Like many Americans, the federal government is shelling out a lot more money to cover interest payments on its debt after a series of Federal Reserve rate hikes over the past year.
Translation: The federal government is nothing “like many Americans.” The federal government is Monetarily Sovereign, while the American people are monetarily non-sovereign. But we want you to believe the government is just like you.
The Treasury Department paid a record $213 billion in interest payments on the national debt in the last quarter of 2022, up $63 billion from the same period a year earlier.
Translation: The Treasury Department pumped a record $213 billion growth dollars worth of interest payments in the last quarter of 2022. That is $64 billion added to Gross Domestic Product (GDP)from the same period a year earlier.
The fourth-quarter tab was also nearly $30 billion more than in the prior quarter, which is the largest quarterly increase on record, said Jerry Dwyer, an economics professor emeritus at Clemson University.
Translation: The fourth-quarter addition to GDP was nearly $30 billion more than in the prior quarter, the largest stimulus to the economy on record.
Borrowing costs are expected to become an increasingly heavy burden in coming years. The Congressional Budget Office is set to provide its latest estimate on Wednesday.
The surge is due mainly to the Federal Reserve raising interest rates by 4.25% between March and December. The central bank increased the rate another quarter point in February.
Translation: The Federal Reserve is raising interest rates by 4.25%, which will increase the price of everything, in its effort to combat increased prices. Think about that.
Until recently, it cost the federal government very little to issue debt to finance its operations.
Translation: Until recently, it cost the federal government very little to create the dollars to finance its operations. Just the press of a few computer keys.
“It was almost free money,” Dwyer said. “You could borrow a trillion dollars, and if you financed it with Treasury bills, you paid almost no interest.”
Translation (courtesy of former Fed Chairman Ben Bernanke): “The U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost.”
Translation (courtesy of former Fed Chairman Alan Greenspan): “There is nothing to prevent the federal government from creating as much money as it wants and paying it to somebody.” So, why would the government borrow dollars? It doesn’t.
“But interest rates weren’t going to stay there forever.”
Translation: The Fed raises rates, which increases all prices, i.e., causes inflation, to fight inflation. It’s like a doctor bleeding a patient to cure anemia.
The national debt is once again in the spotlight now that the US has hit its $31.4 trillion debt ceiling, forcing Congress to take action or risk a catastrophic default.
Translation: The US has hit its $31.4 debt ceiling, which actually isn’t a “debt” ceiling. Everything has already been paid for, and nothing is owed. There is no debt. The dollars exist in T-security accounts. To pay off those accounts, the government merely returns the existing dollars.
Congress created the fake “debt” ceiling to make itself look prudent to an ill-informed electorate.
Decreases in federal deficits (red) cause inflations (vertical gray bars), which are cured by increases in federal deficits.
Those who call for a decrease in deficit spending ignore the fact that economic growth relies on the federal government continuing to pump money into the economy.
The Treasury Department is taking extraordinary measures to allow the government to continue paying its bills in full and on time, which it expects to last at least until early June.
Translation (Courtesy of Alan Greenspan): “The United States can pay any debt it has because we can always print the money to do that.” so the “extraordinary measures” are a bunch of hokum. And so is the fake “debt ceiling.”
The spike in interest payments also contributed to the federal government hitting the debt ceiling that much faster.
And it adds to the pressure on Congress to raise taxes, cut spending or allow the government to borrow more to meet all its obligations.
Translation: The spike in interest payments added growth dollars to GDP much faster. This adds unnecessary pressure on Congress to take dollars out of the economy, thereby causing a recession.
Even if the Federal Reserve slows or stops raising rates this year, as many economists expect, the nation’s borrowing costs will continue to increase.
That’s because as the existing debt matures, the government issues new debt with the higher prevailing interest rates.
Translation: As existing Treasury Securities mature, the government will increase the amount of growth dollars it pumps into the economy.
The higher rates could increase the net interest cost on the national debt to about $9 trillion over the next decade, according to estimates by the Peter G. Peterson Foundation, a nonpartisan organization that seeks to raise awareness of America’s long-term fiscal challenges.
Translation: The higher rates could increase the amount of growth dollars pumped into GDP to about $9 trillion, according to the Peter B. Peterson Foundation, a right-wing organization that, on behalf of the rich, seeks to spread disinformation about America’s finances.
That’s up from the record $8.1 trillion that the CBO projected in May 2022 and the $5.4 trillion it projected in July 2021.
Translation: That’s up from a record $8.1 trillion growth dollars the CBO projected in May 2022, and the $5.4 growth dollars it tried to scare you about in July 2021.
By 2032, interest costs will triple to more than $3 billion per day and to at least $9,400 per household, on average, according to the foundation.
Translation: (Courtesy of Ben Bernanke) “It’s not tax money… We simply use the computer to mark up the size of the account.” By 2032, growth dollars will triple to more than $3 billion per day, and not costing any household a single penny.
The federal government creates ad hoc every dollar it spends by pressing computer keys. No tax dollars are used.
