anti-immigrant policymaking umbrella as undocumented immigrants.
In the fusillades of the MAGA civil war, Trump took Musk’s side, saying he has always been a big backer of H-1Bs, although the president has previously said the opposite.
He once called the visas “very, very bad for workers.”
In fact, during Trump’s first term, his administration set up a partial H-1B blockade.
The denial rate for the already short supply of the visas reached 24 percent in fiscal year 2018. It fell back to 2 percent in fiscal year 2022 after courts found his administration’s handling of these visas to be unlawful.
In one 2014 study, researchers looking at this issue found that cities across the nation with high H-1B denial rates experienced a drop in computer-related jobs, and this decline was accompanied by lower wageb- growth for native-born citizens who lived there.
The U.S. remains a prime destination for foreign-born students and professionals, but the status quo may not hold. Talent-recruitment programs began to emerge in many countries in the 2010s.
One prime example is Canada’s Tech Talent Strategy, which afforded three-year work permits to as many as 10,000 people in the U.S. who have H-1B visas.
Apparently, Canadians are less frightened of immigrants than are Americans.
The ultimate fix for the U.S.’s chronically broken immigration system would be to implement a long-sought massive overhaul through congressional legislation.
Such comprehensive immigration reform would rationalize the competing demands of border security and the need to equitably regulate both legal and illegal immigration. But this kind of all-encompassing measure has little chance of being adopted during the next four years.
“The next four years” is a euphemism for “during the xenophobic, hatemongering Trump administration.
In bringing wider attention to the role of legal immigration, the wrangling over H-1Bs may have an upside. On a podcast last year, Trump remarked that international college students, once they graduate, should be eligible for green cards, which confer permanent residency.
Waiting for them to graduate confers no advantages on America. Those who are students here are more likely to work and live here, giving America the educated people we need.
His administration could make good on some variation of this idea. Other steps might raise the caps on H-1B visas granted annually (currently 85,000 in total) and institute much needed reforms to the visa program—especially to ensure that visa holders are not exploited.
Employers could do their part by seeking out underutilized programs such as the 0-1A temporary work visa for individuals with “extraordinary ability.” If nothing is done on H-1Bs and other legal-immigration measures, the desirability of the U.S. as a destination for STEM students and tech workers will fade.
That already has happened. The door-kicking, Nazi-like harshness of (ICE) Immigration and Customs Enforcement under Trump has scared away many potential immigrants.
The 2024 NAS report notes that between 2019 and 2023, the U.S. fell from first to eighth worldwide in scores for attractiveness to highly educated workers. It will probably slip further.
The anti-immigrant atmosphere ushered in by the Trump administration’s promised mass deportation of undocumented immigrants is also likely to sour foreign students and engineers on coming to the U.S. And this outcome will benefit no one.
U.S. population growth has not been unmanageable. In fact, many experts argue the opposite: the U.S. now faces dangerously low population growth, and immigration is one of the few forces keeping it from shrinking.
SUMMARY
Birth rates in the U.S. have fallen steadily for decades and are now below replacement level (about 1.6 children per woman as of 2023).
Aging population: Millions of Baby Boomers are retiring, putting pressure on healthcare, Social Security, and the labor force.
Without immigration, the U.S. would already be in demographic decline, like Japan, South Korea, or some European countries.
Today, America has labor shortages (especially in caregiving, farming, construction, and tech)
If workers are deported, we will have a slowdown in GDP growth due to fewer workers
Today’s challenge isn’t too much growth — it’s too little. Immigration is increasingly seen by economists and demographers as essential to sustaining the U.S. economy and workforce.
Even Trump’s buddy, Elon Musk, and most economists warn of a looming population collapse and say we need more people, especially working-age individuals, to support aging societies and sustain innovation and economic growth.
Politically, immigrants are falsely scapegoated for job competition, crime, or cultural change, though those fears are unsupported by data.
