–Why Robert J. Samuelson wants to cut Social Security, Medicare and Medicaid. Monday, Mar 7 2011 

The debt hawks are to economics as the creationists are to biology. Those, who do not understand Monetary Sovereignty, do not understand economics. If you understand the following, simple statement, you are ahead of most economists, politicians and media writers in America: Our government, being Monetarily Sovereign, has the unlimited ability to create the dollars to pay its bills.

Robert J. Samuelson is a weekly columnist for The Washington Post, writing on political, economic and social issues. His column usually appears on Wednesdays. Add his name to the long list of economics writers who are ignorant of Monetary Sovereignty, the basis of all modern economics.

In a March 7, 2011 column titled, “Why Social Security is Welfare,” he makes the following comments:

Recall that Social Security, Medicare and Medicaid, the main programs for the elderly, exceed 40 percent of federal spending. Exempting them from cuts – as polls indicate many Americans prefer – would ordain massive deficits, huge tax increases or draconian reductions in other programs. That’s a disastrous formula for the future.

Yes, Robert, not cutting Social Security, Medicare and Medicaid would “ordain” (?) deficits. However, because the U.S. now is Monetarily Sovereign, there is zero connection between deficits and taxes. For your benefit, Robert, I’ll say again what you as an economics writer already should know: “Federal taxes do not pay for federal spending.”

And so far as those draconian reductions in other programs, why do you believe a nation with the unlimited ability to create dollars, needs to cut spending, when inflation is nowhere in sight?

Here is how I define a welfare program: First, it taxes one group to support another group. . .

Robert, now repeat after me until you get it: “Federal taxes do not pay for federal spending.” State taxes do pay for state spending, and city taxes do pay for city spending. The states and cities are not Monetarily Sovereign. But, federal taxes do not pay for federal spending. In fact, FICA could be eliminated, and this would not reduce by even one penny, the federal government’s ability to support this program – even were benefits doubled.

Since the 1940s, Social Security has been a pay-as-you-go program. Most benefits are paid by payroll taxes on today’s workers.

Things have changed markedly since the 1940’s, and Robert has not kept up with the changes. In August, 1971, one of the biggest economic changes in our lives occurred. We became Monetarily Sovereign. At that instant, Social Security ceased being a “pay-as-you-go” program, because FICA no longer supported benefits. In a Monetarily Sovereign nation, tax dollars are destroyed upon receipt. They do not, and cannot, support federal spending.

Think about it, Robert. Why would a government with the unlimited ability to create dollars, need to use taxes to pay for anything? It makes absolutely no sense. Sadly, Robert still lives in a gold-standard (aka “flat-earth”) world.

Annual benefits already exceed payroll taxes. The gap will grow.

Yep, the difference between FICA collections and benefits will grow. More net money will be created. This will stimulate economic growth. So what is the problem?

No doubt people would be outraged (by benefit cuts). Having been misled, they’d feel cheated. They paid their taxes, why can’t they get all their promised benefits? But the alternative is much worse: imposing all the burdens on younger taxpayers and cuts in other government programs. Shared sacrifice is meaningless if it excludes older Americans.

No, shared sacrifice is meaningless if it is purposeless. There is absolutely, positively no reason to cause widespread human misery by cutting Social Security, Medicare and/or Medicaid benefits. Causing misery out of sheer ignorance is unforgivable.

Rodger Malcolm Mitchell

No nation can tax itself into prosperity, nor grow without money growth.

–Cuts to Medicare vs deficit spending Monday, Apr 5 2010 

An alternative to popular faith

I just received a note from Mark Kirk, Republican Congressman, listing the cuts to be made in Medicare. I don’t know how factual they all are, because frankly the new program not only is complex, but evolving.

In any event, this is what the Republicans (and Democrats) should work on, rather than the “repeal and replace” political effort that has no chance to succeed. Forget the McCain, “There will be no cooperation for the rest of the year” attitude. Focus on correcting the negatives rather than throwing out the baby with the bathwater.

By the way, every one of these cuts could be eliminated if wrongheaded, deficit paranoia were eliminated. The federal government can and should pay, via deficit spending, to eliminate all these cuts. Consideration of real damages to real people should take precedence over imaginary, unproven damage from federal deficits

Here is what Rep. Kirk wrote:

2010: Medicare Cuts to Hospitals: The federal government will reduce Medicare reimbursements for hospitals who provide seniors with long-term and inpatient and rehabilitation care.

2011:Medicare Advantage Cuts Begin: Approximately 121,000 Illinois seniors will be dropped from their chosen Medicare Advantage coverage. Drug Discounts for those in Medicare Part D “donut hole” begin: The federal government will impose a new requirement on pharmaceutical companies to provide a 50% discount on “brand name” prescriptions. Increased Medicare Part D Premiums: Seniors with incomes above $85,000 for individuals and $170,000 for couples will be forced to pay higher Medicare Part D premiums. Medicare Imaging Cuts: The federal government will cut Medicare reimbursements for seniors who use MRI and CT scans. Medicare Cuts to Ambulance Services and Durable Medical Equipment: The federal government will begin cutting Medicare reimbursements for seniors who use ambulances or durable medical equipment.

2012: Medicare Cuts for Hospitals with Readmissions: The federal government will cut Medicare reimbursements to any hospital with a high readmission rate. Medicare Cuts for Hospice Care: The federal government will cut Medicare reimbursements for seniors on hospice care. Medicare Cuts for Dialysis Care: The federal government will cut Medicare reimbursements for Americans – both youth and seniors – on dialysis.

2014: Medicare Board Cuts: The federal government will establish an Independent Payment Advisory Board with powers to make further cuts to seniors on Medicare.

2015: Medicare Home Health Cuts: The federal government will cut Medicare reimbursements for seniors who depend on home health care.

I’d be interested in hearing from those of you who think reducing federal deficits is more important than eliminating these cuts, together with your evidence that deficits are harmful in any way.

Rodger Malcolm Mitchell

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