They are on track to become the largest federal budget item, surpassing Social Security and Medicare by the middle of the century.
Translation: The government justifies paying too little to Social Security and Medicare by pretending it is short of money when, in fact, it has infinite money.
“Having rapidly growing interest makes it much more difficult for government to fund all the things that are important to our society,” said Michael Peterson, the foundation’s CEO.
Translation: To keep you from asking for benefits, we pretend that “Having rapidly growing interest makes it much more difficult for the government to fund all the things that are important to our society.”
Why do we do that? Because the rich tell us to widen the income/wealth/power Gap between them and you. The wider the Gap, the richer they are.
So, they bribe the main information sources to tell you the government can afford tax loopholes for the rich, but not Social Security and Medicare increases for the rest of you.
Economists are bribed with university grants and promises of lucrative employment later. The media are bribed with advertising dollars and ownership. Politicians are bribed with political contributions and lucrative jobs in “think tanks.”
All are bribed to tell you that increasing your benefits is unaffordable.
SUMMARY
The rich get richer when the income/wealth/Gapwidens. So they promulgate the lie that your taxes pay for benefits, and your federal deficits are unsustainable.
THE WEEK publishes short, timely articles using an unusual format. Each article begins with a setup, followed by short sections presenting two or more sides of an argument and ending with a summary and opinion.
It is one of my favorite magazines. So, it grieves me to read the following assemblage of outright misinformation and nuttery in a magazine I read every week.
The national debt threat The federal government is spending ever more money servicing an ever-larger debt pile. Are we headed for a crisis?
What does the U.S. owe?
The national debt stands at nearly $35 trillion, or more than $100,000 per person.
And there it is, concise and misleading. The U.S. does not owe $35 trillion, nor do you owe the $100,000 referenced.
The so-called “national debt” is based on the total of all federal deficits (spending minus taxes). The government doesn’t owe the deficits; they all have been paid.
The “national debt” also includes deposits (not borrowing) into Treasury Security accounts (T-bills, T-notes, T-bonds). These accounts resemble bank safe deposit boxes in that the contents are owned and touched only by the depositors, not by the federal government.
The purpose of T-security accounts is not to lendspending money to the government. The government never touches those dollars. They remain the property of the depositors.
Periodically, the government adds interest dollars to the T-security accounts. These are not tax dollars (which are destroyed upon receipt.) They are created ad hoc, from thin air, at the touch of computer keys.
Former Federal Reserve Chairman Ben Bernanke:“The U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost. It’s not tax money… We simply use the computer to mark up the size of the account.”
The purposes of T-security accounts is to:
Provide as safe storage place for unused dollars and,
To help the Federal Reserve control interest rates by setting the rates for the T-securities
Upon maturity, depositors receive their deposits + interest. The government merely returns the dollars that exist in each depositor’s T-security account.
No tax dollars are used. No taxpayers are obligated. You don’t owe the dollars. They already exist in the accounts, and are returned. No “debt” is involved.
The debt has climbed sharply over the past two decades — we owed $5.7 trillion in 2000 —with both Democratic and Republican administrations running budget deficits, meaning they spent more than they took in.
“We” (the federal government or you) don’t owe anything.
It is true that the government has spent more than it took from taxpayers. This is the only way the economy can grow.
It is 100% necessary for the federal government to run deficits, i.e. to create dollars and add them to the economy.
When the federal government instead runs surpluses instead of deficits, this is what happens:
U.S. depressions come from federal surpluses.
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.
By definition, a growing economy requires a growing supply of money. But federal surpluses remove money from the economy, which always causes depressions and recessions.
In fact, deficits are so vital to economic growth that even insufficient federal deficits can lead to recessions.
Two measures of federal “debt” show the same thing. Recessions (vertical gray bars) occur when deficit spending is reduced, and recessions are cured by increases in federal deficit spending.
This year, the deficit is on track to hit $1.5 trillion, about 5 percent of gross domestic product.
The sole connection between the two measures is that federal deficit spending grows Gross Domestic Product (GDP). In fact, it’s part of the formula: GDP = Federal Spending + Nonfederal Spending + Net Exports.
Federal Spending – Federal Taxes = Federal Deficit Spending, and taxes reduce Nonfederal Spending.
On wonders where THE WEEK writers think the economy’s dollars would come from if there were no federal deficit spending.
Because interest rates were low and expected to stay low, many officials and experts thought the cost of servicing that debt would remain manageable.
The federal government has the infinite ability to “manage” (pay for) anylevel of debt. It has the infinite ability to create dollars. It never can run short of dollars to pay its bills.
Former Federal Reserve Chairman Alan Greenspan:“A government cannot become insolvent with respect to obligations in its own currency. There is nothing to prevent the federal government from creating as much money as it wants and paying it to somebody. The United States can pay any debt it has because we can always print the money to do that.”
But the pandemic and the return of high inflation changed that thinking. To curb inflation, the Federal Reserve hiked interest rates from close to zero in 2020 to above 5 percent.