Following the economic growth successes of the Biden administration, Trump has chosen a guaranteed-to-fail hate-promulgating, populist, bigotry-based program of applying leeches to cure anemia.
If the GOP remains cowardly and the Supreme Court continues to give Trump “get-out-of-jail-free” cards, the U.S. will endure a recession, followed by a depression, along with a fascist dictatorship, devoid of legal protections for the populace.
We, as a nation, cannot claim moral leadership — Trump destroyed that — and we soon will lose economic, financial, and military leadership.
Trump is elderly and growing senile, so we can only hope nature takes its course, sooner rather than later.
Imagine that the BMW car dealership in a neighboring village — a dealership you knew to be honest — began to sell new, fully loaded BMWs for $30,000 each.
The BMW dealership in your village sells the same cars for $50,000, so you went to the next village and paid $30,000 for a BMW.
The car was everything you knew BMWs to be — ran great, looked great, no problems — best car you ever owned. So you told your family and friends about it, and they went out, got the same deal, and the same results.
Soon, your entire village was taking advantage of the low price to get these great cars. Altogether that year, they spent a total of $300,000,000 buying BMWs in the next village.
Everything was great until . . . .
Until your village Mayor Trump told you that your village is running a $300,000,000 trade deficit with the next village, and your local BMW dealer was going broke because of the next village’s “unfair” sale tactics.
So from now on, to protect the local dealer, Mayor Trump added a 100% import tax to all BMWs brought in from the next village.
The results:
The neighboring village put a 100% retaliatory tax on the BMWs that your village exports.
The next BMW you bought cost you $50,000 if bought locally or $60,000 if bought next door, rather than the $30,000 you formerly paid.
You and many of your neighbors decided not to buy cars.
Many fewer BMWs were sold in either village: both car dealerhips suffered sales losses.
Eventually, one of the dealers went out of business because there wasn’t a need for two BMW dealers in neighboring towns.
Tariffs are a business cost that increases prices and reduces competition, both of which are inflationary, while taking dollars out of the economy, which is recessionary.
Does this scenario sound familiar?
The lesson is simple: Tariffs are poison to business.
Whether we’re talking about import tariffs (which punish the importing nation) or the rarer export tariff (which discourages exporting), tariffs increase prices and reduce trade.
Tariffs transfer money from the public to the government, and if the government happens to be Monetarily Sovereign, the money will be destroyed upon receipt.
Reader serenebutterye70be631ba sent us the following comment:
Rodger, will you comment on this videohttps://www.youtube.com/watch?v=5LJi6iFHqDc, which says the real reason for tariffs is that it’s the only way to keep production in a country or something like that?
The ostensible purpose of tariffs is to discourage imports by raising their price. But the reality is a bit more nuanced than that. My answer to the question was,
If, for some reason, one wishes to protect an American business from foreign competition, there are several methods. Here are three of them:
Create legislation mandating that the product or service meets criteria that only American businesses can meet. For example, a law saying that all trucks using American roads must be American-made. Bingo. American truck makers are protected.
Levy import taxes, which effectively are sales taxes on imported goods. These represent money transfers from American consumers to the U.S. government. It’s a price increase, but worse, it removes growth dollars from the U.S. economy, so it’s recessive.
The right way — the best way — to protect a U.S. industry is for the federal government directly to aid the industry by giving it money. Examples are farm subsidies. They not only protect U.S. farmers, but they also lower purchase prices to consumers while adding growth dollars to the economy. While #2 reduces GDP and causes inflation, #3 increases GDP and lowers prices.
(Many trade agreements and laws seemingly prohibit protectionism, but nations generally ignore such toothless regulations, preferring to protect their own interests.)
Other protectionist measures that, contrary to tariffs, would benefitan economy would include funding R&D for local businesses, easing immigration laws to gain employees, funding training andeducation for local employment, eliminating FICA to reduce business costs, funding Medicare for All, etc.
