Who are America’s most dangerous people?

Who are America’s most dangerous people? What’s your opinion? You might be tempted to name the white supremacists who attacked Congress and attempted to overthrow the U.S. election. Had they succeeded, the America you know and love would be gone. Or you might list the Trump Republicans who encouraged, then excused, the attempted coup and who still are in our government. But I offer you another choice: These are the leaders of an organization called “The Committee for a Responsible Federal Budget” (CRFB).” They did not cause or join a riot. They did not crash Congress. They did not cry, “Hang Mike Pence.” They are far more clever and subtle. And that subtlety is what, in my opinion, makes them so dangerous. Even the group’s name, including the words “Responsible federal budget,” makes them sound so . . . responsible. But the pen is mightier than the sword, and therein lies the real danger. The CRFB doesn’t march or attack. They write. They talk. They reason. They influence other influencers like politicians, economists, and the media. The group speaks to the public’s ignorance of federal financing. It draws false parallels between federal funding and personal financing. It even draws false parallels between federal financing and state/local government financing. The general public does not understand that the parallels are false. So, when the CRFB people say, in essence, “If you do this, the federal government should do it too,” that sounds reasonable to the uninformed mind. “If you must live within your means, the federal government should live within its means.” “If you can’t afford to borrow, you don’t borrow. The federal government should do the same.” “You have to pay off your debts. So should the government.” You can’t argue with such logic — unless you understand it’s all a lie.  Federal financing is nothing like your financing, nothing like state/local government financing, and nothing like business financing. It is unique. The Federal government is Monetarily Sovereign. It is the creator of the laws that created the U.S. dollar. It cannot run short of laws, so it cannot unintentionally run short of dollars. It can give the U.S. dollar any value it chooses. No amount of federal spending is “unsustainable.” it does not need tax income or any income. Even if the federal government stopped collecting taxes, it could continue spending forever. (The purpose of federal taxes is to control the economy by taxing what it wishes to limit and giving tax breaks to what it wishes to encourage.) The government creates dollars ad hoc when it pays bills. Even the language describing personal finances and federal finances can be different:
    • The federal government never borrows dollars (It accepts deposits into accounts, the contents of which are privately owned. The government never touches the contents — similar to safe deposit acounts.)
    • Federal debt is not a debt of the federal government. It is the total of the abovementioned accounts.
    • Add to the debt means to add money to the economy. To reduce the debt requires that money in the economy be destroyed.
    • A federal surplus is a deficit for the economy (aka “the private sector”). Similarly, a federal deficit is a surplus for the economy.
    • A trade deficit is money flowing out, with goods and services flowing in. Since trade is assumed to be an equal exchange, the trade deficit also could be called “goods/services income.” For a government having the infinite ability to create dollars, goods flowing in are more important than dollars flowing  out.
    • The notorious “debt limit” does not limit debt; it limits paying for existing debt. It is the equivalent of insolvency.
    • The federal government cannot unintentionally become insolvent. That means no federal government agency (Medicare, Social Security, the military, etc.) can become insolvent unless Congress and the President want it to.
    • Federal “trust funds” are not real trust funds. They merely are record-keeping lines on a balance sheet. They too cannot become insolvent unless Congress and the President want that result.
In any economy, scarcity leads to higher prices. Inflation is a general increase in prices caused by an increase in the scarcity of goods and services. Most inflations boil down to a scarcity of oil. Today’s inflation has been caused by COVID-related scarcities of oil, food, lumber, steel, rare earths, supply chains, labor, etc.
Federal deficit spending (red) does not cause inflations (blue). The peaks and valleys do not correspond. Reduced deficit growth leads to recessions (vertical gray lines).
Inflation is caused by shortages of key goods and services, primarily shortages of oil (gray line), which translate into shortages of food, transportation, and virtually all other commodities.
Federal deficit spending does not cause inflation. In fact, it could cure inflation if the spending focused on obtaining and distributing scarce resources. Keep in mind the above facts while you read what the CRFB says:

What Would It Take to Balance the Budget?

It’s encouraging that many in Congress are focusing more on our unsustainable fiscal situation and want a plan to improve the nation’s fiscal outlook.

At no time does the CRFB tell why the fiscal situation is “unsustainable.” The federal government has run a deficit (taxes lower than spending) almost every year since 1940. The net total of those deficits approximates $25 trillion. The CRFB has been wrong every year of its existence, and neither it nor its followers have learned anything from these failures. Yet here we are. Sustaining.