This was a grave error. Interest is a business cost, and increasing interest rates increases business costs. To be profitable, businesses must raise prices above higher costs.
Partly as a result, the government is for the first time expected to spend more this year on interest payments on the debt (about $870 billion) than on defense ($850 billion).
A meaningless statistic. Interest rates and defense have different purposes. It’s another orange/orange crayons comparison designed solely to shock you. It’s like telling you the cost of oranges is greater than the cost of orange crayons.
If rates remain high, interest payments could reach $2 trillion a year by the end of the decade, consuming 30 percent of federal tax revenue.
That means the federal government would pump $2 trillion in growth dollars a year into the economy. The more interest the government pays into the economy, the stronger the growth.
Interest payments do not consume federal tax revenue.
Federal taxes are destroyed upon receipt. The purpose of federal taxes is not to provide the government with spending money. Taxes have two purposes:
To control the economy by taxing what the government wishes to discourage and by giving tax breaks to what the government wishes to reward, and
To assure demand for the U.S. dollar by requiring taxes to be paid in dollars.
Interest payments, like all other federal spending, are made ad hoc with dollars created by pressing computer keys.
Payments on the debt would be the second-largest federal program, behind only Social Security. “We are in a spiral now — it’s a slow spiral, but it’s still a spiral — of rising debt and rising payments on the debt,” said Phillip Swagel, director of the Congressional Budget Office (CBO).
“The situation is unsustainable.”
Utter nonsense. Here are some of the people who have been claiming since 1940 (!) that the federal debt is unsustainable. They called the debt a “ticking time bomb.” For 84 years, it has been “ticking.” Still no explosion.
Being wrong for 84 years doesn’t seem to embarrass them.
The term “unsustainable” often is used by debt worriers, but what does it mean? Does Mr. Swagel really believe the Monetarily Sovereign U.S. government, the government that invented the U.S. dollar and created the first dollar from thin air, really believe the federal government can now run out of the dollars?
Let’s replay Chairman Alan Greenspan’s words: “A government cannot become insolvent with respect to obligations in its own currency.”
Cities, counties, states, businesses, euro nations, you and I can run short of money. The U.S. government cannot. One is Monetarily Sovereign, while the others are monetarily non-sovereign.
Apparently, Mr. Swagel doesn’t understand the difference.
How did we get here?
It’s mostly because the government doesn’t collect enough tax revenue to cover the cost of federal programs—a problem exacerbated by multiple rounds of tax cuts.
Unlike state and local taxes, which do pay for state and local payments, federal taxes pay for nothing.
The federal tax cuts added growth dollars to the economy, which would have grown more slowly or sunk into recessions or depressions without them.
According to the Center for American Progress, the cuts signed into law by President George W. Bush in 2001 and 2003 have added more than $8 trillion to the debt, while the tax cuts passed under President Donald Trump in 2017 have added another $1.7 trillion.
Nearly $5 trillion in emergency pandemic outlays under Trump and President Biden further added to the debt pile.
Translation: The Bush and Trump tax cuts added more than $14.7 trillion in growth dollarsto the economy, and Biden added $5 trillion more. That is why U.S. economic growth has been so robust.
“The pandemic created enormous economic losses, and we used borrowing not so much to make the losses vanish into thin air but to spread them out over time,” said former CBO chief economist Wendy Edelberg.
No, Ms. Edelberg. The U.S. government, being the original creator of dollars, never borrows dollars; it creates them at will by pressing computer keys.
And your “vanish . . . spread” comment makes no economic sense. Think about it.
Meanwhile, the costs of Social Security and Medicare — the top two government outlays — will rise as millions more Baby Boomers retire over the coming years.
Why is this a problem?
The bigger the deficit, the more bonds the Treasury must issue to cover otherwise unfunded spending — unfunded spending that now includes repayments for those bonds.
All federal spending is funded by sovereign money creation. No federal spending is funded by tax collection.
Federal bonds do not pay for anything. They are deposits into safekeeping accounts. The words “bonds,” “notes,” and “bills” are misleading. They do not represent federal borrowing; they are terms used when monetarily non-sovereign entities borrow.
There’s a risk that investors could demand higher yields to buy the flood of government bonds, which in turn could push up borrowing costs on mortgages, credit cards, and business loans.
There is no such risk:
The federal government does not need to offer bonds in order to pay its bills. It can create all the dollars it needs simply by pressing computer keys
Investors have no leverage over the Federal Reserve’s setting of interest rates.
The Fed arbitrarily sets rates with inflation in mind, not to sell bonds. Even during the decade beginning in 2010, when federal debt growth was as high as 30% and averaged well over 8% a year, interest rates held near 0%. Were investors asleep, then?
The following graph demonstrates no relationship between federal debt growth and interest rates.
This graph demonstrates that the Fed does not raise interest rates when “investors demand higher rates,” asdebt rises. Investors have no leverage over the rates set by the Fed.
