SOCIAL SECURITY AND BRAIN DAMAGE
by Dale Coberly
SOCIAL SECURITY AND BRAIN DAMAGE
Liberals Destroy Social Security While Claiming Victory
Republicans Cry “Please Not the Briar Patch, Br’er ‘Bama, please, please!”
Robert Kuttner, http://www.huffingtonpost.com/robert-kuttner/obama-social-security_b_1178904.html tells us that Obama has won a great victory by getting the Republicans to extend the payroll tax cut; SS “will be made whole from transfers from general government revenues. So far, so good.”
So far so bad. The great glory of Social Security has been that it does not depend on “general government revenues.” It is not a welfare program. The workers pay for it themselves. Therefore it contributes absolutely nothing to “The Deficit.”
Since “liberals” frequently defend Social Security by pointing this out, you’d think that they could remember it long enough to avoid destroying the very foundation of Social Security.
But Kuttner tells us “there is no good reason why Social Security has to be funded entirely by payroll taxes.”
No reason, indeed, except that that is what Social Security IS. Fund it from the general fund and it stops being Social Security. It becomes welfare as we knew it. You can keep calling it Social Security but you will be fooling yourself.
Then Kuttner tells us, “the payroll tax…is one of our most regressive taxes…”
Except that it’s not a tax, and it’s not regressive.
A tax is a “required payment FOR THE SUPPORT OF A GOVERNMENT.”
The payroll “tax” does not support any government; it is used to support the person who pays the tax.
You can find reasons for calling the payroll tax a tax [it is a mandatory payment TO the government], but please contemplate this one fact: SS does not support the government. It supports the worker when he can no longer work. I am sorry if the use of the word “tax” confuses you, especially when i deliberately say “the payroll tax is not a tax.” The point here is to get you to think. Think about what Social Security IS, whatever words you want to use to refer to it.
As to being “regressive,” a low income worker can expect to get an effective “real rate of return” on his Social Security investment of 10% or so; a high income worker would expect about a 2% rate of return. How “regressive” is that?
Again, if you have been taught to say, “regressive tax, regressive tax, awk, regressive tax” whenever you hear Social Security, I can’t stop you. I can only ask you to think about the harm you are doing.
You don’t call SS a “regressive tax” unless you are advocating changing it to a “progressive” tax by turning it into welfare paid for by “the rich.”
FDR, in spite of what Kuttner says, was smarter than that. He knew what becomes of welfare programs, so he insisted SS be paid for by the workers themselves “so no damn politician can take it away from them.”
But Kuttner thinks that “making up the Social Security gap with a tax on millionaires is good policy. As long as the system is substantially financed by payroll taxes, the benefit still feels earned.”
How nice. The poor can feel they earned their benefit, while the millionaires who are not getting the benefit will feel so good about paying for it that they won’t bother to try to cut the benefits, or means test them, or raise the retirement age… because, you know, the rich are like that. Kind and generous about paying taxes, as long as the poor “feel like” they are paying for it.
I could let Kuttner and other pppprogressives call SS whatever they want in the privacy of their own faculty clubs, but when SS is under attack for its life, it is reckless irresponsibility to call it “a regressive tax” and to entertain sucker dreams about getting “millionaires” to pay for it.
The Social Security “gap,” before Obama started playing with it, was forty cents per week. Now that Obama has won his great victory over the Republicans the gap is sixteen dollars per week.
Since Obama has told the world that the Republicans won’t dare “impose such a huge tax raise on the middle class” we can be reasonably sure the Democrats won’t either.
So Social Security is now a welfare plan paid for by government deficits… just like Peterson always said… except it wasn’t true when Peterson said it. Now, thanks to Obama and the Democrats and “progressives” like Kuttner, it is.
SS could still be resurrected, but that would take some skill and leadership… probably something like a “making work pay” tax cut to replace the “payroll tax holiday,” so that when the tax cut has to end, the “tax increase” won’t get blamed on Social Security.
But skill and leadership we do not have.
Write this down, so when your children are forced to live in the poor house in their old age, someone may read it and remember that once upon a time there was a way for workers to save their own money so they could retire at a reasonable age… with their money protected from inflation and market losses, and government deficits… by the ingenious idea of pay as you go financing. This was called Social Security. But it was destroyed by “the friends of the poor,” who thought they could force the rich to pay for it.
The problem is, conservatives and millionaires will “try to cut the benefits, or means test them, or raise the retirement age…” anyway. They were doing it last year before the “holiday” and have been trying to do it since day 1.
While I understand your zeal to maintain the purity of SS as a non-welfare program, the practical upshot is that it doesn’t matter. Those who hate SS (and FRD, come to think of it) will not be moved by your arguments, no matter how fact based, no matter how logical. Because they don’t care about the funding. They have an agenda — having the rich stay rich and the poor stay poor.
But you need to take a step back and see why this would not work:
a “making work pay” tax cut to replace the “payroll tax holiday,” so that when the tax cut has to end, the “tax increase” won’t get blamed on Social Security.
Money is fungible, so it’s a bit of a fiction, anyway; and more importantly, it will get blamed on SS, because that is the conservative meme, plus the tale is very easy to spin, and virtually impossible to refute.
As to being “regressive,” a low income worker can expect to get an effective “real rate of return” on his Social Security investment of 10% or so; a high income worker would expect about a 2% rate of return. How “regressive” is that?
A differential rate of return, favoring a low income worker — How “welfare-ish” is that?
It doesn’t matter that you’re right. Reaganomics, and all that it stands for, is working to its fell purpose. Every bit of econ data you can find screams their success. This is no different.
The opponents of Social Security don’t care about such things. They will attack it, anyway. Their main attack has been, and continues to be, that Social Security is going broke. If there were no Social Security Trust Fund, they might attack it as welfare. So far, they have not attacked it because temporarily the gov’t is subsidizing workers by putting more money in the Trust Fund than they collect in payroll taxes or pay in interest. They have attacked the temporary workers’ tax cut. According to you, they secretly welcome it, because it means that they can attack Socal Security later as welfare. But really, they don’t care.
i have spent ten years trying to teach people about the lies from the “right.” It is the idiocy from the “left” that this post is about.
Money is fungible… except that there are laws that keep you from robbing Social Security to pay for the rest of government. Your concept of “fungible” is what I would call “embezzlement.”
the higher rate of return to the poor worker does not make SS welfare. it does make it insurance. is your fire insurance welfare because the guy who doesn’t get the fire pays for your fire?
I am aware that the right will keep lying about Social Security. What I am yelling about here is the left changing SS in order to make the right’s lies “true.”
“they don’t care” because it is the victory they have worked for, and lied for, for seventy five years.
