–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.
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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.

–Worried about your children and grandchildren paying the federal debt? Thursday, May 20 2010 

An alternative to popular faith


     The debt hawks claim to be concerned about your children and grandchildren, but their proposals actually will punish your heirs. The debt hawks say future taxpayers will pay for today’s federal deficit spending. This is factually wrong. Unlike state and local governments, the federal government does not spend tax money. It, in fact, destroys the tax money sent to it, and it creates new money, ad hoc, when it credits the bank accounts of creditors. Federal spending is not limited by, or related in any way to, federal taxes. Thus, taxpayers never have, nor ever will, pay for federal spending.

    What the debt hawks fail to mention is that their solutions (raising taxes and cutting federal spending) to this non-existent problem will impoverish you, your children and your grandchildren. Here is a sampling of debt hawk proposals. Read them carefully, and think about each proposal’s effect on current and future generations.

Retirement:
    Raise the normal retirement (Social Security) age to 68
    Reduce scheduled Social Security benefits
    Reduce Social Security spousal benefits
    Increase taxes on Social Security benefits

Health care:
    Tax insurance benefits
    Tax employees for employer-paid premiums
    Cut Medicare payments
    Cut Medicaid payments
    Raise Medicare premiums
    Cut spending on graduate medical education
    Raise the Medicare retirement age (again)
    Cut federal Medicaid funding to states

Jobs:
    Do not enact a new jobs bill

More taxes; higher taxes
    Raise taxes on higher incomes
    Increase the inheritance (“death”) tax
    Increase the gas tax
    Enact a VAT tax
    Increase the payroll tax (FICA)
    Eliminate the mortgage interest deduction
    Eliminate state and local tax deductions
    Tax life insurance benefits
    Eliminate EITC (Earned Income Tax Credit for low and moderate income workers
    Eliminate the $400/person making-work-pay credit
    Eliminate the “American Opportunity” college tax credit
    Add and excise tax on high-cost health plans

Military and Security:
    Reverse the “Grow the Army” initiative (fewer paid soldiers)
    Reduce purchases of weapons systems
    Reduce veterans’ income security benefits
    Reduce Homeland Security spending

Aid for the poor:
    Cut food stamps
    Cut average unemployment benefits
    Cut temporary assistance to needy families (TANF) program
    Cut funding for adoption and foster care

Education:
    Cut federal funding of K-12 education
    Cut school breakfast programs
    Cut funding for the education of disadvantaged and disabled children

Infrastructure:
    Cut federal highway funding
    Cut funding for bridge repair

Research & Development:
    Cancel NASA missions to the moon and Mars

States and Cities:
    Cut mass transit funding
    Cut federal funding to the states and cities

This is the world — a world of higher taxes and fewer benefits — the world the debt hawks propose for you, your children and your grandchildren.

And what is the federal debt the debt hawks worry over? The federal government spends by crediting the bank accounts of its vendors. Every credit demands a debit, and this debit on the government’s balance sheet is called “debt.” It more properly should be called, “money,” because the way the government creates money is by crediting bank accounts. That balance sheet merely is a score sheet, showing how much money the government has created.

You don’t owe it, nor do your children and grandchildren. It’s just a score sheet.

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

No nation can tax itself into prosperity

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