Unfortunately, due to continued borrowing over the past several years, the desirable fiscal goal of budgetary balance has become much more difficult to reach, and it is doubtful it could be achieved in a decade or less, notably if revenue, defense, and other parts of the budget are excluded from the solution.

The federal government does not borrow money. Why would it, when it has the infinite ability to create the laws that create U.S. dollars? It can’t run out of laws or dollars. What the CRFB incorrectly terms “borrowing” is the acceptance of deposits into T-bill, T-note, and T-bond accounts, which are owned by depositors, not by the government. The government never touches those dollars. It “pays off” the so-called “debt” by returning the dollars to their owners, the depositors. And why is budgetary balance a “fiscal goal” when it invariably causes recessions and depressions? (See the first graph above.)

1804-1812: U. S. Federal Debt reduced 48%. Depression began 1807. 1817-1821: U. S. Federal Debt reduced 29%. Depression began 1819. 1823-1836: U. S. Federal Debt reduced 99%. Depression began 1837. 1852-1857: U. S. Federal Debt reduced 59%. Depression began 1857. 1867-1873: U. S. Federal Debt reduced 27%. Depression began 1873. 1880-1893: U. S. Federal Debt reduced 57%. Depression began 1893. 1920-1930: U. S. Federal Debt reduced 36%. Depression began 1929. 1997-2001: U. S. Federal Debt reduced 15%. Recession began 2001.

In order to achieve balance within a decade, all spending would need to be cut by roughly one-quarter and that the necessary cuts would grow to 85 percent if defense, veterans, Social Security, and Medicare spending were off the table.

Economic growth is measured by Gross Domestic Product (GDP), one formula for which is:

GDP = Federal Spending + Non-federal Spending + Net Exports

Your elementary school algebra should show you what happens to economic growth when federal spending declines. Growth declines.

RECESSION: a period of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in GDP in two successive quarters

DEPRESSION: a prolonged and severe recession in an economy

By definition, the CRFB’s “fiscal goal” is a recession or a depression.

These cuts would be so large that it would require the equivalent of ending all nondefense appropriations and eliminating the entire Medicaid program just to get to balance.

And is that supposed to be a good thing?

Balancing the budget has become increasingly challenging over the past 15 years.

Efforts to show balance too often rely on unrealistically aggressive cuts, unspecified savings, rosy economic assumptions, and other budget gimmicks as a result.

Successful budget actions in recent years have come mainly from more targeted deficit reduction efforts than from trying to meet overly aggressive fiscal goals.

“Successful budget actions in recent years”? One is left to wonder what the CRFB considers “successful.” The only spending reduction in the past 80 years came in the 1998 – 2001 period, the reduction President Clinton is so proud  to boast about. It caused the recession of 2001, which was cured by increased deficit spending.
President Clinton’s reduced deficit spending led to the recession of 2001, which was cured by increased deficit spending.
When the CRFB refers to “targeted deficit reduction,” they mean less money was spent on specific projects. The CRFB doesn’t explain how those mini-reductions were deemed “successful.”

And with deficits on course to reach $2.4 trillion (6.6 percent of GDP), balancing the budget is now harder than it has ever been.

Balancing the budget is problematic because it damages the economy. The CRFB is aware of this but pretends there is some way to cut Federal Spending while not cutting GDP — a mathematical impossibility.

The exact amount of savings needed for full budget balance is uncertain and will depend both on budget projections in the Congressional Budget Office’s forthcoming ten-year baseline as well as the path of any proposed policies.

In the recent CRFB Fiscal Blueprint for Reducing Debt and Inflation, we estimated achieving balance would require roughly $14.6 trillion of deficit reduction through 2032, including over $2 trillion of policy savings (and nearly $400 billion of interest savings) in 2032 alone.

To achieve these savings without more revenue, we estimate all spending in 2032 would need to be cut by 26 percent; this figure rises to 33 percent if defense and veterans spending is exempted from the cuts.

Cut all spending by “only” 26 or 33%? Think. How would that affect GDP? Then think of the definition of “depression.” The CRFB wants to cause a recession or depression as a “cure” for the non-existent evils of federal spending. The true purpose is to make the rich richer by widening the Gap between the rich and the rest.