Consumer spending and corporate investment would dip, slowing the economy and causing tax revenues to drop — requiring the government to borrow even more to make up the shortfall. New debt isn’t the only problem.
It is true that raising interest rates is recessionary, but since the U.S. federal government never borrows U.S. dollars, federal debt does not lead to federal borrowing or increased interest rates.
Over the next three years, more than half of the government’s publicly held debt will mature and need to be refinanced at higher rates.
Unlike with private debt, the Fed does not raise rates in response to maturing T-securities. The magazine author seems to have no concept of the fundamental differences between federal Treasury securities and private sector bonds.
If inflation drops next year, the Fed will drop interest rates, regardless of how much deficit spending the government does.
And the more tax money that goes to debt servicing, the less there is for government programs that might boost growth, whether that’s investment in infrastructure, health care, or anti-poverty measures.
“We are paying for the past, not the future,” said Tim Penny and David Minge of the nonpartisan Committee for a Responsible Federal Budget (CRFB).
The above two sentences could not be more misleading. Federal tax dollars (unlike local tax dollars) do not service debt. Federal tax dollars service nothing; the federal government pays all its debts by creating new dollars, ad hoc.
Federal “debt servicing” does not reduce the amount available for “infrastructure, health care, or anti-poverty measures.” The government has the infinite ability to fund those programs.
Through a combination of tax hikes and spending cuts. “The middle class is going to have to contribute on the tax side or on the spending side,” said Marc Goldwein of the CRFB.
“There really is no path if they’re not part of it.”
What do “tax hikes” and “spending cuts” have in common? They take dollars from the private sector, especially the middle classes, and widen the Gap between the rich and the rest while slowing or stopping economic growth.
In his most recent budget proposal, Biden said he’d let Trump’s tax cuts expire next year, but that only individuals making more than $400,000 would see a tax hike.
He also called for the minimum corporate tax rate to be hiked from 21 percent to 28 percent and for a 25 percent tax on individuals with more than $100 million in assets.
Would that plan make a difference?
Yes, it would make several differences:
It would take billions or trillions of growth dollars out of the economy, assuring much slower economic growth, or, more likely, recessions
It would do nothing to hurt the rich, who would find other tax dodges of the sort that allowed billionaire Donald Trump to pay far fewer dollars in taxes than you did in the past ten years.
It would directly hurt the economy by taking research and development dollars from American businesses.
It would shrink the deficit by nearly $3 trillion over the next decade, according to the White House.
But many of Biden’s proposals would struggle to pass even a Democratic-controlled Congress; with Republicans in control of the House, they’re going nowhere.
Thank goodness it won’t happen. The last thing the private sector needs to have $3 trillion pulled out, for no good purpose.
Should Trump return to the White House, he has vowed to extend his 2017 tax cuts —which the CBO says would add nearly $4 trillion to the deficit over the next decade —and to push for more cuts.
Trump’s promise to extend tax cuts almost (but not quite) makes me consider voting for him. Naw.
Both candidates oppose making cuts to the big sources of federal spending: Social Security, Medicare, and defense. “Neither party is remotely serious about either spending cuts or tax increases,” said Brian Riedl, of the conservative Manhattan Institute.
Yet, I often read false claims that the Medicare and Social Security fake trust funds are going bankrupt without tax increases or benefit reductions.
This is a lie based on the rich’s desire to widen the income/wealth/power Gap between them and the rest of us.
What happens if Congress does nothing?
Under current policy and in the best-case scenario, the U.S. has 20 years to take corrective action before the federal debt reaches an unsustainable level, according to the University of Pennsylvania’s Penn Wharton Budget Model.
Sadly, I’m too old to be alive 20 years from now when none of the above nonsense is scheduled to happen, and this foolish prediction has been forgotten.
After that point, the analysts note, “no amount of future tax increases or spending cuts could avoid the government defaulting on its debt.”
Such a default would be disastrous for the U.S. and global economies.
A reckoning could be delayed if interest rates fall back to recent lows, or if U.S. economic growth outpaces interest rates. But most experts agree that the country will eventually have to tackle its surging debt and deficits.
The problem is that “nobody really knows what ‘eventually’ means,” said Louise Sheiner, of the Brookings Institute. “The longer you wait, the more you are shifting costs onto the future generation.”
I’m sorry, but this simply is wrong. The federal government cannot unintentionally default on its debts. It has the infinite ability to create dollars.
If you sent the government a legitimate invoice for a trillion dollars, or a hundred trillion, or a thousand trillion, it could pay it instantly simply by tapping a few computer keys.
“The analysts” do not understand the fundamental differences between a Monetarily Sovereign entity, like the U.S. government, and a monetarily non-sovereign entity, like a local government, a business, or a euro nation.
And, uh oh, here it comes, as usual:
Saving Social Security A demographic time bomb could blow a hole in Social Security.
The program taxes current workers to support older Americans.
