The only 3 possible solutions to the entitlements crisis — no, make that 3 fake solutions + 1 real solution.

You often hear about the “entitlements crisis. Here is what it is and the 3 solutions — no, make that the 3 fake solutions + the one real solution.

In US Economics, what is the Entitlement Crisis? Erin J. Hill, Last Modified Date: February 28, 2023 The United States entitlement crisis refers to the deficit between what programs such as Social Security and Medicare will require in comparison to how much funding is available.

Men: We have three solutions to your situation. Man: How about taking the rope off my neck. Men: Hmm, never thought of that one.
Immediately, Erin J. Hill starts on the wrong foot when she talks about “how much funding is available.” The U.S. federal government uniquely is Monetarily Sovereign. It created the first dollars from thin air by passing laws it created from thin air. So long as the federal government can pass laws, it can pass laws that create dollars.

(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.”)

This means that the cost of these programs will be more than what is in the federal budget.

There is nothing to prevent the U.S. federal government from increasing what is in the federal budget enough to pay for all the entitlements, twice over.

Government officials have not yet discovered a long-term solution for the issue, although some have suggested raising taxes on certain goods and making some government programs harder to be accepted into.

Those are the two fake solutions to the manufactured crisis, raise taxes and cut benefits. Both solutions would impoverish the middle- and lower-income groups by widening the income/wealth/power Gap between the rich and the rest. Here is the third fake solution:

The third rail Republicans can’t stop touching By Natalie Allison Social Security and Medicare are wildly popular. So why do GOP Senate candidates keep talking about privatizing them?

For two decades, campaign after campaign, Republican politicians have floated the idea of privatizing government entitlement programs including Social Security and Medicare. And campaign after campaign — from Paul Ryan to George W. Bush — it’s been a loser.

But for some reason, they keep trying. The latest is Don Bolduc, New Hampshire’s GOP Senate nominee, who advocated privatizing Medicare during a campaign town hall in early August, according to a recording of the event obtained by POLITICO.

In a statement, Bolduc spokesperson Jimmy Thompson walked back Bolduc’s comments, saying the candidate now opposes privatizing Medicare, Medicaid and Social Security.

“Having served 10 tours of combat in Afghanistan, General Bolduc relies on his health care from the VA,” Thompson said in an email. “He knows first-hand how important its services are to veterans, and he believes that every American who is eligible should be able to rely on the benefits they have paid into it, including Medicare, Medicaid and Social Security.”

Having wilted from the political heat, Bolduc retreated to his military service for shelter. But he wrongly said people should rely on the benefits they have paid into it.

What people have paid may be politically relevant, as President Franklin D. Roosevelt claimed, but it is not financially relevant. Those FICA dollars are destroyed upon receipt by the U.S. Treasury.

FICA payments are made with M2 money-supply dollars. When they reach the Treasury, they cease to be part of any money supply. They disappear into the government’s infinite money-creation system. Infinity + FICA dollars = infinity.

(President Roosevelt, the originator of Social Security: “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.”)

FICA does not exist for financial reasons. It is all psychological. The government neither needs nor uses those dollars, but FICA makes people feel they are entitled to the benefits.

All entitlement benefits are paid the same way every federal obligation is paid: By the ad hoc creation of new dollars.

Even if all FICA collections ended (as they should), the federal government could continue funding entitlements, forever.

The 3 “solutions” are especially supported by the rich-loving GOP. Sadly, the Democrats agree that “something must be done} about the crisis, though their solutions involve raising taxes or cutting benefits, either of which would recess the economy and widen the Gap between the rich and the rest.

Most agree that the entitlement crisis is a result of poor government budgeting and overzealous spending.

No, the crisis is not due to budgeting and spending. It is an artificially manufactured crisis based on to failure to understand Monetary Sovereignty and the federal government’s infinite ability to pay for things with U.S. dollars.

(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.”)