For a sense of magnitude, applying this cut across the board would mean reducing annual Social Security benefits for a typical new retiree by $10,000 to $13,000 in 2032.

It would also mean laying off 1.1 to 1.4 million federal employees (more than two-thirds of the civilian workforce if the military were exempted) and removing 20 to 25 million people from Medicaid eligibility.

Reducing Social Security and firing 1.1 to 1.4 million so that the federal government, which has infinite dollars, is not how to run an economy, though it is a great way to make the rich richer.

Excluding Social Security and Medicare from cuts would make the task of balance even more unrealistic. Without touching spending on defense, veterans, or Social Security, all other spending would need to be cut by 51 percent. Also, excluding Medicare would mean that the remaining spending would need to ultimately be cut by 85 percent.

It gets dumber and dumber, but the CRFB favors these draconian cuts to benefit the rich.

The figures above do not include additional savings that might be necessary if policymakers choose to extend $3 trillion worth of tax cuts that have expired or are set to expire in the coming years.

To give a sense of just how challenging achieving balance in 2032 by controlling spending is, it would require doing one of the following:

*Eliminating virtually all defense and nondefense discretionary spending programs; *Cutting Medicaid spending in half while eliminating all other mandatory spending outside of Social Security and Medicare; *Eliminating all nondefense discretionary spending and ending the entire Medicaid program; *Repealing Medicare, all income security programs, and all refundable tax credits; or *Discontinuing all Social Security retirement and survivors’ benefits.

Did you notice what is missing from the above list? Anything that would take from the rich. Because the CRFB is a tool of the rich, something like a 90% tax rate (which America had in 1941 is not even discussed. In 1941, in fact, Roosevelt proposed a 99.5 percent marginal rate on all incomes over $100,000. )

Wanting to balance the budget is an admirable and desirable goal.

No, it is a stupid goal. It would cause a recession if we are lucky, but most likely, a deep depression that only could be cured by massive federal deficit spending. The CRGB goal is based not on economic need but on making the rich richer. That is the CRFB mission.

The first step, of course, is to avoid actions that would worsen our already unsustainable fiscal situation.

The irony is palpable. Here are people recommending taking trillions from the private sector but claiming they want to “. . . avoid actions that would worsen our fiscal situation.” It would be laughable were it not so harmful.

We commend the adoption of a specific and realistic fiscal target.

The realistic target should be to narrow the Gap between the rich and the rest and to provide more human benefits to the populace. The federal government has all the tools it needs to create a paradise on earth, so long as these most dangerous people in America don’t hold sway: Rodger Malcolm Mitchell Monetary Sovereignty Twitter: @rodgermitchell Search #monetarysovereignty Facebook: Rodger Malcolm Mitchell

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The Sole Purpose of Government Is to Improve and Protect the Lives of the People.

MONETARY SOVEREIGNTY

Ex jailbird, GOP mouthpiece Dinesh D’Souza has a suggestion for the GOP. They just might do it.

The GOP, America’s “Party of the Rich,” will love this.
Dinesh D'Souza in December 2018.jpg
D’SOUZA
First, some background:

The United States Attorney for the Southern District of New York announced today that DINESH D’SOUZA was sentenced in Manhattan federal court to five years of probation, with eight months during the first year to be served in a community confinement center.

He pled guilty to violating the federal campaign election law by making illegal contributions to a United States Senate campaign in the names of others.

Manhattan U.S. Attorney Preet Bharara stated: “Dinesh D’Souza attempted to illegally contribute over $10,000 to a Senate campaign, willfully undermining the integrity of the campaign finance process.

Like many others before him, of all political stripes, he has had to answer for this crime – here with a felony conviction.”

This extreme right-winger was one of the many crooks pardoned by Donald Trump. The irony is that he broke campaign laws and produced a phony movie blasting Democrats for — you guessed it — breaking campaign laws. Now he has a suggestion for the GOP, America’s “Party of the Rich,” they are bound to love, for it combines the two things they most desire. Ending the IRS and taxing the lower income more. Dinesh D’Souza on Twitter:

“The House GOP should pass a bill basically wiping out the IRS and the tax code and instituting a flat tax of 15%.

The rich pay more, but they pay at the same rate.

This won’t become law now, but it can become a central plank for Republicans in the 2024 presidential election.”