Those FICA taxes, like all other federal taxes, support nothing. Even Franklin D. Roosevelt, who initiated Social Security, knew the taxes were useless.
Why did he create them when there were no special taxes to “fund” Congress, the Supreme Court, the White House, the Military, etc.?
When told the programs could be funded the same way all other federal spending was funded, he said the taxes created “a legal, moral, and political right to collect their pensions and their unemployment benefits. With those [payroll] taxes in there, no damn politician can ever scrap my social security program.”
FICA was a political decision, not a financial one.
But as the population gets grayer and lives longer, the worker-to-retiree ratio is dipping lower and lower.
As a result, Social Security’s trust fund is projected to run dry by 2035, triggering an immediate 17 percent cut in benefits.
A number of proposals have been floated to stave off insolvency, including raising the age at which full benefits can be claimed from 67 to 70; hiking payroll taxes; and raising the limit on annual earnings subject to Social Security taxes, now about $168,600.
Yet despite nearly a decade of warnings about the program’s financial health, Congress has yet to approve any meaningful reform. “Nobody’s acting as if that’s something they’ve got to take seriously,” said Andrew Biggs, senior fellow at the American Enterprise Institute.
“So, I’ll just be honest and say I’m worried about how this thing plays out.”
The federal government can’t afford to help you unless you’re rich.
Is it ignorance or intentional rubbish? Probably both.
“Insolvency.” “Tax hikes.” “Benefit cuts.” All lies.
The American people have been fed so many lies about federal affordability that not one in a million understands the differences between Monetary Sovereignty and monetary non-sovereignty.
There are lies about the so-called “debt,” lies about the purposes of federal taxes, lies about the so-called “trust funds,” and “ticking time bomb” lies.
The liars mislead about virtually everything regarding federal financing, so who can blame the American people for believing that federal spending is “socialism” and that federal surpluses are better than federal deficits.
It’s all they hear. The lies are even taught in economics classes and books.
Sadly, the fear of federal deficits has prevented people from receiving health care insurance, adequate retirement benefits, unemployment compensation, education, cures for poverty, hunger, homelessness, and so many other benefits the federal government could and should provide.
But there is a penalty for ignorance. The Gap widens.
In summary:
1. The federal government does not owe the “federal debt.
2. The federal government does not borrow dollars
3. Social Security and Medicare Trust Funds cannot become insolvent
4. FICA does not fund Social Security or Medicare
5. Federal taxes do not fund anything.
6. T-bonds are not debt
7. Interest rates are not determined by investor demand
8. Taxpayers do not owe the federal debt
9. Federal deficits are necessary for economic growth
10. Federal surpluses cause depressions.
11. The federal debt/GDP ratio is meaningless.
12. Federal taxes are destroyed upon receipt.
The U.S. Supreme Courtrequests $90.4 million ($2.7 million for mandatory expenses and $87.7 million for discretionary costs) in FY 2020 for the Salaries and Expenses account.
The FY2023 defense budget request will exceed $773billion, according to the House Armed Services Committee chairman. By 9 March 2022, a bipartisan agreement on a $782 billion defense budget had been reached, thus avoiding a government shutdown.
As of 10 March 2023, the presidential budget request for the fiscal year 2024 was $842 billion.
In January 2023, Treasury Secretary Janet Yellen announced the US government would hit its $31.4 trillion debt ceiling on 19 January 2023; the date on which the US government would no longer be able to use extraordinary measures such as issuance of Treasury securities is estimated to be in June 2023.
On 3 June 2023, the debt ceiling was suspended until 2025. The $886 billion National Defense Authorization Act (NDAA) faces reconciliation of the House and Senate bills after passing both houses on 27 July 2023; the conferees must be chosen next.
As of September 2023, a Continuing Resolution was needed to prevent a Government shutdown. A shutdown was avoided on 30 September for 45 days (until 17 November 2023), with the passage of the NDAA on 14 December 2023.
The Senate will next undertake negotiations on supplemental spending for 2024.
The Supreme Court wants $90.4 million; Congress votes and poof! The money appears. Congress wants $5.9 billion to operate. It votes, and the money is created.
The White House wants $200 million, which will be available as soon as Congress votes. The military wanted $773 billion but decided it needed $782 billion. Congress made a bipartisan agreement, and the money became available. Congress also suspended the debt ceiling and passed a new NDAA.
Congress will discuss supplemental spending in 2024.
Notice anything missing? Nowhere is there a discussion about “Where will the money come from?”
Congress votes; the President signs. And the money appears. It’s the way all federal spending is handled. The money doesn’t come from anywhere. It appears at the touch of a computer key.
To raise Social Security’s retirement age or not — that was the question, and the only two Republican presidential candidates at CNN’s debate on Wednesday did not agree on the answer.
Florida’s governor, Ron DeSantis, said, at least for now, he would not raise the retirement age for Social Security. In contrast, former South Carolina governor Nikki Haley said she would for younger constituents.
“We have to keep our promises to seniors, but we also can’t keep our heads in the sand,” she said. “Social Security is on a path toward insolvency.