Programs like Medicaid have been expanded, and overspending is a large issue within the government. This has resulted in a much higher national debt.

These factors, combined with the housing crisis and government bailouts may result in some programs being downsized or cut altogether.

Overspending is a non-issue for a government that pays for everything with dollars it creates at will. The so-called “national debt” is not even a debt. It is the total of deposits into T-security accounts, which resemble safe deposit boxes. The depositors in those accounts are not lenders. They are owners. The government never touches the deposits which remain the property of the depositors. To pay off the so-called debt, the federal government merely returns the deposits, plus interest, which the government has the infinite ability to do. The sole purpose of those deposits is not to provide the government with spending money. The purpose is to provide a safe, interest-paying place for dollar-users to store currently unused dollars. This stabilizes the dollar by making it safer to own.

As Baby Boomers get older, many expect the Medicare program to be placed under heavy financial stress.

Baby Boomers expect this because that is what they have been (falsely) told.

Some studies have shown that if the entitlement crisis is not remedied soon, in 15 years the only programs that will be able to be funded will be Social Security, Medicare, Medicaid, federal employee retirement, and interest on the national debt.

Other programs would have to be cut or funded through deficit spending.

No federal programs ever need to be cancelled for the government’s lack of money. The federal government never lacks money. Federal deficit spending not only is beneficial (It adds dollars to the economy), but it is necessary for economic growth. When deficit spending is absent, we have depressions:

Fact: U.S. depressions tend to come on the heels of 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.

Even when federal deficit spending exists, but in too-small amounts, we have recessions:
Reductions in federal debt growth lead to inflation
When federal deficit growth (blue line) declines, we have recessions (vertical gray bars) which are cured by increased federal deficit spending.

One of the primary reasons for the entitlement crisis happening in this time frame is that roughly 78 million baby boomers will reach retirement age during this time period.

The primary reason for the “entitlement crisis” is people being told there is a crisis, when the so-called crisis is an invention of the rich. They want to grow richer by widening the Gap between the rich and the rest. This widening can be accomplished by reducing the net income of the rest. The government easily could fund entitlement programs, not just for the 78 million baby boomers, but for every man, woman, and child in America.

While many agree that the entitlement crisis is a huge issue facing the American economy, others believe that the issue has been blown out of proportion.

It hasn’t been blown out of proportion. It doesn’t even exist. It is pure fiction.

Some even go so far as to say that it is a sham used to raise taxes and scare the public out of their money.

I’ll say it. It is a sham used to raise taxes and to scare the public out of their money. Pure and simple.

There is no debate, however, on the United States economy being in a tough position. In order to stop a crisis, either now or further in the future, changes need to be made to remedy government spending.

Raising taxes to pre tax-cut rates would also allow more breathing room, along with downsizing many government programs.

The author restates the pitifully wrong “solutions” to the non-problem of federal insolvency.

(Alan Greenspan: “A government cannot become insolvent with respect to obligations in its own currency.”)

Deficit growth declined before the recession. Increased deficit growth cured the recession.

If nothing is done and lawmakers continue to turn a blind eye, the coming economic crisis may bear many similarities to the one which started in 2007.

The recession of 2007 was caused by reduced deficit growth from 2003 through 2007. It was cured by increased deficit growth from 2007 through 2009.

Fortunately, the problems at hand are not insurmountable, and changes in Social Security and Medicare can be made so that both programs can be sustainable.

These changes need to be implemented sooner rather than later, though, before it’s too late.

The “changes” lead us to the 4th, the real solution: The federal government should eliminate all FICA taxes and should fund:
  1. Comprehensive, no-deductible Medicare for every, man woman and child in America.
  2. Social Security benefits for every man, woman, and child in America, regardless of age, income, or wealth
  3. School for grades K-12 + graduate levels for everyone who wants it.
That one tax cut and those three easily affordable benefits would enrich America far beyond current myopic visions. They permanently would eliminate the crippling and false financial equivalence between our Monetarily Sovereign U.S. government and the monetarily non-sovereign states, counties, cities, businesses, euro nations and people.