The tragic fact is that “the left” including you and jazz don’t understand Social Security. You think it’s welfare and that welfare is good.
For once I agree with you Coberly. The FICA tax holiday will be the death of SS as we once knew it.
I think the holiday will have to be extended. Look at all the other cutbacks that are scheduled to kick in 1/1/13. The PR tax will be the easist to roll over. And so it will. I don’t expect to get back to the 6.2% rate ever. SS will change, so will contributions. The general budget will pick up the slack, just as you say.
Me? I’m happy with this development. It wasn’t conservatives that took SS out behnd the barn and shot it. It was the liberals who did the shooting.
You worry about what might happen to children today and what they will face when they get old. You think they will not have the same benefits that someone 65 today has. You’re right. But if we go down the road of pretending that the promises that have been made in the past can be kept in the future, then those same kids don’t have much future anyway.
there was never any reason the “promises” couldn’t be kept. if the children today want the same benefits as the elderly of today all they would have to do is pay for them.
but you are right, it is the liberals who did the shooting.
“MONEY IS FUNGIBLE”
this was said by a politician not so long ago (as my memory goes) to explain why tax dollars could be shifted from, say, welfare to defense.
unfortunately now every idiot who wants to steal money from Social Security, or pretend that Social Security steals money from the budget, repeats “money is fungible” “money is fungible,” awk, “money is fungible”
Except that an earller Congress and a smarter, or more honest, President went to a lot of trouble to separate Social Security from “the budget” and even set up a “Trust Fund” exactly so the money paid into Social Security would NOT be “fungible.”
unfortunately they didn’t think to write the law so it worked both ways. Now, very bad people, much smarter than you, have used that loophole to effectively cut the payroll tax and undo the 1983 “reform” (payroll tax increase) that made SS work for the next 50 years and with another tiny increase forever.
Ha Ha, they said, we can cut the funding for SS and call it a “tax holiday.” And then SS WILL be paid for by “deficits as far as the eye can see” a huge burden on “the young… especially the rich young. And since the payroll tax holiday will never end, the only thing left is to cut benefits, raise the retirement age to where it is meaningless, means test the welfare and bring back the poor house.
And the liberals will celebrate the end of the “regressive tax.” regressive tax, regressive tax, awk.
I’m with the MMT people on this.
do me a favor here. my computer is really slow at opening links. and most of them aren’t worth the wait.
why don’t you try to summarize what they said. this will give your brain a chance to do some thinking and maybe free yourself from “what the other guy said.”
Problem is, the view you offer is not based on fact, but based on your analysis. You are claiming to know future results that you cannot know. Kuttner and Obama and others who have chosen the payroll tax cut disagree with your view. What you have done is simply repeat a view that you have long espoused, and sprinkled it with “bad liberals” and “no leadership” an other non-sunstantive yack. The non-sustantive yack doesn’t make your argument any stronger. It doesn’t turn your view into fact. It doesn’t make the other side of the argument any wronger than it was.
I understand that one keeps repeating one’s views to keep them in view. Pretending that the other side is vile because they disagree doesn’t make your view stronger. It just makes your effort at selling your view more small minded.
I would recopmmend you don’t go to the link. I fear for your heart! Here is a little snip from the first link:(From the Franklen and Delanor rosevelt Foundation
To understand the current set-up of Social Security, we need to go back to the Greenspan Commission, which tried to change Social Security from “paygo” (tax revenues equal benefits) to “advance funding” (taxes exceed spending) in 1983. Before the crisis, the payroll tax was set about two percentage points higher than necessary for total revenues to equal benefits paid. So the proposed payroll tax holiday essentially returns the program to “paygo”. But in truth, tax revenues never “pay for” benefit payments — either on an individual level or at the level of the program as a whole. This was well understood at the time the program was originated. However, President Roosevelt feared that Social Security would be seen as welfare or, worse, as socialism. So a fiction was maintained: that there would be both an individual link between taxes paid in and retirement benefits paid out (albeit, a loose one), and that at the aggregate level the payroll tax “pays for” benefits. Later, Greenspan’s Trust Fund would provide a buffer stock of “money in the bank” for the inevitable date on which a shortfall would occur. These twin beliefs are what James K. Galbraith would call a “convenient fiction” and over time they became a not so innocent “innocent fraud”.
Liberals have come to see that payroll tax fiction, as well as Greenspan’s Trust Fund fiction, as necessary to maintaining support for Social Security. Perhaps there was a time when this was true. But the fictions have become an albatross around Social Security’s neck. They are forcing left-leaning liberals to oppose tax relief for workers, arguing for a tax rate that is set well above what is required to generate revenues equal to benefits in a growing economy (and thus acting as a fiscal drag on an already suffering economy). Worse, they fuel the fire of Social Security’s enemies, encouraging calculations of money’s worth and Armageddon day. Inter-generational warriors are able to estimate with some precision the program’s budgetary shortfall at something like $10 trillion. Since payroll taxes are already so high as to burden most Americans more than the income tax, virtually no one advocates tax increases to close the shortfall. Hence the debate centers on when, and by how much, benefits must be cut. President Obama has been sucked into this debate, adopting the neocon view that the program is unsustainable because there is a coming shortfall.
Islam will change
And from the second – I think it says it all…(they were making a point by point rebuttal of the first link’s comments. here is point 9…
9. Payroll Taxes Do Not “Pay for” Social Security. Let us first look at this from a conventional viewpoint of government finance. Benefit payments are made by Treasury, just like any other federal government spending. Payroll taxes are paid to Treasury, just like any other federal taxes. If total spending, including Social Security, exceeds total tax revenue, including payroll taxes, the government records a budget deficit. It does not matter whether one part of the budget — say Social Security — receives dedicated taxes greater than spending. We can just as easily imagine that fuel taxes “pay for” transportation, and that income taxes “pay for” military adventures. If Social Security runs a surplus but the rest of the budget runs an equal deficit, the government has a balanced budget. It can say that the rest of the budget “owes” Social Security — but that is just internal record keeping. Later, if the rest of the budget continues to run deficits and then Social Security also runs a deficit, the sum of those two equals the budget deficit — an external deficit. The internal records that show Social Security has run years’ worth of surpluses do not change that fact at all. From the perspective of the budget as a whole, this internal accounting makes no more sense than when a household allocates the husband’s income to the house payment and the wife’s income to the auto loan with careful record keeping to track the husband’s debt to the wife when he comes up short. If total income is less than spending, there is an external budget deficit and the wife cannot collect from the husband on all the internal debts he may owe her from previous years.
Islam will change
Please explain how Social Security is not a government program.