If Trump and his advisors cared about the U.S. economy, they would choose #3, but that would help narrow the income/wealth/power Gap between the rich and the rest — the last thing the rich want to do.
So, we have Trump’s ridiculous tariffs, which are inflationary and recessionary, while punishing the middle- and lower-income people, and widening the Gap.
Sadly, the populace does not understand this, and the people pay the price. Ignorance is expensive.
Importing more than we export is neither bad nor good. It merely means we exchange our dollars for goods and services.
You exchange more dollars with your local retailers than you receive from them. In short, you run a trade deficit with almost every supplier of products and services — your grocer, your gas station, your maid, etc.
Is this bad? No, it just means it’s easier for you to obtain dollars than to make the goods and services. You would rather work at your current job than try to build a car, so you work for dollars, which you exchange for a car.
If the government wanted to protect the car industry, it could send you a coupon good for $xxx dollars when you buy a new car. That would boost car sales and stimulate GDP. By contrast, puttingariff on car imports raises all car prices and takes dollars from the economy.
The choice is clear (except to politicians, media, and economists who don’t understand Monetary Sovereignty — the government’s infinite ability to create stimulative dollars).
SUMMARY
Tariffs add to business costs, which are passed on to consumers, and so, are inflationary.
Tariffs reduce competition, thus allowing for higher prices, and so again, are inflationary.
By reducing competition, tariffs reduce the motivation to spend on Research and Development of product improvements and new product creation.
Tariffs take growth dollars out of the economy, and so are recessionary.
While it’s difficult to verify the exact words or the precise historical record of the exchange, the essence of the story is historically consistent with Franklin D. Roosevelt’s thinking about Social Security.
Here’s the most widely cited version of the exchange:
During the creation of the Social Security program in the 1930s, FDR was advised by his economic team — particularly economist John Kenneth Galbraith and others in the Treasury — that the federal government, as a monetary sovereign, did not need to collect payroll taxes to fund Social Security benefits.
They explained that the government could simply create the money and pay the benefits directly.
Roosevelt is reported to have responded with something along these lines:
“I guess you’re right on the economics — but the politics are what matter here. Those taxes aren’t really needed for revenue. They’re needed to give the workers a sense of personal stake in the system — to give them a legal, moral, and political claim to their benefits.”
“With those taxes in there, no damn politician can ever scrap my Social Security program.”
Now compare that to what AARP wrote in its May/June 2025 issue of the AARP Bulletin, Social Security and Medicare, by T.R. Reid:
“These two programs (Social Security and Medicare) have protected the quality of life for older Americans,” (AARP’s Nancy) LeaMond observes. “So we need to save them.
“Job 1 is ensuring the solvency of the programs for current beneficiaries, but also for future generations. To do that, we have to ensure that the trust funds are stable.”
And there it is, the Big Lie, that Social Security and Medicare are paid for by taxes via federal trust funds. It is a lie believed by most Americans, and possibly most federal politicians, most media writers, and even most economists.
But despite common belief, it is a pernicious, harmful, cruel lie.
Even Franklin D. Roosevelt, the creator of Social Security, knew it was a lie, but he allowed it, not for financial reasons, but for political reasons — so that “no damn politician can ever scrap my Social Security program.”
How little did even he realize the depths of ignorance the damn politicians would plumb in order to limit benefits to the common people vs. the rich.
The rich have bribed the media (via ownership and advertising dollars), the economists (via university grants and promises of future think tank employment for professors), and the politicians (via many routes), to feed you false information. This guarantees ignorance through false information from trusted sources.
It is a multi-layered campaign of receipt:
1. Ignorance About Monetary Sovereignty: Unlike state and local governments, businesses, and individuals, the federal government is Monetarily Sovereign. It is the original creator of the U.S. dollar and continues to create dollars at will.
The federal government can never unintentionally run short of its sovereign currency, the U.S. dollar. Even if the federal government did not collect a single dollar in taxes, it could continue creating and spending dollars forever.