Scott Pelley: Is that tax money that the Fed is spending? Ben Bernanke: It’s not tax money… We simply use the computer to mark up the size of the account.

And finally, lest you believe the myth that federal spending causes inflation, it’s just that: a myth.
There is no relationship between changes in federal debt (blue) and changes in the consumer price index (red).
Ofttimes, the simplest solutions are the best solutions. Rodger Malcolm Mitchell Monetary Sovereignty Twitter: @rodgermitchell Search #monetarysovereignty Facebook: Rodger Malcolm Mitchell


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


A wonderful article that makes two points the American politicians do not understand.

The two points the American politicians (and much of the public) do not understand are:

  1. Monetary Sovereignty can prevent and solve any financial ill, any recession, any depression, any inflation, any shortage, almost any national need.
  2. Donald Trump, by intent or ignorance, is destroying our American way of life and attempting to install a dictatorship.

An excellent article by Noah Millman describes both points.

As today’s post will provide only excerpts, I urge you also to click the link and to read his article in its entirety.

America is coming apart. Europe is coming together.
Noah Millman, July 25, 2020

Why do some societies, like some couples, fall apart under pressure, while others band together?

Portland protests: Neither side is backing down as federal agents ...
Today, Portland. Who’s next?

If a crisis brings them together, will that make them stronger in the future?

And if they come apart, is that a sign that they should never have been together in the first place?

This week’s exemplar for “banding together” is the European Union (EU), whose leaders agreed to extraordinary new measures to promote a broad economic recovery in the wake of the novel coronavirus.

The agreement represents an about-face from the stance the EU took in the wake of the financial crisis of the last decade, which emphasized austerity rather than stimulus.

More importantly it broke two key structural taboos: the European Commission will, for the first time, be authorized to borrow significant sums of money; and a large portion of that sum will be disbursed to member governments in the form of grants.

The EU bears a cursory similarity to the United States of America. Both groups are composed of individual state governments.

Both the U.S. and the EU themselves are Monetarily Sovereign. They each own sovereign currencies, which they have the unlimited power to create.

The U.S. cannot run short of dollars; the EU cannot run short of euros.

For the EU, most of those governments are monetarily non-sovereign, meaning they don’t have their own sovereign currency. For the U.S., all the constituent state governments are monetarily non-sovereign.

Pepper spray everyone.

You and I also are monetarily non-sovereign entities. So are counties, cities, and businesses. None of us owns a sovereign currency.

To survive long-term we monetarily non-sovereign entities must have a net inflow of money.

Even “break-even,” i.e. a balanced budget, is not sufficient because, with even the most modest amount of inflation, a balanced budget would cause us monetarily sovereign entities to lose real wealth.

For the monetarily non-sovereign states of the U.S. and the EU, this net inflow must come from net exports or grants from their Monetarily Sovereign U.S. or EU governments.

But within any group, it is mathematically impossible for all members to be net exporters, and it is unlikely they all will be net exporters to the rest of the world.

So there are periods when the states of the U.S. and the states of the EU run short of money.

Typically then, these states must borrow money, and when borrowing has reached its limit, they must levy increased taxes on their citizens.

But, because the citizens are monetarily non-sovereign, they too can run short of money. Increased taxes impoverish the citizens, who subsequently are unable to pay further taxes.

This is known as “austerity,” which always leads to an endless, downward helix of impoverishment, which only can be solved when the Monetarily Sovereign U.S. or EU creates new money and distributes it as grants, not loans, to the needy states.

The U.S. federal government impoverishes its states by unnecessarily taxing the states’ citizens — “unnecessarily” because the U.S. government, having the unlimited ability to create dollars, has no need for taxes.

And indeed, all your tax dollars are destroyed upon receipt.