You’d be much better off reading the two posts, but how I understand it is as follows:
1. A sovereign currency issuer does not require taxes to “pay for” its programs. Taxes are necessary to a)create demand for and acceptence of the sovereign currency b) regulate demand to maximize employment and price stability.
2. Payroll taxes are an unnecessary burden on the poor and middle classes, especially in an economic environment in which there is a shortfall in aggregate demand. Eliminating them gives workers more purchasing power and lowers costs for employers creating stimulus from the bottom up.
3. Social Security is an overwhelmingly popular program because we can see how important it has been in reducing poverty among seniors and most of us know how important it is to the seniors in our lives and we expect it will be just as important to us when we get to retirement age.
4. Tying SS to a payroll tax allows the predator class to create scary scenarios in which the program will “go broke” as a means to direct money into privitization schemes. Instead we should support at as an essential function of government that doesn’t have a “dedicated source” of revenue, just like defense or payment of interest on maturing debt.
5. Funding Social Security like any other necessary program doesn’t make it “welfare” because it is available to all seniors and isn’t means tested. Seniors earned their benefits by being productive workers creating goods and services during their preretirement years, which benefited the retired seniors of that era.
6. The best way to save Social Security is to make sure we maximize employment and productivity so enough goods and services are produced to allocate to each new generation of retired seniors. Boosting demand in a recession is how we maximize employment and eliminating burdensome taxes on the most income constrained citizens is one of the best (but not the only) ways to increase demand.
That’s all I have time for on my lunch break, but I hope you read the actual posts and investigate MMT further if you aren’t familiar with it.
be careful what you read. what you quote is artfully designed to mislead you. in fact SS “in the aggregate” is people paying for their own retirement benefits. The “mismatch” between what an individual pays in and what he gets out is the insurance function. so far even those who pay in the most, take out the most, but not the most as a percent of what they paid in. they DO get everything back they paid in plus enough interest to cover inflation plus about 2% real return.. this is possible because pay as you go is “paid” from taxes, at the same rate, on the higher incomes (from growth plus inflation) of the next generation. and the next generation gets the same deal so it’s “win win.”
there is no fiction… it’s all out there where you can see it, and the Petersons can lie about it, and their hidden allies on the left can “reluctantly” agree with them. there is no fraud. maybe i’ll write another post to cover all this… as if anyone would read it and understand.
the payroll tax is not too high… it is exactly high enough to pay for a minimum retirement.
Obama has not been sucked into the debate he is a paid agent of the Petersons.
there is no precision in the 10 trillion dollar shortfall. you don’t get precision with “present value over the infinite horizon.” and the 5 Trillion dollar shortfall over 75 years turns out to be forty cents per week added to the tax each year. not a crushing burden. and you get the money back with interest. when you need it most.
and this is a straight out lie intended to fool the stupid, which is most everyone. SS was created off budget exactly to prevent this kind of budget shell game.
thanks for the lesson on logic and rhetoric. my “analysis” of Social Security is mostly numerical fact, with a little careful reading of the legal structure… which sadly is only fact if the supreme court ultimately agrees with me.
as for my opinion that obama is a criminal and kuttner is a fool. well this is a blog. i am not god. but i suspect that if there is a god, he knows.
and all of your tedious pedantic bullshit doesn’t change any of that.
be careful. think slowly. say ALL the words:
social security IS a government program. it is NOT welfare. “the government” does not pay for it. the workers pay for their own retirement and other benefits by something called insurance. for the most part most people get back exactly what they pay in plus the interest that comes from pay as you go in a growing economy. for some people… they get back what they paid in plus interest, but not as much interest as most people. that extra interest goes to help those who did not make enough money over a life time to save enough… even with interest… to be able to retire.
see. it IS a government program. the government does NOT pay for it. all the government does is manage the details of the insurance pay as you go formula. and, of course, force you to pay the “tax.”
that’s the tax that is not a tax if that doesn’t blow your brain out.
So why didn’t they simply reduce earned income taxes on all income below $106,000 directly rather than transferring the money from the general funds to the Trust Fund to make up for the idiotic FICA (as in Contribution) reduction?
Aiden, Just to be a little more clear about it. Social security is a retirement/disability insurance program funded by worker and employer contributions (that’s your money in the box marked F.I.C.A on your pay stub and W-2) and administered by the government.
The armed forces are also government programs, but they are supported by general tax revenues and government borrowing. In that case the government transfers wealth from the pockets of the workers (general tax revenues) and their children and grand children (that’s the government borrowing part). In fact the Congress and the other two branches of government (Executive and SCOTUS) are also government programs paid for in that same manner. So you see the workers pay for their own retirement, if the political class doesn’t abscond with their money that’s in the Trust Fund and FICA revenue stream, and the wealth and retirement of some pretty useless scum.
I share your concern about the longer term implications about this and lacked enthusiasm for the original cut over a year ago. In principle we could go the route of Australia and simply have everything paid for out of the general fund, but indeed people are used to the deal established by the setup we have in this country. This is why I long opposed any changes to the SS system, as you should well remember, and, of course, no taxes get raised in the US, even those cut temporarily, which means indeed that this payroll tax cut will stick with long-term damage, even as I admit to having enjoyed seeing the hypocrisy of supposedly anti-all-tax-increases Republicans coming out against continuing the payroll tax cut.
This pdf contains the Leninist strategy to destroy Social Security. What Buff, Krasting and others here are saying proves it works. Briefly, the guys from Peterson’s libertarian institutes and other similar think tank analysts say that the whole idea that FICA supports current benefits is true the same way other useful fictions are–a soothing lie for the intended to reassure the peasantry. Furthermore, FICA and the whole scheme is against all free market priniciples. To take money out of the equities/bonds marketplace and set it up in a insurance scheme that pays a government guaranteed benefit (Oh noes!) produces a morally weak population on its way to serfdom. It’s ALL SO WRONG! (Hat tip to Hayek here.) So, SS delenda est and here’s how. That’s the Leninist strategy. It’s getting a lot of attention lately because of this article published yesterday in the LA Times. http://articles.latimes.com/2012/jan/13/business/la-fi-hiltzik-20120113
Bruce Webb, Coberly and I among others argue for leaving the current system as it is. This is the safest and most conservative position regarding SS but is often attacked. The regressive FICA tax argument comes up. So does the “Trust us! We’ll provide an equivalent benefit!” argument (as in the links Matt supplies.) And, the ever popular inadequate/regressive ROI argument. Few “serious people” advocate raising FICA to pay for future benefits. The voters are perfectly willing to pay a higher tax to keep SS as it is but nobody’s asking them.