The notion of “wiping out the IRS” has some merit. Our Monetarily Sovereign government neither needs nor uses the tax dollars (or any other dollars) that come into the Treasury. In fact, federal taxes begin in the M2 money supply measure, but upon reaching the Treasury, they cease to be part of any money supply measure. They are effectively destroyed, disappearing into the Treasury’s infinite money supply. The IRS is not on anyone’s list of favorite federal agencies, but no one dislikes them more than the rich do. If you’re salaried, there’s not much you can do about income taxes and virtually nothing you can do about payroll taxes. The rich continually try to game the system by stretching the meanings of tax laws to the breaking point. I’m pretty well off, but even I can’t begin to imagine the Byzantine translations of tax laws that the wealthy use. You undoubtedly have read that you paid more taxes in the past 15 years than did billionaire Donald Trump. We all did because he paid virtually none. Now he is being investigated and may even have to pay a bit. You can be sure he and his fellow billionaires despise the IRS. The main problems with felon D’Souza’s recommendation are:
  1. He believes (or only claims) federal taxes are necessary, and
  2. He advocates a flat tax to replace the current graduated tax.
Number 1 is false. Federal taxes do not fund federal spending. Federal tax dollars are destroyed upon receipt. The non-funding purpose of federal taxes is to control the economy by taxing what the government wishes to limit and by giving tax breaks to what the government hopes to encourage. This could be accomplished without taxes simply through rewards and non-tax penalties. Number 2 reflects the very rich’s desire to widen the income/wealth/power Gap between them and those below them. The flat tax is the anti-equalization version of the graduated tax. The ostensible purpose of our graduated tax system is to narrow that Gap. Sadly, it has been perverted by the numerous tax breaks afforded to the rich that are not available to the rest of us. As weak as our graduated system is, the flat tax is worse. It is the ultimate dream of the rich and their lackeys, the Republicans. The reality would be that tax breaks would not disappear, but the published tax rates on the rich would decline to 15%. In short, a convicted felon, “right-wing conspiracy wingnut,” and mouthpiece for the rich has made two suggestions for further enriching the rich. We now await his applause from the GOP. Rodger Malcolm Mitchell Monetary Sovereignty Twitter: @rodgermitchell Search #monetarysovereignty Facebook: Rodger Malcolm Mitchell

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The Sole Purpose of Government Is to Improve and Protect the Lives of the People.

MONETARY SOVEREIGNTY

GOP does the right thing for the wrong reasons. The Dems do the wrong thing for the right reasons.

Readers of this site know that federal tax dollars, unlike state/local tax dollars, do not fund anything. (See “Motley Fool spreads the bullshit about Social Security”)

Liars, Cheaters, and Thieves Continue to Increase the Federal Debt | The TNM
Your federal tax dollars are taken from the economy and are destroyed upon receipt.

Unlike state/local tax dollars, federal tax dollars are destroyed the second they are received by the government.

State/local governments, being monetarily non-sovereign, need tax dollars to support spending. The Monetarily Sovereign federal government does not.

Federal tax collections do nothing but take dollars from the U.S. economy and therefore are recessive. (State/local tax dollars remain in the economy.)

Thus, steps to reduce federal tax collections are economically stimulative because those steps keep money in the economy.

An article from the Wall Street Journal discusses the latest Republican steps to reduce federal tax collections — the right move for the wrong reasons.

GOP House Takes First Swipe at IRS Money
A bill expected to be first legislation from the new Republican majority would rescind billions in funding for tax agency

WASHINGTON—The new Republican-controlled House is poised to vote as soon as Monday to repeal tens of billions of dollars in Internal Revenue Service funding, taking up a bill that is unlikely to become law but that previews coming battles with Democrats over the tax agency’s expansion.

Initially, this repeal would be recessive. It would prevent the federal government from adding tens of billions of growth dollars to the economy.

However, if those dollars were to be used to increase the collection of taxes, repealing the added federal spending could be stimulative. 

The bill—expected to be the first legislation advanced by the Republican majority that took over the House last week—aims to erase a key policy priority of the Democrats, who used their control of the government to enact it last year.

Democrats, who still hold the Senate and White House, could block the legislation. But Republicans’ emphasis on clawing back IRS funding marks it as a top concern and demand for the House majority, one that could re-emerge when lawmakers turn to raising the debt ceiling or passing annual spending bills later this year.