2. Ignorance about federal deficits, debt, and borrowing. Federal deficits are the net amount of money that an infinitely rich federal government sends to the private sector to grow Gross Domestic Product. Without federal deficits, the economy cannot grow and instead would fall into a depression.
The federal “debt” is not federal, and it is not “debt.” It is the total of outstanding Treasury security accounts (T-bills, T-notes, T-bonds) the dollars in which are owned by depositors and only held by the federal government for safety.
Those dollars are never used by the federal government for anything. The accounts are similar to bank safe deposit boxes in which the contents are held for safety and not part of the bank’s debt.
The federal government does not borrow dollars; it has the infinite ability to create them from thin air. As the St. Louis Federal Reserve wrote in their October 2011 publication titled “Why Health Care Matters and the Current Debt Does Not”:
“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. In this sense, the government is not dependent on credit markets to remain operational.”
3. Ignorance About Federal Taxes: Federal taxes fund nothing. The purposes of federal taxes are different from the purposes of state/local gov. taxes. The sole purposes of federal taxes are:
To assure demand for the U.S. dollars by requiring taxes to be paid in dollars
To control the economy by taxing what the government wishes to discourage and by giving tax breaks to what the government wishes to reward
To deceive the public into believing that benefits must be limited by taxes. This is a belief fostered by the rich to limit benefits to the rest of us.
Contrary to popular wisdom, the rich pay a much lower tax rate than you do. Pay no attention to the tax rate table that say otherwise. The rich have managed to engineer special tax deductions that make the tax tables invalid.
For example: Billionaire Donald Trump paid nofederal income taxes at all in 10 of 15 years prior to 2016, In 2016 and 2017, he paid just $750 each year in federal income taxes.
In 2020, he paid $0 in federal income tax. He reported large losses across many years, some in the tens or hundreds of millions, which allowed him to offset future income.
These losses were often carried forward using legal provisions in the tax code. He claimed major business expenses — including for residences, aircraft, and other personal luxuries— as deductions.
(Have you been able to deduct the costs of your home, transportation, meals, clothing, cars, furniture, entertainment, etc.? Trump and other billionaires could.) But Social Security and Medicare are headed toward insolvency?? Really?
4. Ignorance about Inflation: No sooner does anyone realize that the federal government’s finances are nothing like state and local governments’ finances, than we hear the false claim of last resort about federal spending, “but that would cause inflation.”
Let me be very clear about this: Inflation is not a spending problem, and inflation is not a demand problem. Inflation is, always has been, and always will be a supply problem.
Federal spending does not cause inflation. In fact, federal spending cures inflation when directed at curing the shortages that cause inflation. We discuss this in more detail here.
The inflation myth has been promulgated solely to prevent the populace from demanding the kinds of federal spending and tax relief afforded to the rich — the kind of relief that has allowed billionaires like Donald Trump to pay less federal taxes than you have.
5. Ignorance about Federal Trust Funds: The USA.gov A–Z Index lists over 400 federal departments, agencies, and related entities.This includes executive departments, independent agencies, government corporations, commissions, and government-sponsored enterprises.
Very few federal agencies are (supposedly) funded through trust funds.The largest and most well-known trust funds include:
Social Security Trust Funds: Managed by the Social Security Administration, supposedly funded by payroll taxes.
Medicare Trust Funds: Managed by the Centers for Medicare & Medicaid Services, supposedly funded by payroll taxes, premiums, and general revenues.
Highway Trust Fund: Managed by the Department of Transportation, supposedly funded by fuel and excise taxes.
Unemployment Trust Fund: Managed by the Department of Labor, supposedly funded by federal and state unemployment taxes.
Civil Service Retirement and Disability Fund: Managed by the Office of Personnel Management, supposedly funded by employee and agency contributions.
In total, there are approximately a dozen major federal trust funds.So, only a small number of agencies are supposedly funded through these mechanisms.