This entire conversation is going on just between the Cato-ites, various WH and cabinet level staff, fiscally conservative R and D senators and people who have no prospect of ever needing or depending on SS. Frankly, these people don’t have a clue about how SS works and how it affects the lives of ordinary people. They are the last people who should be allowed to control the conversation, but they’re the “serious people” who’ll decide how this discussion comes out.
I have the most experience of administering SS’s benefits. I know about the ins and outs of who is eligible for what and how the program affects ordinary people. Thanks to my readings here and y’all’s comments, I have learned a lot about the theoretical underpinnings of the of SS and the various economic theories being advanced for and against leaving it alone. As a result, I have concluded that economic theories are like religions. They depend on a priori reasoning in terms of what gets advocated by whom at different points in time. So, I don’t see a dime’s worth of difference between the Leninist strategy and the appeals being made to progressives to shut up about FICA, COLA reformulations, means testing and the like.
So, when Krasting says that the FICA tax holiday threatens SS, I agree with him, Coberly, Webb and others who say the same thing. I understand all the reasons given for differing views on SS and I see nothing wrong with making these arguments. What I insist on as an old hand in the SS game is leaving it alone is the best thing to do. That way, FDR’s beautiful fiction is not fiction, but fact. NancyO
thanks for helping me out.
i would say that this is too “high falutin” for most people. we like to see that we pay for what we get. and we like to be paid for what we do.
the program you describe is probably “strictly true” and would even work… except for the politics.
what would happen if SS did not have dedicated funding…. as it now no longer does, thanks to Obama… is that the politician would always argue “we can’t afford such generous payments to the elderly.” with the dedicated funding the elderly, and those who expect to become elderly can always say “i paid for it myself.” and point to the receipts.
as for boosting demand in a recession, there are better ways to boost demand than to destroy Social Security. i am told the “making work pay” program that the “holiday” replaced was a better stimulus and better targeted to the really needy. the holiday actually puts a thousand dollars a year into the hands of the rich and maybe 400 per year into the hands of the low income. and nothing at all into the hands of the unemployed.
thanks. yes it’s true. old age pensions “could” be paid out of the general fund. and it would even still be true that the old folks “earned” them. but with politics in america those old age pensions would soon be reduced to “the work house.”
what’s hard to take is that the “liberals” (not all of them) have here given away to the Petersons the best argument they (the liberals) had for not cutting SS…”they paid for it themselves.”
directly and explicitly and in a way they understand. or used to.
I didn’t say I agreed to it. I just put these to snippits in so you could get the flavor and decide if you wanted to actuially spend the time to go read it all (its lengthy and I didn’t read it all).
That was my comment about sparing your heart!
Islam will change
Just to insure: My strategy on SS was just do nothing. It was/is fine and call me when the TF finally gets close to running out…
thanks. it was hard to tell you from what you were describing. i hope no harm done. usually i try to b careful exactly how i phrase my screams so the innocent don’t get hurt unless they choose to.
when you said “it says it all” it sounded like you were agreeing with it. in fact it is a bogus analogy. a better analogy would be if the husband and wife had separate bank accounts and were not on the best of terms and the husband borrowed from the wife and then said “hey, it’s all in the family” when she asked him to pay her back.
this would be especiaily ugly if the husband was going into debt to pay for sports cars to wow his mistress with while the wife was saving for their kids education.
the divorce court could sort it out, if records were kept. SS record are kept. trouble is SS can’t get a divorce. which is mostly what the crazy libertarians are on about. but the facts are that even as we speak, the husband IS paying the wife back. it’s those records, you see.
SS is somewhat redistributive, so in that sense it is somewhat welfare-ish. Retirement accounts held at private firms don’t redistribute.
ah buff. an honest man.
it would be better if that forty cents per week tax increase was started now. that way there would be a seamless transition when the TF runs out to the higher tax that will be needed to pay for the longer life expectancy of the current “young.”
but even “do nothing” is better than “give them a tax holiday.” or “raise the retirement age.” or “scrap the cap.” fiddlng with the CPI could be fixed when its damage becomes apparent, as could other cutting benefits. i think real means testing would cause a revolution once people find out what it means.
scrap the cap would cause a revolution at the top and we would see stronger efforts to kill SS. rasing the retirement age would not do its damage until it was too late to fix and would amount to murder of old people. yes it’s that bad.
but the tax holiday kills SS right here and now. replaces it with welfare. right back where we were in 1932. that was ugly then. it will be ugly again. coming to a theater in your neighborhood soon.
it is possible that “do nothing” will work forever. the predicted shortfall is not great and a rejiggering of the benefit schedule would avert the worst harm.
this is not very different from what Bruce Webb calls the Rosser Equation. that is something i have fought with rosser on because it is effectively making SS price indexed instead of wage indexed and sets a bad, bad example. but if just left as it is until the TF actually runs out, or very close, there would be some hope that the people of that time would be smart enough to do the right thing.
the people of this time sure as hell aren’t smart enough.
Buff–Yes. Leaving it alone is best, as you have said all along. The citations you have provided illustrate the Leninist strategy or some version of it, but that’s not your view. I should have been clearer. Sorry I wasn’t clearer. NancyO
Yes, Steve, but redistributing corporate profits from the shareholders to the CEO and Boards of Directors is also redistributive. In an of itself, redistribution isn’t bad. It’s not even new since governments have always taxed citizens and used the money/goods for purposes which don’t directly enrich all citizens. It’s what happens to the money that matters. We could argue that using corporate profits to reinvest in their businesses is a more capitalistic use of the money. Maybe SS is a more socially oriented and therefore “wefare-like” use. But, alla same process. Just different effect. NancyO
it is redistributive in the same way fire insurance is redistributive. if you have the fire you get paid. if you don’t have the fire your “investment” is distributed to those who do. Does that make fire insurance welfare… or “welfare-ish”?
It is just lazy sloppy thinking to go from “government plan” to think “government paid.” And just as lazy to go from “socially good” to “socialism.” Or from “welfare-ish” to welfare. It is also “tax-ish.” But then again it is also “insurance premium – ish”, or even “savings -ish.”
of course it’s “forced savings,” so therfore it is “serfdom – ish.”