The bill, sponsored by Rep. Adrian Smith (R., Neb.), would rescind almost all of the $80 billion in IRS funding that Congress approved in August in the climate, health, and tax law known as the Inflation Reduction Act.

In short, whether the Smith bill would be stimulative or recessive depends on whether the $80 billion would result in more or fewer federal tax dollars being collected.

If rescinding the $80 billion investment would prevent the collection of more than $80 billion tax dollars, the Republican bill would be stimulative. Until that point, however, rescinding the $80 billion investment would be recessive.

That’s just arithmetic.

The other consideration is why the Republicans wish to rescind this expenditure.

House Speaker Kevin McCarthy (R., Calif.) promised, “Our very first bill will repeal the funding for 87,000 new IRS agents. We believe government should be to help you, not go after you.”

The IRS would keep $3.2 billion for taxpayer services, which it started using to hire thousands of customer-service representatives to answer phone calls during the coming tax-filing season. In fiscal year 2022, the agency’s level of service—a measurement of how often phones are answered—was 17.4%, below its 30% target for that year, its 75.9% level from 2018, and the 85% target for this year.

The Republicans, the party of law and order — the party that is pro-police — tells America that added IRS “police” would “go after” the public. The Dems deny it.

The fact that the IRS would keep $3.2 billion is stimulative from the standpoint of dollars added to the economy. Using that money to improve customer service is stimulative in that it increases the efficient use of time. Increased efficiency is stimulative.

The IRS would also keep $4.8 billion for systems modernization, which the agency plans to use to update aging technology.

If updating aging technology would increase federal tax collections by more than $4.8 billion, the systems modernization would be recessive.

But tens of billions designated for enforcement, operations, the inspector general’s office, the U.S. Tax Court and the Treasury Department would be rescinded.

Democrats championed the $80 billion IRS expansion to bolster the agency, which had generally flat or declining budgets for much of the past decade. The IRS has shed staff and conducts audits less frequently than it did in the past.

Conducting audits less frequently is stimulative because it leaves more dollars in the private sector (i.e., the economy).

The biggest piece of the money went to enforcement, and administration officials say they want to focus on high-income taxpayers and large corporations. The Congressional Budget Office estimated that the $80 billion in spending would generate $180.4 billion in additional revenue.

If the Congressional Budget Office is correct, the Democrat’s bill would be $100 billion recessive. 

But then we come to the huge unknown, the key phrase, “. . . focus on high-income tax-payers and large corporations.”

To the degree that the $80 billion would focus on high-income taxpayers, the program would help narrow the income/wealth/power Gap between the rich and the rest. That Gap is currently too broad, and it is widening. Narrowing the Gap would help the economy.

But the effect of large corporations on the economy is primarily positive. On balance, large corporations can better provide efficient services than small businesses. 

While the economy needs small businesses’ creativity and employment power, using tax laws to punish large companies seems counter-productive.

The administration has said audit rates for taxpayers with incomes below $400,000 would stay around recent or historical levels. But the IRS hasn’t specified what those audit rates would be, and audit rates have fluctuated over time.

Democrats argued that removing the funding would offer comfort to tax cheats, making it harder for the IRS to find and penalize tax dodging.

Federal taxes are a significant drag on the economy, and tax laws exacerbate the Gap between the rich and the rest of us. So again, we have a split decision.

Tax dodging helps the economy by leaving more dollars in the private sector, but the rich are more able to do it, hurting the economy.

Perhaps, a vital issue is motive.

The Democrats wish to collect more taxes from the rich, using the false premise that those additional tax dollars would pay for more benefits given to the poor.

The GOP wishes to collect less tax from the rich because it, more than the Democrats, is ruled by the rich. As perhaps an overly broad generalization, the Republicans are the party of the rich, while the Democrats are the party of the rest — at least from a purely financial standpoint.

Race, religion, and country of origin affect that metric.

IN SUMMARY

Federal taxes are an unnecessary drag on the economy. They pay for nothing and are destroyed on receipt. Anything that reduces federal tax collections benefits the private sector (aka, “the economy”).

The sole function of federal taxes is to control the economy by punishing what the government wishes to discourage and by giving tax breaks to what the government wishes to encourage.

The economic drag could be eliminated if the government gave financial rewards to what it wishes to encourage, and simply didn’t reward what it wishes to discourage.