“If nothing is done to fix the problem, the trust funds that support the program are expected to run out of money in about a decade; at this point, beneficiaries will see a cut to their checks every month.
“Congress has never let Social Security falter, but legislators have yet to decide how to repair the program.”
Do you wonder why the SCOTUS, Congress, the White House, and the military budgets are handled simply by the House and Senate passing bills and the President signing?
Why does no one ask, “Where will the money come from?” when Congress passes a “Continuing Resolution.”
Do you wonder how the so-called federal “debt” could rise from $300 billion in 1970 to $29 trillion in 2023, and there is seldom talk about the federal government being insolvent? It can’t. Not now, not ever.
Instead, the worry is about two federal agencies, Social Security and Medicare, going bankrupt.
The federal government cannot become insolvent. As former Federal Reserve Chairman Alan Greenspan said, “There is nothing to prevent the federal government from creating as much money as it wants and paying it to somebody.”
And if the federal government can’t unintentionally become insolvent, none of its agencies unintentionally can become insolvent.
Potential solutions include increasing the retirement age, raising taxes, eliminating the income cap for high-earning individuals, or combining those and other proposals.
The real solution is for Congress to create a bill that allocates more money to Social Security and Medicare and for the President to sign it. Period.
The current Full Retirement Age, or FRA, is 67 for people born in 1960 and later.
The last time the FRA was raised was in 1983, from 65 to 67, which resulted in a 13% benefit cut. Moving the FRA from 67 to 70, as some have proposed in recent years, would “effectively cut currently scheduled benefits by nearly 20%,” according to the Center on Budget and Policy Priorities.
The federal government can “create as much money as it wants. You can’t. So why do the politicians, the media, and even many economists worry that Social Security and Medicare will run short of dollars but don’t seem to fear that you will run short?
When beneficiaries claim Social Security benefits before their FRA, they receive a permanently reduced benefit. Raising the age could make those cuts feel even deeper.
Lower- and middle-income individuals would be worse off than their higher-earning counterparts, partly because they rely on Social Security more heavily and have not seen the same life expectancy increases as those with higher incomes, the CBPP said.
This isn’t the first time Haley has made her pitch to reform the Social Security program.
Tell it like it is, Haley. It’s not “reform.” It’s a benefit cut. You want to cut federal benefits going to the people who need it most, the poor and middle classes.
Under Haley’s proposal, younger Americans, such as those in their 20s, would have a higher retirement age, while older Americans near claiming age would see no change made.
Haley also noted DeSantis has voted to increase the retirement age for Social Security in the past. The Florida governor voted for proposals that included changes to Medicare and Social Security eligibility and full retirement ages in the early 2010s. However, he has said that his position “had shifted in more recent times,” according to Factcheck.org.
DeSantis said now is not the time to make any changes to the retirement age for Social Security. “The problem is, now, life expectancy is going down, so I don’t see how you can raise the retirement age when life expectancy is collapsing,” he said.
The Florida governor also said the cost of living, including prices for groceries and rent, is “through the roof,” and the cost-of-living adjustment under Social Security isn’t enough to cover those increases.
“I’m not going to mess with seniors’ benefits.” To that, Haley argued Florida is one of the hot spots for inflation.
When asked what the new retirement age would be or if workers in their 20s should plan on working until they’re 70, the former governor did not have a specific answer but did say they should expect an increase in the age.
“We have to start looking at how to get out of this,” she said during the debate. “We want to make sure everyone was promised and gets it, but we also want to ensure our kids have something when they get it too.
She wants to ensure everyone gets what was promised — by unnecessarily cutting benefits?
Social Security and Medicare cannot be insolvent unless Congress wants it to happen. Why would Congress want it? Because they are bribed by the rich.
The rich grow richer only by widening the income/wealth/power Gapbelow them. To widen the Gap, the rich must get more for themselves or make those below them have less.
That is why cutting Social Security benefits makes the rich richer. It widens the income/wealth/power Gap between them and us.
To make you compliant and willing to have your benefits cut, the rich bribe your critical sources of information: The politicians, the media, and the economists.
The rich bribe the politicians with campaign contributions plus promises of lucrative employment. The rich bribe the media with ownership and advertising dollars. The rich bribe the university economists with university donations and promises of employment at think tanks.
The rich even use the word “socialism” to discourage federal support for Social Security and Medicare. It is a lie. Socialism is government ownership and control, not merely funding. The VA hospital is socialism; a fully funded Medicare is not.
The cause of every inflation in history is not interest rates being too low, which is why raising rates doesn’t cure inflation. In fact, raising interest rates makes things more expensive. It is inflationary.
The cause of inflation always is shortagesof critical goods and services, most often oil and food. The cure for inflation is more government spending to increase the public’s access to the scarcities causing inflation.
Finally, some feel it’s “unfair” to benefit those who don’t pay for them. If federal support is “unfair,” what about all those tax loopholes available to the rich but not everyone else. All taxes are unfair in some way, with the regressive FICA tax being the least fair of all.