The Supreme Court is not supposedly funded via a trust fund. Nor is the Executive Branch (The White House). Nor is Congress itself. Nor are the military services. Why, out of 400 federal departments, agencies, etc., are there only about a dozen trust funds?
Trust funds are not used because the governmentneedsthe money. They’re used because Congress wants to: Create political protection for specific programs (e.g., Social Security, Medicare), give the illusion of self-funding (“you paid in, so you earned it”), and limit or earmark spending, to avoid general budget fights — not for any financial reasons.
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 trust funds finance Social Security, portions of Medicare, highways and mass transit, and pensions for government employees.
Federal trust funds bear little resemblance to their private-sector counterparts, and therefore the name can be misleading.
A “trust fund” implies a secure source of funding. However, a federal trust fund is simply an accounting mechanism used to track inflows and outflows for specific programs.
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 then combined with other receipts that the Treasury collects and spends.
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.
Note the last line, which is worth repeating: “The federal government unilaterally can alter the purposes of the accounts and raise or lower collections and expenditures.
While Congress, the media (including AARP), and the economists pretend to fret over the coming “insolvency” of the Social Security and Medicare “trust funds,” the simple and honest fact is this:
Congress and the President could prevent or cure any “insolvency” simply by voting to do so.
They could vote to add a few trillion dollars to the fake trust funds, or they could vote to do away with the trust funds altogether and pay for Social Security and Medicare the same way they pay for the POTUS, the SCOTUS, or Congress.
At one time, there even was the suggestion to create a multi-trillion dollar platinum coin (which the Treasury specifically is allowed to do) and to deposit that coin in the Social Security trust fund account, to prevent insolvency. This solution was rejected because. . . because it would have demonstrated the Big Lie about federal financing.
When did you ever hear that the President was running short of money? Or that SCOTUS couldn’t pay for the justices’ salaries? Or that Senators couldn’t be paid?
Answer: Never, and you never will.
There has never been a time when the Supreme Court, the Presidency, the military, or Congress was said to be “facing insolvency.”
Why? Because those agencies are funded directly by Congressional appropriations from the General Fund of the U.S. Treasury, which is not constrained by tax revenue or borrowing.
The Social Security and Medicare programs were deliberately designed to resemble savings accounts. This has enabled politicians and media to manufacture a crisis narrative: “We’re running out of money!” But that’s accounting fiction.
The difference is purely political, not financial:
Agency/Program
Funding Mechanism
Ever faced “insolvency”?
Why or Why Not
Department of Defense
General Fund (appropriated)
❌ Never
Congress always appropriates what it wants
Congress itself
General Fund (appropriated)
❌ Never
Congress won’t default on itself
Supreme Court
General Fund (appropriated)
❌ Never
Treated as an essential government function
Social Security
Trust Fund + FICA tax
✅ “Facing insolvency”
Artificial limit imposed by political design
Medicare (HI)
Trust Fund + payroll tax
✅ “Facing insolvency”
Same as above — not a real constraint
.
.
.
For years, you have been told about the Social Security and Medicare crisis, which is exacerbated by Congress’s and the President’s ridiculous decision to tax your benefits.
So to make themselves wealthier, the rich bribe Congress to pass lawsthat widen the Gap, bribe the media to promulgate those laws, and bribe economists to justify those laws. And that is why you see persistence in the Big Lie.
SUMMARY
The Big Lie in economics is that federal taxes and borrowing fund federal spending.
The Big Truth in economics is that even if the federal government didn’t collect a penny in taxes, and continues not to borrow dollars, it could keep spending forever, without causing inflation.
The so-called “crisis” in Social Security and Medicare solvency is a lie invented by the very rich, to widen the income/wealth/power Gap between them and you. There is no crisis other than a crisis of truth.
Your information sources and leaders are lying to you, and they will continue lying until you demonstrate that you will reject their lies. Vote the liars out of office. Stop using the lying media until they expose the truth. Stop funding universities that teach the lies.
Then one day, you will pay the same taxes as Donald Trump.