Now, lets free ourselves from being word bound… or worse, word-ish bound… and look at what SS actually does in the real world:
people pay 6 or 12 percent (depends on if you think the boss would “really” give you his share if he didn’t have to pay it to SS) of their nominal pay. In return the get a promise (government guranteed… just like government bonds and insured savings) of significant help when they retire in the form of a monthly check based very closely on what they paid in, and so far always more than they paid in plus inflation plus growth in the economy. besides that they get insurance in case they die, get disabled, or just don’t make enough money to “save” enough to be able to afford to retire.
and all this is separated from “the government” by a firewall that has, until now, been unbreakable by the bastards that wanted to destroy SS, or the congress that would raid it. until now. now the liberals have found a way to blow up the fire wall. and they are so proud of themselves because now they can force the rich to pay for the poor. isn’t that what being a liberal means?
thanks for the lesson on logic and rhetoric. my “analysis” of Social Security is mostly numerical fact, with a little careful reading of the legal structure…
as for my opinions about Obama and Kuttner. well this is a blog. i am not god. but i suspect that if there is a god, he knows. I think all the non substantive yak is in your head.
i am not “selling” my view. i am trying to explain the facts. if you want smooth talking salesmen, obama is your man.
i don’t see where i said “bad liberals” anywhere, much less sprinkled it.
I agree this payroll tax holiday is bad policy and something of a trap, but the trap is as much for you as for anyone and you seem to be quite securely within its jaws.
You are vociferously telling anyone who will listen that social security is “welfare” and that that is bad and leaving them one step from “well guess we ought to abolish it now”. They have you right where they want you.
i thought i was vociferously telling them that Social Security was NOT welfare. The payroll tax holiday is turning it into welfare and that’s bad. it’s bad because it leaves them one step from abolishing it now… only they won’t do that. they are smarter than that. they will let it run a while then they’ll say lookie there, SS is causing huge deficts, and huge taxes on the rich, just like we always said, we need to cut it. we need to raise the retirement age, we need to means test it. then we can drown it in the bathtub.
i hope you don’t think they need ME to tell them that. they know. it’s their plan. i am trying to tell YOU so you can demand to have your social security tax back.
but i already know how that goes.
I tried pretty hard in my comment to indicate that I don’t think the way you think I think.
what i should have said is
Social Security is not welfare.
The payroll tax holiday is.
I tried pretty hard in my comment to indicate that I don’t think the way you think I think.
I think my car insurance is somewhat reditributive also. It is an individual mandate, I must have it and if I have no accident I will not get back one cent. I would rather not have an accident and not get any money back.
But even a minor fender bender I better pay out of pocket because my premium would go up for years and I would pay the damage several times over. But it is a private for profit insurance. If it were government, not for profit, I would not put up with that.
i have that problem myself. care to try to clarify?
you have discovered their strategy. government mandate, private vendor. basically the vendor charges what the traffic will bear and the government provides him with customers.
i hated mandatory car insurance as much as the libertarians hate SS for much the same reason. I did grow up though. Now I pay my insurance and accept being robbed as “caesar’s money.” Not sure if government ownership of the car insurance biz would work out any better. But SS works about as well as anyone could hope.. or did.
Of course if I ever do have a serious accident i will be glad i paid those premiums all these years.
Sorry, stick a “now” into the first sentence of my second paragraph and It’s a lot more clear what I meant to say:
“You are vociferously telling anyone who will listen that social security is _NOW_ “welfare””
The Coberly-Webb-Ortiz view of SS is consistent with law, as well as Congressional intent as expressed in the law. Alternative views fail this test. They rely on accounting procedures and conventions that we’ve adopted to simplify the books for some, but clearly not all, purposes.
I do not agree entirely with Coberly that SS has been destroyed by the payroll tax holiday. Maybe, maybe not. If we decide in 2012 to elect politicians who are committed to refuse to raise and prefer to further cut taxes, we will be electing politicians who don’t want the payroll tax holiday. (Yes, you must stop and think about that one.) If we decide to elect politicians who are committed to raising taxes, then we’ll be electing politicians who–grudgingly or not–are willing to end payroll tax holiday while imposing higher marginal income tax rates for the top 2 percent of earners. Coberly’s nighmare is real primarily because our election results may not sufficiently change the status quo, i.e. a stalemate in which nothing can be accomplished.
thanks. but it may be too late for me “to think about that one.” can you explain what you mean?
there is room enough in the world for different takes… opinions, expectations. not infinite room;some things are clearly wrong.
but i think your take on this, as i think i understand it, is as good as mine… we’ll just have to see how it plays out. but if they “abolish it now” don’t blame me. i haven’t had that much effect on anyone let alone everyone.
fact is, Social Security was not welfare. now that they have killed it, what they have in its place which they call “Social Security”, but it’s not. it’s the corpse of Social Security, IS welfare… and they will abolish even that at their convenience.
Right Coberly, let me try again. First, the “let’s cut taxes even more” politicians don’t like the payroll tax holiday. If these pols win the 2012 elections, they’ll end the holiday. That may sound like anti-tax people raising taxes, but that’s the way it is. Second, the “let’s raise taxes” politicians don’t really care about the holiday, because their goal is to end the originally-Bush tax cuts for the top 2 percent. They took the holiday in lieu of getting what they really want and will give it up when they can get the big prize. So if these pols are victorious, the holiday will end. Either way, the holiday ends. The problem: maybe the election leaves us with a stalemate and do-nothing Congress. Then we and SS are screwed.
It’s not often I praise your posts, but wanted to chime in with an atta boy for this one.
“government guaranteed benefit”
Since the benefits can be changed by the government, or the amount of premiums one has to pay to achieve the same benefits can be changed by the government, the “guaranteed” nature of this is specious.
I agree that failure to let the payroll tax cut ‘holiday’ expire after the economy gets back on its feet would be a catastrophe and a real test of Democrat’s commitment to Social Security. And I understand that there is going to be a lot of pressure to continue it. But it is really too soon to assume that they will do the wrong thing. And if it does remain a temporary measure, it isn’t the end of the world. It is a fight I am quite willing to have. And I am essentially agreeing with you in spirit. But I think you are jumping the gun. I suggest you hold your powder. Face it, there isn’t shit you can do about it now anyway. And after there is some sense that the economy is in recovery there will be a move by many more responsible folks to end the ‘holiday’ for the sake of the program’s long term health. I am not willing to admit that this is not a winning political positition after what we have just been through.
thanks. i understand what you are saying. i can’t understand how they are thinking.
politics must be a branch of abnormal psychology.
not really specious. just a fact of life. nothing is guaranteed absolutely. but a guarantee by the United States of America used to be pretty good on the scale of guarantees. we used to think we lived in a democracy and “we” could prevent “the government” from robbing us.
actually, i think we still could. but we are not smart enough.
i hope you are right. but the way Obama went about getting the holiday, and the fact that a “dysfunctional” congress passed it over a weekend makes me think the fix is in.
Listening to the bastards lie about it… from both parties… does nothing to make me think they will be honest about it in the future.
Meanwhile, my powder is not going to change anything.. for better or worse. If it would I’d say end the holiday now. There are better stimulus and better ways to help the poor.