Federal taxes can and should be eliminated.

The Democrats wish to increase federal tax collections while promulgating the false notion that federal deficits are too high and federal taxes are necessary to minimize deficits while paying for benefits.

The Democrats correctly, wish to narrow the income/wealth/power Gap between the rich and the rest, but increasing federal taxes is a poor strategy for that purpose.

The Republicans wish to widen the Gap and enrich the rich by cutting tax collections from the rich. They promulgate the lie that the middle classes and the poor should pay more taxes to fund such benefits as Medicare, Medicaid, and Social Security, though federal taxes do not fund those benefits.

The GOP’s stated concern that additional IRS agents would attack the low-paid is camouflage for their genuine concern that additional agents would focus on the rich.

Rodger Malcolm Mitchell
Monetary Sovereignty

Twitter: @rodgermitchell Search #monetarysovereignty
Facebook: Rodger Malcolm Mitchell

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The Sole Purpose of Government Is to Improve and Protect the Lives of the People.

MONETARY SOVEREIGNTY

Motley Fool spreads the bullshit about Social Security

You probably know Motley Fool as a site that spreads reasonably accurate information about the stock market and individual stocks, along with buying suggestions.

I never have subscribed to that service for one main reason: If they knew what they were talking about, they could make a lot more money by following their own trading advice than by giving advice.

So why do they give advice?

A little more than two years ago, they proved to me that they didn’t know what they were talking about by publishing a scare story referencing Social Security’s financial troubles.

The article was titled 7 Reasons Social Security Is in Big Trouble By Sean Williams – Oct 3, 2020.

The article comes with this caveat: “You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services,” which seemingly means: “If you pay us, we’ll tell you what we really believe.”

Social Security: Reform or Runout – American Journal of Trial Advocacy
DO YOU BELIEVE THIS BIG LIE?

Here are some excerpts from that article.

Over the past eight-plus decades, we’ve watched Social Security grow into the most important social program in this country.
Today, nearly 65 million people receive a monthly payout from the program, with over 22 million of these folks pulled out of poverty thanks to their benefits. 
But the program is in big trouble. Every year since Social Security first began paying benefits (1940), the Social Security Board of Trustees has released a report that examines the short-term (10-year) and long-term (75-year) outlook for the program.
Since 1985, the OASDI Trustees’ report has cautioned that program outlays would exceed collected revenue over the long term.
Put another way, Social Security has unfunded obligations over the next 75 years.
More specifically, the latest Trustees report estimates that Social Security’s $2.9 trillion in asset reserves (i.e., its net cash surpluses built up since inception) would run out by 2035.

The above is nothing but bullshit.

“Collected revenue,” i.e., FICA taxes, do not fund Social Security or Medicare. Indeed, no federal tax pays for anything.

All federal taxes are destroyed upon receipt. The federal government has the infinite ability to create dollars from thin air. That is how it created the first dollars, and that is how it still creates dollars.

Unlike you, and me, and state/local governments, and businesses, the federal government pays all its bills by creating new dollars, ad hoc.

The dollars you pay to Social Security (actually, the Treasury) come from the M1 money supply measure. But when your dollars reach the Treasury, they cease to be part of any money supply measure.

Because the federal government has the infinite ability to create dollars, it has infinite dollars.

Adding your dollars to the Treasury’s infinite dollars does not change the number of dollars the Treasury has. Infinity plus any number = infinity.

When your dollars reach the Treasury, they cease to exist. Although the Treasury keeps records of dollars received and spent, these records are unlike private bookkeeping records.

They do not show “Dollars Available.” The Treasury has infinite dollars available.

To be clear: Social Security isn’t going bankrupt just yet.
It has two recurring sources of revenue — but if and when these asset reserves are depleted, an across-the-board benefit cut of up to 24% may await retired workers and survivor beneficiaries.

Bullshit.

Social Security, like every other federal agency, has just one source of revenue: The federal government.

Social Security has as many dollars as Congress, and the President want it to have.

In total, the 2020 Trustees report estimates that Social Security is facing $16.8 trillion in unfunded obligations between 2035 and 2094, which is $2.9 trillion higher than in the previous year.
How exactly does the nation’s top social program suddenly find itself on such poor financial footing? 

Bullshit.