It is federal deficit spending that enriches the populace, grows the economy, and makes state, county, and city survival possible.

Contrary to popular wisdom, it is the insufficiency of federal deficit spending that invariably leads to recessions and depressions.

Sadly, many state citizens pay more money to the federal government than their state receives from the federal government, which causes an erosion of those states’ finances.

(See: “Eleven states pay more in federal taxes than they get back”)

Over time, these states must receive money from the federal government or they will become insolvent, and be unable to service their debts. EU Budget.png

This bit of simple arithmetic is not well understood in America.

The U.S. federal government levies taxes it neither needs nor even uses.

Indebted states struggle to provide basic benefits to their citizens.

A similar situation exists in the EU.

Of the 28 EU states, 12 do not have a positive balance of payments vs. the EU.

But of those 12, three are Monetarily Sovereign — UK, Sweden, and Denmark.

Those three cannot run short of their own sovereign currencies, and so long as those currencies have widespread acceptance, those countries always will be able to pay their bills.

The others have been, and it was feared always would be, struggling to stay afloat financially.

But Mr. Millman’s phrase, ” . . . a large portion of that sum will be disbursed to member governments in the form of grants.” seems to indicate that the EU just possibly may finally have discovered its own Monetary Sovereignty. 

If so, the heretofore lagging EU will rocket ahead of the U.S. in growth and prosperity for its members and its people.

One hopes that the U.S. federal government’s current, proven ability to create trillions of stimulus dollars, with none of the bad effects predicted by deficit and debt critics, may awaken the realization that yes, the U.S. federal government is Monetarily Sovereign, and so has the unlimited power to support the states and the residents of America. 

Which brings me to the union that seems to be coming apart: (America).

The primary characteristic of the American response to the coronavirus has been the lack of any national policy to speak of.

Individual states have been responsible for setting up their own testing infrastructure and contact-tracing apparatus, setting their own policies with regard to non-pharmaceutical interventions from lockdowns to mandatory masking, and even placed in competition with one another for personal protective equipment.

The federal government (has been) derelict in either building essential common infrastructure or promoting an agreed upon set of best practices.

It (has refused) to provide necessary funding to facilitate the opening of schools, and then threatening districts that don’t open with financial ruin.

President Trump has evinced a complete lack of interest in achieving meaningful collective goals, even those he ostensibly favors (like building a wall with Mexico).

Trump is interested in using power for pure assertion of prerogative, as he has demonstrated through his abuse of the pardon power and, most recently, by sending federal agents to Portland in response to ongoing protests and damage to federal property.

The purpose of his intervention is precisely to create the very chaos that he claims to want to quell, on the theory that public disorder ultimately helps the candidate promising a strong hand.

But it is also intended to demonstrate a willingness to use force against those who, in the view of his core supporters, deserve such treatment.

We frequently have noted Trump’s dictatorial, even Hitlerian bent ( here, and here, and here) which, along with his proven psychopathy, has been an ever-growing disaster for America.

Legality of federal agents in Portland scrutinized as protests ...
A “calming” influence?

Rather than merely protecting federal property, Trump’s storm troopers are dragging innocent protestors, even onlookers, off the streets, in clear violation of the Constitution’s guarantees of “the right of the people peaceably to assemble, and to petition the government for a redress of grievances.”

In the eyes of Trump, Trump’s supporters, and all dictators throughout history, merely assembling and petitioning the government for a redress of grievances are adequate reasons for harsh retaliatory measures.

The consequences to national cohesion of this approach to federal governance — neglect coupled with brutality — are likely to be felt long after this administration has ended.

A progressive prosecutor in Pennsylvania is already on record as saying he will order the arrest of federal agents if they break the law in his jurisdiction, as they did in Oregon.

Even if he never has to make good on that threat, a line has been drawn, and the prospect of direct confrontation between state and federal authorities in some future contingency is real.

