Tag: Hard choices on Social Security Medicare defense and taxes

–Why Robert J. Samuelson wants to cut Social Security, Medicare and Medicaid.

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.
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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
http://www.rodgermitchell.com

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

–America, wake up

The debt hawks are to economics as the creationists are to biology.

“Congress to Weigh Options for Reducing Federal Debt

Hard choices on Social Security, Medicare, defense and taxes can’t be avoided much longer. By Richard DeKaser, Contributing Economist, The Kiplinger Letter
July 30, 2010

Is Washington serious about tackling the federal debt? […] The key is Obama’s debt commission. Its short-term mission is to balance the budget by 2015 — not counting interest on the swelling national debt. That would slash the annual deficits by two-thirds, to about $500 billion. The long-term goal: Achieve fiscal sustainability, which is generally seen as holding debt at something under the equivalent of 65% of gross domestic product (GDP).”

Let’s get this straight. With a balanced budget, even minuscule inflation would reduce the amount of real money in the economy. Historically, recessions follow low deficit growth, and recoveries correspond with high deficit growth. So why aim for a balanced budget? No evidence, just anthropomorphic economics disease.

What makes fiscal sustainability 65% of GDP? No evidence. The DEBT/GDP ratio is meaningless – an apples/oranges comparison with zero significance. And where did 65% come from? Nowhere. Just popped into someone’s head. And that “pop” will cost you plenty.

The ignorant article continues:

“Recommendations in four areas are likely:

“Social Security. . . .Gradually raise the retirement age to 68, calculate benefits using the Consumer Price Index instead of wage inflation and shave a half point from annual cost-of-living increases would knock $548 billion off the deficit in 2040, for example. Another possibility is to raise the cap on earnings subject to payroll taxes, perhaps to 90% of earnings for everyone. That would juice up incoming revenue.”

If someone told you they would cut your Social Security payment, would you at least ask, “Why?” And if the answer were, “The government can’t afford it,” would you at least say, “Show me the evidence”? You never have seen any evidence except for unsubstantiated statements that the debt is too big. This is the same answer you have received since 1971. Wrong then; wrong now.

The ignorant article continues:

“Health care. . . apply a means test for Medicare and revise the recently passed health care law.” Yes, we’re going to cut your Medicare payments, reduce your doctors’ payments and require you to prove you need the money. Do you care? Naw. And don’t even bother to prove the government can’t afford the expense. I trust you. Just take my money and reduce the number of doctors. I love pain.

More from the ignorant article:

“Other government spending. . . A full-scale review is already under way, including plans to forgo or scale back big weapons systems — the F-35 Joint Strike Fighter, the C-17 transport and more. More base closings, especially abroad, are also possible.” Either we need these things for defense or we don’t. Or are you saying the unsupported notion that the government is broke trumps American defense initiatives?

And finally, my favorite ignorant paragraph:

“Taxes. . . rates will surely be raised at some point. Holding them steady for a year — for all but high incomers — costs $95 billion. For 10 years, the tab climbs to $2.46 trillion. Other tax options on the table include limiting itemized deductions and imposing a value-added tax.” Yes, debt hawks, raise my taxes. You don’t provide evidence, but you are much smarter than me, so go ahead, take my money. I don’t care.

The ignorant article continues, “All of the options are extremely painful, and lawmakers’ instincts will be to balk and refuse to budge.” And with darn good reason, because these options not only are painful, but are incredibly harmful and foolish.

America, wake up. These fools want to steal your money, your health, your defense and your lifestyle. Don’t let them do it. Demand proof they know what they’re talking about. Demand proof the federal deficit and debt are unsustainable. If someone wants to steal from you, vote them out.

Or you can just lie back, spread wide and say, “Take me.”

By the way, my $1000 offer still is unclaimed. I wonder why.

Rodger Malcolm Mitchell
http://www.rodgermitchell.com

No nation can tax itself into prosperity