Social Security has no unfunded obligations. All federal obligations are funded by the government’s full faith and credit.

The federal government promises to pay all its bills which it has done since its inception. It never can run short of dollars to pay its bills. Every financial obligation has been funded by money creation.

1. Baby boomers are retiring

I’m not a fan of blaming baby boomers simply for being born, but their exodus from the labor force is weighing down the worker-to-beneficiary ratio.

According to intermediate-cost model estimates from the Trustees report — which represent what’s most likely to happen — the number of retired workers receiving benefits should surge from 45.1 million in 2019 to 64.6 million by 2035.

Over that time, the worker-to-beneficiary ratio is expected to decline from 2.8-to-1 to 2.2-to-1. 

As a reminder, the payroll tax revenue collected from workers was responsible for $945 billion of the $1.06 trillion in revenue collected for Social Security in 2019. So, yes, the retirement of boomers is a big deal.

Bullshit.

This is the myth that Social Security is funded by FICA. It isn’t. Even if FICA collections totaled $0, the federal government could continue paying benefits forever.

2. We’re living longer than ever before

Another bittersweet concern is that we’re living longer. Between 1940 and 2020, the average life expectancy at birth for Americans jumped from north of 64 years to almost 79 years.

On the one hand, living longer is fantastic. We get to spend more time with our friends and family, and do what we love. But it’s not necessarily a great thing for the Social Security program.

According to data from the Social Security Administration, the average 65-year-old will live about 20 more years. Social Security was never designed to pay benefits for multiple decades.

Further, the full retirement age — i.e., the age at which retired workers can collect 100% of their monthly benefit, as determined by their birth year — will have only risen by two years through 2022. Meanwhile, life expectancies are up by more than 15 years since 1940.

Put simply, longer average life spans are straining the Social Security program.

Bullshit.

The federal government has the infinite ability to pay benefits. Even if FICA were eliminated, the federal government could supply full Social Security to every man, woman, and child of all ages.

President FD Roosevelt knew SS didn’t need FICA when he began it. He created FICA, not to fund SS, but to keep Congress from ending it.

He didn’t say, “We put payroll contributions in to pay for benefits.” He said,

“We put those payroll contributions there so as to give the contributors a legal, moral, and political right to collect their pensions… With those taxes in there, no damn politician can ever scrap my Social Security program.”

Congress and subsequent Presidents still have found ways to cut the program by taxing benefits and by raising the qualifying age.

Ironically, they only were able to do this by using FDR’s logic falsely to convince the public that FICA funds SS.

3. Income inequality is on the rise

Social Security’s woes can also be partly blamed on rising levels of income inequality.

The 12.4% above payroll tax, which does the heavy lifting for Social Security, is applied to earned income (wages and salary, but not investment income) ranging between $0.01 and $137,700, as of 2020.

Approximately 94% of working Americans will earn less than $137,700 this year, meaning they’ll be paying into Social Security on every dollar they earn.

Earned income above $137,700 is exempt. Between 1983 and 2016, the amount of earned income escaping Social Security’s payroll tax roughly quadrupled from north of $300 billion to $1.2 trillion.

Additionally, the well-to-do have little or no financial constraints when paying for preventative medical care or prescription medicines.

The same can’t be said for everyone else. As a result, the rich are living notably longer than everyone else and collecting bigger monthly benefits in the process — further weighing down Social Security.

Donald Trump, who pays virtually no FICA taxes, collects the same Social Security you do.

The reason: Social Security benefits have nothing to do with FICA. The government pays for SS benefits just as it pays for every other financial obligation: By creating dollars from thin air.

Did you ever wonder why Social Security has a “trust fund” but the military has no “trust fund?” The SS trust fund is a fake. It is not a real trust fund at all.

All the phony rules related to the fake SS trust fund are arbitrary inventions to reduce the benefits paid to you. The whole process is a fraud on America.

There are no real federal trust funds. 

4. Net legal immigration levels have been halved

Immigration is also a serious problem, albeit not for the reasons you might have read about.

As a whole, immigration is a net positive for the Social Security program.Most legal migrants into the U.S. tend to be young, and are therefore going to spend decades in the labor force contributing via the payroll tax.

The Trustees’ intermediate-cost model assumes a net average of 1,261,000 legal migrants entering the U.S. every year over the long-term.