There are so many excuses for not giving you benefits: “Unaffordable,” “unsustainable,” “unfair” — all false, all promulgated to widen the Gap.
This is not to say that all politicians, media, and economists intentionally lie. A great many of them (most?) have been indoctrinated just like the public and sincerely believe that federal taxes fund federal spending and that Social Security and Medicare can become insolvent.
And that is the problem. The false belief is so ingrained that it’s difficult to dislodge. But the world is not flat, and even Einstein was wrong about quantum mechanics. That is how we progress.
SUMMARY
Neither Medicare nor Social Security can become insolvent unless Congress and the President want them to. They are agencies of a Monetarily Sovereign government that has the infinite ability to create U.S. dollars.
Even without collecting a penny in taxes, the federal government could continue spending forever. The sole purposes of federal taxes are not to fund spending but to control the economy, assure demand for the dollar, and to convince the public that dollars for benefits are scarce. ) City, county, and state governments are monetarily non-sovereign, so they need and use tax dollars to fund spending.
The U.S. government is controlled by the rich, who grow richer by widening the income/wealth/power Gap between them and those below. Falsely claiming that Medicare and Social Security benefits are unaffordable and unsustainable helps justify cutting benefits to those who are not rich, thereby widening the Gap.
Federal funding of Medicare and Social Security would not be “socialism,” the other epithet the wealthy use to discourage benefits.
Federal spending does not cause inflation, and federal support of benefits to those who don’t pay for them is not “unfair”.
The federal government can, without collecting taxes, fund a comprehensive, no-deductible Medicare for people of all ages and a Social Security that provides a living wage.
A sustainable fiscal policy is defined as one where the ratio of debt held by the public to GDP (the debt-to-GDP ratio) is stable or declining over the long term.
That is the definition of a “sustainable fiscal policy??? Who in the government invented such a definition?
First, the debt/GDP ratio is a ridiculous, meaningless number with zero analytical or predictive power. A high ratio says nothing. A low ratio says nothing. A rising or declining ratio says nothing.
The Debt/GDP ratio is a classic Apples/Oranges measure. GDP (Gross Domestic Product) is an annual, usually one-year measure of productivity. Debt is a decade-long measure of net deposits. GDP begins every year at 0. Debt is cumulative. Mathematically, it’s a silly fraction, no better than butterflies/butter churns.
Countries with the Highest Debt-to-GDP Ratios (%)
Venezuela — 350%
Japan — 266%
Sudan — 259%
Greece — 206%
Lebanon — 172%
Cabo Verde — 157%
Italy — 156%
Libya — 155%
Portugal — 134%
Singapore — 131%
Bahrain — 128%
United States — 128%
Countries with the Lowest Debt-to-GDP Ratios (%)
Brunei — 3.2%
Afghanistan — 7.8%
Kuwait — 11.5%
Congo (Dem. Rep.) — 15.2%
Eswatini — 15.5%
Burundi — 15.9%
Palestine — 16.4%
Russia — 17.8%
Botswana — 18.2%
Estonia — 18.2%t
Do the above ratios tell you anything about whether a government’s fiscal policy is “sustainable”? Is Russia’s economy more “sustainable” than Japan’s and the US’s?
Then there is this graph. What does it tell you about sustainability (whatever that supposedly means)?
Gross Federal Debt / DGP is red. GDP is dark blue.Real (inflation-adjusted) GDP is light blue.
The debt/GDP ratio rose during World War II. Then, for about 35 years, it declined until 1980, when it began to rise. In 1996, the ratio had a 5-year decline, after which it grew until 2020 and a short decline.
Meanwhile, GDP has had relatively steady growth.
So, what did the debt/GDP ratio tell you about the economy? What did it predict? What did the ratio say about “sustainability”? Nothing.
GDP measures the size of the nation’s economy in terms of the total value of all final goods and services that are produced in a year.
Considering financial results relative to GDP is a useful indicator of the economy’s capacity to sustain the government’s many programs.
I keep reading and rereading that phrase, “the economy’s capacity to sustain the government’s many programs. “ I can’t visualize what it means.
Does it mean the government is running out of money (which, for a Monetarily Sovereign government is impossible)?
Former Federal Reserve Chairman Alan Greenspan: “There is nothing to prevent the federal government from creating as much money as it wants and paying it to somebody.”
Does it mean the government doesn’t have enough people to run its programs? (Just hire enough people.)
Or what?
World War II tested the government’s “capacity to sustain many programs.” It merely spent more money, hired more people, and sustained very nicely, thank you.
Since then, despite repeated claims that the federal debt is a “ticking time bomb,” and much to the consternation of the debt Henny Penny crowd, the economy keeps growing and remaining healthy. Even COVID was only a short-term setback for the U.S. economy.
This report presents data, including debt, as a percent of GDP to help readers assess whether current fiscal policy is sustainable. The debt-to-GDP ratio was approximately 97 percent at the end of FY 2022, down from roughly 100 percent at the end of FY 2021.