Excellent post, Coberly, thank you.
m.jed–Government guaranteed so far. Obviously, the benefits can be changed and program could become as Coberly points out a “transfer program” which is wonkese for “welfare.” Or abolished altogether in a libertarian utopia as some want. But, as guaranteed as anything gets for the last 76 years. Those who penned the phrase “full faith and credit” had no idea the Tea Party could ever exist. NancyO
SW–I’m glad you see cause for optimism. The budget mess Congress has got us in is a threat not just to SS but to all other domestic spending. I don’t for a minute believe that this or any other Congress will ever “pay back the debt.” I worked in the government for 32 years and it never went anywhere but up. But, what they don’t appropriate for health, education and welfare, including such things as TANF and food stamps, will cost us dearly in the end. NancyO
coberly: “politics must be a branch of abnormal psychology.”
😉 😉 😉
m.jed: “Since the benefits can be changed by the government, or the amount of premiums one has to pay to achieve the same benefits can be changed by the government, the “guaranteed” nature of this is specious.”
Then don’t vote for Republicans.
coberly: “The tragic fact is that “the left” including you and jazz don’t understand Social Security.”
Moi: “Neither Left nor Right but In Front.”
I disagree it is too “high falutin” for most people to understand a very basic fact that all government spending (whether it’s a payment for Social Security or an arms manufacturer) works the same way: by the Treasury electronically increasing balances in bank accounts. If people can understand how the points on a football scoreboard can go up when a team scores a touchdown, then they can understand how government spending by a currency issuer works. If they can understand that the football stadium scorekeeper doesn’t need to collect points from the teams before the game so it can “credit” a team for a touchdown later on, then they can understand that a currency issuer doesn’t need to collect tax revenue before it spends. If they can understand that the football stadium scoreboard can’t in theory run out of points (even if it can run out of space due to the physical size of the board) then they can understand that a currency issuer can’t run out of money and go “broke.”
The main tool of the enemies of Social Security is fear. They want people to be afraid that “the gov’t” will take Social Security away from them, when, of course, if anyone takes away Social Security it will be the enemies themselves. The current attack makes the claim that Social Security will become unaffordable. That is absurd. Even the CBO projections do not indicate that.
But talk is cheap. The best way to restore confidence in Social Security is to restore the economy, not just for Wall Street, but for Main Street. Given current politics, the FICA tax cut is one of the few things that the Federal gov’t is doing to bolster the economy, and bolstering the economy supports Social Security.
You believe that that tax cut will make people regard Social Security as welfale, and that will play into the hands of its enemies. But people love Social Security. Even the Tea Party, which is anti-tax, would tax rich people in order to save Social Security. Do they believe that Social Security is welfare? Do they believe that taxing the rich to support Social Security would be welfare? Maybe so, but they support Social Security, anyway.
IMO, the best response to the anti-Social Security propaganda is to call it what it is, and to point out that the only thing that we have to fear for Social Security is the propagandists and others who would destroy it or attempt to profit from it.
you are usually a pretty sensible guy, even here. i hope you can take a little rough debate without hurt feelings.
not rough exactly. but i am too old and never did like “polite” talk. it’s a simple fact that i think you and others don’t understand SS. not an insult.
and if you notice, the quality of comments, except for kharris, was pretty good too.
As a general rule, you can make credible claims about the intent of your writing, but not about the reality. That’s sort of basic to linguistic theory, don’t you know. You may believe you’ve made a case based in numbers and the law, but you actual make the case that ends up on electronic paper, not the one you made in your head. I repeat, you have claimed to to know future outcomes that are unknowable. It matters not that you are impressed with your own use of numbers and reading of the law. It matters little that you’ve met your own standard for careful. In the end, you’ve delivered nothing more than the prognostications of coberly.
The justification for making denigration of the other side of the debate is pretty thin. “It’s my party and I’ll play whatever music I like” doesn’t make the music you are playing any good. I applaud your admission that what you’ve said about Obama and Kuttner (you left out “liberals”, but whatever) is mere opinion. Problem is, once you strip away the mere opinion, your “analysis” is quite thin. What you claim to be “mostly numerical fact” looks to me like a pretty common use of numbers – sprinkle in numbers to give the impression that they back your view. Perhaps, now that you’ve repeated the numbers and the view together so often, you have come to think the numbers do support your view in some compelling way. The issue is political decisions to be made in the future, and the numbers may or may not drive the political decision in the way you suggest. They are not in any sense proof of your view.
You are uttterly mistaken about the “selling” business. Self-serving claims about your goals don’t change the nature of what you’ve written. It is big on polemics, light on real substance, though you have offered a good bit of what you seem to think is substance – those facts and numbers things.
And if I was insufficiently literal with “bad liberal” you have my deepest apologies. I intended to suggest that your tone implied “bad liberal”. I had thought, given the stretches you require from your readers from what is to what you claim will be, that you’d allow a stretch from others. I was obviously wrong.
And your welcome for the lesson. If more lessons are needed, you can depend on me.
If the important distinction is that the “government doesn’t pay for it”, then Social Security is in good company. The public pays for highways, either through taxes or through lending government money. The public pays for bombs in the same manner.
“Welfare” is a lovely thing made into a dirty word by those trying to kill government programs. Two common definitions of welfare are:
The health, happiness, and fortunes of a person or group.Statutory procedure or social effort designed to promote the basic physical and material well-being of people in need.
One doesn’t necessarily imply any government connection. The other is a perfectly good description of Social Security. You don’t get to decide that something is or is not welfare.
Implying that others in the discussion aren’t as clever as you (“be careful. think slowly…”) serves pretty much the same argumentative function as implying that others have bad motives – it allows you to claim superiority for your argument that hasn’t been earned.
Yes, Social Security is a government program. One paid for by the public, just like all other government programs.
Kharris your argument falls to pieces because it is the OPPONENTSof Social Security was are using ‘precise’ projections of future events to sell ‘crisis’.
Why are Peterson and friends allowed to frame the debate in terms of ‘unfunded liability’ over the God help us ‘Infinite Future Horizon’ while people like Coberly who are using shorter term derided for relying on the unknowable future?
Swallowing Camels while Straining at Gnats comes to mind here. If the future is unknowable then by definition Social Security is not in crisis-per kharris logic.
If you actually examine the details of the actual plan Coberly et al have advanced it doesn’t rely on long term projections at all. Like the Trustees Report it keeps an eye on the long term prize of ‘sustainable solvency’ but addresses that by using numbers derived from the Trustees ten year test for ‘Short Term Actuarial Balance’, which is to say the same ten year timeframe used for all budget scoring by CBO and OMB.