Meanwhile, states (such as in the northeast) that banded together to combat the coronavirus, and that are now requiring visitors from the rest of the country to quarantine upon entry, will undoubtedly find new ways to work together without waiting for the federal government. 

rifle in face.png
“Brave” Trump stormtrooper faces “dangerous rioter.”

The nation has not been so divided since the civil war, and it is no coincidence that one of the innumerable points of contention involves rebel flags and names.

One part of the nation still considers those who fought against America to be heroes, and rather than feeling freed of the onerous yoke of slavery, they feel subjugated and resentful for having lost their freedom– their freedom to enslave.

For his own purposes, Trump has picked at this lingering wound and made if fester more than it has in over 15 decades.

Rather than “Make America Great, Again,” Trump has Made America Hate, Again.”

Trump has finally united the center of the country against him, and a decisive repudiation will restore Americans’ faith in the possibility of collective action.

The first part may prove true in November, but I wonder about the second, and not only because I remember how quickly the overwhelming Democratic majority of a dozen years ago curdled into endless partisan trench warfare.

We discussed the Democrats’ propensity for “endless partisan trench warfare” in “The left’s suicidal insistence on purity” and “The left’s suicidal insistence on purity II

Perhaps it behooves all of us who are appalled by the Trump years, and by what has happened to the party he purports to lead, to devote at least some of our energy to thinking outside the box.

How much do we actually want our states and cities to depend on the federal government, versus how much freedom do we want to chart our own course?

Do we want the battle against climate change to depend on which party controls the EPA — or do we want California to be able to use its economic clout to muscle the rest of the country along? 

The rest of Mr. Millman’s article is devoted to his “outside the box” suggestion that we should consider the various states seceding from the union, just to scare people into thinking seriously about coming together.

But, our current divisions are not simply geographical. Trump also has made our nation’s divisions moral, theological, ethical, and national.

Good heavens, he even has divided us about something so obvious and basic as wearing masks to protect each other. How can there even be an argument about that?

Yet, there it is, another Trump division.

Thinking outside the box, seems to me, to begin with an acknowledgement of:

  1. The benefits of Monetary Sovereignty, and the federal government’s unlimited ability to give virtually everyone virtually everything they want.
  2. The dangers inherent in Gap Psychology, the desire to advance by making others fall behind.

Life is not a zero-sum game.

If the evil Trump has wrought doesn’t scare Americans sufficiently, then nothing will, and there is no hope for our future as one nation. We forever will be divided and weak.

It will be the end of the American experiment.

Rodger Malcolm Mitchell

Monetary Sovereignty Twitter: @rodgermitchell Search #monetarysovereignty Facebook: Rodger Malcolm Mitchell …………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………..


The most important problems in economics involve:

  1. Monetary Sovereignty describes money creation and destruction.
  2. Gap Psychology describes the common desire to distance oneself from those “below” in any socio-economic ranking, and to come nearer those “above.” The socio-economic distance is referred to as “The Gap.”

Wide Gaps negatively affect poverty, health and longevity, education, housing, law and crime, war, leadership, ownership, bigotry, supply and demand, taxation, GDP, international relations, scientific advancement, the environment, human motivation and well-being, and virtually every other issue in economics. Implementation of Monetary Sovereignty and The Ten Steps To Prosperity can grow the economy and narrow the Gaps:

Ten Steps To Prosperity:

1. Eliminate FICA

2. Federally funded Medicare — parts A, B & D, plus long-term care — for everyone

3. Social Security for all or a reverse income tax

4. Free education (including post-grad) for everyone

5. Salary for attending school

6. Eliminate federal taxes on business

7. Increase the standard income tax deduction, annually. 

8. Tax the very rich (the “.1%”) more, with higher progressive tax rates on all forms of income.

9. Federal ownership of all banks

10.Increase federal spending on the myriad initiatives that benefit America’s 99.9% 

The Ten Steps will grow the economy and narrow the income/wealth/power Gap between the rich and the rest.