The long-term fiscal projections in this report are based on the same economic and demographic assumptions that underlie the SOSI.
The Statement of Social Insurance (SOSI) presents the projected actuarial present value of the estimated future revenue and estimated future expendituresof the Social Security, Medicare, Railroad Retirement, and Black Lung social insurance programs which are administered by the SSA, HHS, RRB, and DOL, respectively.
In short, the government is comparing probable expenses of these social programs with projected revenue — mostly tax receipts.
There’s one small problem with that comparison. The federal government’s finances are nothing like the finances of monetarily non-sovereign entities like you, me, businesses, and local governments, which require income to pay bills.
The federal government requires, and indeed uses, no income to pay its bills. Being Monetarily Sovereign, it creates new dollars every time it pays a creditor. In fact, paying creditors is how the federal government creates dollars.
To pay a bill, the government sends instructions (not dollars) to the creditor’s bank. The instructions are in the form of a check or wire, telling the bank to increase the balance in the creditor’s checking account (“Pay to the order of”).
When the bank does as instructed, new dollars are created and added to the M2 money supply measure.
Thus, even if the federal government received $0 taxes and any other revenue, it could continue spending forever simply by sending instructions to banks.
The current fiscal path is unsustainable.
To determine if current fiscal policy is sustainable, the projections based on the assumptions discussed in the Financial Report assume current policy will continue indefinitely.
The projections are therefore neither forecasts nor predictions.
Nevertheless, the projections demonstrate that policy changes need to be enacted for the actual financial outcomes to differ from those projected.
I don’t know what the above paragraphs are supposed to mean, but I’ll take a guess. See if you agree with this translation:
“The government can’t keep increasing deficits the way it has been for the past eighty years. We don’t know why, but it simply can’t.
“Although this isn’t a forecast or a prediction (if there is any difference between the two), something has to change, just because we say so.”
If there is another meaning, please let me know.
The debt-to-GDP ratio ratio was approximately 97 percent at the end of FY 2022. Under current policy and based on this report’s assumptions, it is projected to reach 566 percent by 2097.
The projected continuous rise of the debt-to-GDP ratio indicates that current policy is unsustainable.
Let’s return to the Debt/GDP graph. In 1974, the Debt/GDP ratio was 23%. By 2022, 48 years later, the ratio was 97%, a 4.217-fold increase.
The government forecasts and predicts (Oops, supposedly it isn’t a forecast or a prediction) — let’s say it’s a WAG (wild ass guess) that by 2097, which is 75 years later, the ratio will be 566, which represents a 5.8% increase from the 97% of 2022.
In short, we had a 4.217-fold increase in 48 years, and the WAG is for a 5.8-fold increase in 75 years. And that is supposed to be “unsustainable.” Except . . .
Except the Treasury’s WAG is that future ratio growth proportionately will be less than the past ratio growth.
Apparently, Wild Ass Guesses aren’t as accurate as they used to be. Not that it matters because, as we have seen, Debt/GDP for a Monetarily Sovereign entity is meaningless.
Federal “debt” isn’t federal, and it isn’t debt.
It’s deposits into T-security accounts that are wholly owned by the depositorsand never invaded by the federal government. That’s right. The government doesn’t own or even touch those dollars. They belong to depositors.
The government merely holds them in safe keeping, like it holds whatever is in your bank safe deposit box.
To “pay off” the misnamed “debt,” the government merely returns the depositor’s’ dollars to the depositors. It does that every day.
Think about it. Do you really think the government of China would turn over ownership of billions of their dollars to U.S. government usage?
In summary, the Treasury supports the lie that the growing “Federal Debt/ GDP is in some way “unsustainable,” without ever saying what they mean by “unsustainable.”
There never has been a time when the U.S. government has not been able to “sustain” (whatever that means) its “debt” (whatever that means).
So why the lies?
For much of the government, it’s pure ignorance. The people writing this stuff simply do not understand Monetary Sovereignty.
But for some, it’s malevolence, paid for by the rich who run America.
“Rich” is a comparative.There are two ways to become richer: Get more for yourself or make those below you have less.
A millionaire is rich if everyone else has a thousand dollars. But a millionaire is poor if everyone else has a billion dollars. It’s the income/wealth/power Gap that determines whether you are rich or poor.
Cutting the Debt/GDP ratio requires cuts to such programs as Social Security, Medicare, and/or other benefits for those who aren’t rich. Or it requires increases in FICA and income taxes — the taxes that most affect the not-rich. You seldom hear recommendations to reduce the tax loopholes enjoyed by the rich.
By impoverishing the middle and the poor, the rich make themselves richer. So, they bribe the media, the politicians, and the university economists to tell you your benefits must be cut and your taxes increased because “the current policy is unsustainable.”
They rely on the public’s ignorance about Monetary Sovereignty, and so far, that has worked.
#Monetary Sovereignty - Mitchell 