However, net immigration rates into the U.S. have been sinking for the past two decades. In the most recent rolling five-year measurement from the World Bank, a net average of 954,806 legal migrants entered the U.S. annually between the second half of 2012 and the second half of 2017.

Less legal (and undocumented) immigration will almost certainly weigh on the worker-to-beneficiary ratio. 

Bullshit.

The worker-to-beneficiary ratio is meaningless. Beneficiaries are paid in U.S. dollars. The federal government has the infinite ability to create U.S. dollars.

5. Birth rates are at all-time lows

Couples also bear part of the blame for Social Security’s woes.

The program counts on a steady or rising level of births each year to offset the number of older workers leaving the labor force.

The intermediate-cost model had been running with an assumption of 2 births per woman for years, but lowered this figure to 1.95 births per woman in 2020. This is a big reason we saw unfunded obligations jump by $2.9 trillion from the previous year.

In 2019, the U.S. birth rate hit an all-time low of 1.68 births per woman, below even the high-cost model estimate of 1.75 births per woman provided by the Trustees. Couples are waiting longer to get married and have children.

They’re having fewer unplanned pregnancies and have been discouraged from having children by the poor state of the U.S. economy. Without a quick turnaround in birth rates, the worker-to-beneficiary ratio will be negatively impacted. 

Bullshit.

Workers don’t pay for SS. The government does.

The government could pay double or triple the number of workers simply by doing what it always does for every government agency: Create dollars from thin air.

That is the process it has used since the inception of the dollar.

6. The Fed has crippled Social Security’s interest-earning capacity

Even the nation’s central bank gets a wag of the finger.

The Federal Reserve is tasked with controlling and influencing monetary policy.

It primarily does this by increasing or decreasing the federal funds rate, which is the overnight lending rate that banks charge one another. Moving this rate higher or lower causes ripples that influence interest rates.

With the U.S. economy currently in recession, and the Fed maintaining a predominantly dovish stance for much of the past decade, the federal funds rate is now at a record-tying low range of 0% to 0.25%.

This is great news for companies and individuals looking to borrow, but awful for anyone looking to generate interest income.

Social Security’s $2.9 trillion in asset reserves are required by law to be invested in special-issue bonds and, to a lesser extent, certificates of indebtedness.

The yields on newly issued bonds have been plummeting, with some yielding a meager 0.75%. In other words, the Fed’s dovish monetary policy means less interest-earning capacity for Social Security.

Obsolete bullshit now that interest rates are high.

But even if interest rates were triple or one-third of what they are now, this would not change, by even one penny, the federal government’s ability to fund Social Security.

Think of how nonsensical the notion is of the federal government not paying enough interest to an agency of the federal government (which is what the Motley Fool claims).

This is how ridiculous the Motley Fool argument has become. They are telling you: “If the federal government paid more interest. The federal government could afford to pay more benefits.”

Wow!

7. A Capitol Hill deadlock

Finally, point your finger at lawmakers on Capitol Hill.

Though lawmakers may be somewhat responsible for some of the issues described here, it’s really their inability to find common ground to fix Social Security that’s worthy of blame.

For every year that Congress doesn’t resolve Social Security’s cash shortfall, it usually widens. The longer lawmakers wait to act, the costlier the fix will be on working Americans who form the backbone of the Social Security program.

Democrats and Republicans have each offered plenty of solutions on how best to resolve Social Security’s shortcomings. But since both parties have solutions that work to strengthen the program, neither side feels compelled to find common ground with their opposition.

We can only hope that Congress finds a way to work together on a bipartisan solution sooner rather than.

Mostly bullshit with one small glimmer of truth in the final statement.

SS doesn’t have a “cash shortfall.” The word “shortfall” implies something unintentional.

But this “shortfall” is intentional.  It’s like claiming the federal government has a law shortfall.

The “fix” needn’t be costlier “on working Americans.” No working American would need to pay for the “fix.”

Congress quickly could solve the “problem” only when it admits that the real problem is the Big Lie that taxes fund federal spending.

That would result in a giant step toward “fixing” SS.  

 

 

Rodger Malcolm Mitchell
Monetary Sovereignty

Twitter: @rodgermitchell Search #monetarysovereignty
Facebook: Rodger Malcolm Mitchell

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The Sole Purpose of Government Is to Improve and Protect the Lives of the People.

MONETARY SOVEREIGNTY