The Peterson people are using a bullshit measure introduced only in 2003, the ‘Infinite Future Horizon’ to present precise per household measures of current’unfunded liability’. Coberly has just turned around and showed how little THEIR numbers mean in actual per week per household tax increases.
For the sake of argument he accepts the BAD GUYS NUMBERS AND ARGUMENTS and refutes them on their own chosen ground. To turn around and blame him for using his opponents models against them whie giving those opponents a free pass for deploying those models to start with is somewhere between incoherent and dishonest.
To repeat the Northwest Plan simply takes the official Intermediate Cost estimate for long term Acturial balance and then shows how that could be addressed by actions triggered by actual failure of a ten year test. In so doing it establishes a specific methodology for annually changing a fix that would start at the point of ten year test failure. On a combined basis Social Security is projected to pass that specific ten year test every year until around 2022. Which means we need take no ACTION to change FICA on a combined basis until then, which doesn’t mean we shouldn’t have a flexible PLAN and METHOD in place that would allow us to show that we have solved the 75 year actuarial gap NO MATTER HOW THE NUMBERS ACTUALLY COME IN.
Your condescension here just shows that you haven’t bothered to distinguish between Coberly’s use of the oppositions own models to demolish the case for ‘crisis’ against his/our proposal to use official numbers and actuarial tests in the course of designing a METHOD that will work given any outcome within the current probability spreads. The Northwest Plan gives due attention to Intermediate Cost projections but is not bound to it or any other specific outcome. In fact one of the three authors of the Plan thinks Intermediate Cost too pessimistic and believes that trigger points will get pushed out, while another believes that certain projections of IC are too optimistic and will offset the effects the other author sees. While Coberly takes the more sensible approach of just using IC as the departure point while not trying to over project the future at all, even as we designed a method that handles optimistic, mid-scale, and pessimistic outcomes alike.
Your attack on Coberly is 180 degrees turned from the truth. Coberly USES an official set of numbers while never ENDORSING them. Meaning that attacks on that set of numbers misses the point, instead you need to take that argument to SSA and CBO and OMB and get THEM to change the official numbers. At which point the authors of the NW Plan will show how they can be accommodated into our flexible model.
To repeat THESE ARE NOT OUR NUMBERS. On the other ones they are the […]
Kharris call for the waaa-mbulance. Your argument at heart is to blame Coberly for not being a Social Democrat.
Plus you are ignoring the fact that Coberly is deploying the bad guy’s vocabulary and usage in a successful attempt to show the internal incoherence of those opponents arguments. It is called fighting fire with fire and is a time honored argumentive technique, admit (in both senses) the opponents’ premises FOR THE SAKE OF ARGUMENT ONLY and then show how they don’t support THE OPPONENTS CONCLUSION.
You have missed the crucial intermediate stage and insist on inserting your own definitions and premises. Well that is literally a different argument and I would add with the wrong opponent. Coberly is USING a set of premises without necessarily endorsing any of them in whole or in part.
Conservatives and Libertarians make explicit arguments about proper and improper functions of government and generally assign the term ‘welfare’ (as in the Constitution’s ‘General Welfare’ to the improper ones. That is they totally reject the idea that a ‘government program is a government program’ even as they occasionally embrace the idea that ‘taxes are taxes’ as it suits their purposes. For example ‘poor people don’t pay taxes’ along side ‘payroll taxes are fungible, it is all tax revenue’.
You are directing your fire at the wrong target and if I may say so being a fairly insufferable ass in the process. Your real argument is with AEI and Heritage, I suggest you take it there.
Dale I think you have misunderstood the implications of the Rosser Equation it relates to the underlying argument Prof Rosser and I have been pushing separately and on one occassion in a joint policy paper.
The Rosser and Webb position, partially endorsed by 1999 Dean Baker (but abandoned some as Dean saw the probable impacts of the housing crash starting with his 2004 warnings), was that certain aspects of the Trustees Imtermediate Cost alternative were too pessimistic and that it was reasonable to expect better than projected outcomes. What I later called ‘Rosser’s Equation’ was simply an illustration of the lower bound if we were in fact wrong about our plan of ‘Nothing’ and not an endorsement of that outcome as such. Descriptive rather than prescriptive if you will. Or at worst a confusion of ‘acceptable at the bound’ and ‘near optimal’.
In any event it has zip to do with endorsing price indexing over wage indexing, indeed Rosser’s equation simply projects current law (which includes wage indexing) and IC economic projections and shows how those compare I’m real terms with those of current beneficiaries. You are reading a positive value judgement into that arithmetic result that does not hold, at least not for me.
m.jed the benefit is guaranteed within any reasonable definition. On the other hand the benefit formula and so ths subsequent projected benefit amount are not.
You are combining that fact with the larger principal that no Congress can bind a future Congress to float a specious distinction floating in detachment from political reality.
Under current law SOME benefit is guaranteed and at the lower bound is that level of benefits financiable out of then current tax revenue. The theoretical argument that Congress could just wave it’s hand and make Social Security vanish is just as true as the argument that the U.S. Congress could declare war on Switerland tomorrow. Yeah it COULD happen, but—–
that is a reasonable position, as things are. i very strongly believe that turning SS into welfare is fatal. In fact by definition it is fatal SS IS worker paid. Replacing it with welfare may work out. I dnn’t expect it to. The bad guys have been calling it welfare for so long even the good guys can’t keep it straight in their head.
But once you can’t say “I paid for it myself,” watch out.
Nancy public debt as a percentage of GDP went down under every post-war and pre-Obama president not named Reagan or Bush. As always don’t confuse nominal and real. And this was true even as we fought Korea and Vietnam, paid for the GI Bill and the Marshall Plan, built the Interstate Highway System and put men on the Moon, and oh yeah introduced the Great Society programs.
We can and have paid down debt in the way most economically significant, as a percentage of national annual wealth. As recently as the Clinton Administration. There is no reason to believe that we couldn’t do it again.
i would suggest you and your psychiatrist go over what i wrote, word for word, and compare that to what you wrote about what i wrote. Then discuss the concept of “projection.”
your statement that SS is “paid for by the public” shows that you don’t know the first thing about Social Security. FDR insisted it not be “the dole.” He had to send his commission back a couple of times before they got that part right.
I don’t know if you ever worked for a living, but if you did you might have noticed that part of your check where they deducted for the Federal Insurance Contribution. Then, when you retire, you may pay attention to how they calculate your benefit… they base it on what you contributed.
That might be hard for you to understand because they “say” they are basing it on your “adjusted wages” but your contribution strictly depended on your wages.
seems to me that if you are going to talk about Social Security you need to spend as much time learning about it as you do reading Miss Manners.
I have come around to accepting that. As I said.. I argued… past tense… that the Rosser Equation argument looked too much like accepting price indexing in principle. Anymore I use the Rosser Equation myself to help people understand that we are not facing ANY kind of crisis, insolvency, or bankruptcy.
So give Professer Rosser my best, and accept my thanks (both of you) for pointing it out. And keep being a good sport when I argue my beliefs more strongly than kharris would like.
allow me to say that you and Nancy are both right. your point of view needs to be understood by those who take the point of view and argue that the government can’t be trusted to be responsible.
I don’t think Nancy goes that far. She just points out that the debt is never “paid back,” as others on this blog have attempted to explain to the confusion and consternation of those who think it “must” be.
allow me to say that you and Nancy are both right. your point of view needs to be understood by those who argue that the government can’t be trusted to be responsible.
I don’t think Nancy goes that far. She just points out that the debt is never “paid back,” as others on this blog have attempted to explain to the confusion and consternation of those who think it “must” be.
I am by nature a mathematician and a particle physicist (careful folks: i said by nature. I don’t claim that my education or talent are up to the job.) so I am charmed by your idea and your analogy.
but I don’t think there is a chance in hell of most people understanding it or accepting it.
Ha, your observation about abnormal psychology should serve as fair-warning to economists.
Rough debate? What rough debate?
I do not claim to understand Social Security. What I do understand is the anti-Social Security BS. (And I do understand that the treasuries in the Trust Fund do not reduce the deficit. :))
Bruce Webb: “Plus you are ignoring the fact that Coberly is deploying the bad guy’s vocabulary and usage in a successful attempt to show the internal incoherence of those opponents arguments. It is called fighting fire with fire and is a time honored argumentive technique, admit (in both senses) the opponents’ premises FOR THE SAKE OF ARGUMENT ONLY and then show how they don’t support THE OPPONENTS CONCLUSION. “
That may score debating points, but it does not defeat Big Lies. (Seriously, this is the stuff of cognitive dissonance. Showing people that they are illogical can harden their position. It can also make people sympathize with them.) Au contraire. What their sympathizers hear is that you agree with their premises, even though you are just granting them “for the sake of argument”. Don’t give an inch.
i think jazzbumpa went away mad, or sad. thing is people don’t realize you can talk a little more and fix honest misunderstanding. or disunderstanding. especially now that the trolls are away.
Min your mistake here is to assume that my target audience are the purveyors of the Big Lie as opposed to their audience.
I don’t care if this keys them harden their position not if it makes them look incoherent and hidebound both. And generally it is not my experience that embarrassing bullies makes them sympathetic figures. Mostly the opponents of Social Security stride on the fiield confident to the point of arrogant insolence, half the time thir argument starts with some ner equivalent of “Bruce you ignorant slut, everyone knows X, Y, and Z, haven’t you ever heard of experts A B and C citing Report/Study/Table D, E or F?” Well often enough I am familiar enough with A to F and fully understand how they historically have tried to support X, Y, and Z. And while it is possible to show weal points in my arguments you need more than second hand taking points garnered from Allan Sloan and Robert (Not Paul) Samuelson or the Opinion page of USA today. Which more often than not is all these folks have.
I often talk about the Fool vs Knave conundrum. Does any given opponent understand the holes in their argument and so are just lying when they advance them in an attempt to overawe me (the Knave-Liar)? Or are they simpletons themselves overawed by the clever tricks of the Knaves among us (the Fool-Rube)? After all these years, and I have been in this game for a long time, my inclination is to go all Punch and Judy and Fool and Knave alike and pack them all out of the Ring in their limping Clown Car. Taking the chance that the audience will be left laughing at them rather than booing me.
To return from this fanciful, and mixed imagery, the more acute members of the audience will understand what is going on and in the specific case at hand only the most obtuse wil fail to see that Coberly is not truly buying into the premises as such, but instead using a pseudo-Socratic method to discomfit the interlocutor. And it is not he who is trying to muddy the waters here.
Bruce Webb: “Min your mistake here is to assume that my target audience are the purveyors of the Big Lie as opposed to their audience.”
Sorry if I gave that impression. I was not talking about the purveyors of the Big Lie, but about those who have accepted it or are inclined to accept it. Their reasons for belief are not logical, nor are they defeated by logic.
Again I must disagree. As someone of average intelligence (and if you spoke with my former math teachers they might politely suggest that to be an overstatement) it wasn’t difficult to understand after reading Warren Mosler’s work (the scoreboard analogy is his btw) that explains complex monetary operations in plain English.
There’s also the fact that many of the rank and file on the Right are able to comprehend and argue for monetarism, supply side, and Austrian economic doctrines which are wrong and conflicting, but at least as complex as MMT.
For progressives MMT provides the understanding to not only protect Social Security against nonsense “affordability” arguments, but also to refute panicked jeremiads WRT to deficits and public debt. A currency sovereign doesn’t need to “borrow” the money it creates by keystrokes from China. Borrowing became obsolete when we left the primative gold standard, but our “leaders” (not to mention most of our economic departments) haven’t yet figured this out. The $15 trillion debt that supposedly dooms our grandchildren is actually $15 trillion in private sector savings! A treasury security is just a savings account, and “paying” debt is the equivalent of electronically moving a balance from this savings account to a checking (reserve) account at the FED. It has zero to do with how much our grandchildren will be able to produce and consume in the future! Unless, that is, we fail to understand actual monetary operations and continue to buy into irrational conventional wisdom which prevents us from maximizing productivity, employment and price stability in the present.
Similarly, as MMT undermines the case for fear over the debt, it also allows us room to reconsider the appropriate level and complexity of taxation. A currency sovereign doesn’t need to collect the money it creates by keystrokes from workers in order to obtain revenue to fund its operations. The currency soveriegn imposes taxes on the population so they will produce goods and services in exchange for the currency they need to obtain to pay off their tax obligation. This is what gives fiat money its value. This is what allows the government to get the real resources it needs from the private sector in order to perform its functions. Taxes also allow the government to regulate aggregate demand. When there is too much money bidding for too few goods and services it can raise taxes and take away purchasing power to lower inflation. When there are too many goods and services available to buy and not enough money to buy them, the government can lower taxes to give the population more purchasing power and end a recession.
Think about the advantage progressives could gain with this understanding! Won’t it be easier to get support for stronger social safety nets if taxes could be lowered and simplified? If instead of perpetual conflict over “punishing success” we could direct our attention to figuring out what and how many REAL resources we want to devote to public purpose, we will have already won a significant victory.