Social Security Discussion

[Toro]

Again, for a second time, privatization will have zero effect on the economy or actual savings. As I explained quite clearly, these instruments will simply change hands, and no new money enters the economy. The only beneficiaries are the financial sectors due the potential for significant transaction costs. Over the next 40 years, quite frankly, I rather see an expansion of the economy and an increased standard of living for the majority of Americans, not for money manger capitalism (the very people that are responsible for the crisis).

I fundamentally disagree with this.

The duration of govies in the Barclay's Agg is, what, 5 years? What's 5 year debt yielding? Less than 2%? The long-term average is 3%-4%. Reinvested, that's all recipients invested in SS will receive. Investing in stocks over the next 100+ years will generate for greater returns, even if stocks are over-valued today. The equity risk premium is 3%-4%. Equities will do much better than government debt, especially at the end of a 35-year bull market in debt.

The composition of savings matters.

All fair points, but handing over SS to Wall Street is another nightmare waiting to happen. The profit motive is involved. On the other hand, the public sector serves everyone, which is why I'm a proponent as SS being turned into a retirement program (part of the social contract).

The vast majority can't even afford to adequately fund their IRAs or 401k since their incomes are too low to begin with. The old corporate pensions have went the way of the dinosaur with the evisceration of the industrial economy.

Which is why I think participation in SS should be compulsory. People simply don't save enough.

However, the structure should be different IMHO. FICA taxes would go into a defined benefit pension plan, a United States Pension Plan, and receive benefits upon retirement drawn from the plan. Or people could have the option to opt out but still have FICA taxes deposited into an IRA-like structure. Or, acknowledging that people generally are bad investors, if someone decides to pull out, a portion of the taxes remain in the USPP and the individual can invest only a portion of his contributions.

 

[Toro]

Here's what I said over three separate posts:

Individuals or firms selling stocks have bank accounts, right? For example, if an investor purchases assets from a seller, such as a corporate bonds or stocks, then payments are made from the bank to the seller. In order for any payments to be cleared and settled, a debit will be made from the reserve account of the bank buying these assets to the reserve account of the seller’s bank. Total net bank reserves are unaffected (unless the seller has a deposit account at the purchasing bank, then the bank will just credit more $$$$ to seller’s deposit account, both the bank’s reserves and aggregate reserves will remain unaffected).

Your stocks can payout dividends or you can sell them, correct? Bank accounts are settled and cleared when this occurs. If you sell say, 10k worth of Cisco, one account is debited and another is credited, settlements are made in dollars. Those dollars are non-government assets, but are also liabilities of the government sector.


The net worth of the private sector can indeed increase if private sector financial assets are negative, such as time period between 1997-2008.

Net worth is calculated through valuations, but accounting flows aren't dependent on such valuations. Your example of a certain type of financial asset (stocks) is used when we calculate net worth.

If the market price for a certain stock is $40 and then I purchase one share of the stock from you for $60, all that occurs in this transaction is that I have $60 less then I had and you have $60 more than you had previously. I have one more share of stock, you have less share. Also, the stock's market price went from $40 to $60.

Everyone else who owns a share of this stock thinks they're $20 wealthier per each share. This happens when the stock market goes up across the board.

Hey, wait a minute, what happens when the private sector net financial assets go negative yet net worth increases? Oh yeah, a bubble.

We can even sub-divide the both the government sector and private sector into smaller components in a stock-flow consistent model if we really wanted to.

Either way, even those of us in the private sector who want to take in more $$$$ than we spend in aggregate, will require that some other sector must spend more $$$$ than it receives. In this three sector example, we have the private sector, government sector, and the foreign sector.

Net financial assets of all the aforementioned sectors in the economy must add up to zero. The is a fact as a matter of accounting identity alone.

A company produces a shirt for $10. It then creates a new technology that allows it to sell the shirt for $5. The buyer of the shirt instead of having to spend $10 on a shirt can now spend $5 on a shirt and $5 on something else. Now, the consumer is wealthier and spends it on something else, say a pair of pants. Technology allows the consumer to buy both a shirt and pair of pants instead of just a shirt. Technology has created wealth.

Or, the company keeps charging $5 for a shirt but it's profits go through the roof.

Oh, and we are on the gold standard.

In both cases, the net wealth of the economy has risen. Technology has increased the value of the shirt company or it has increased the value of the shirt and the pants company. The accounting identities nor the monetary system play a part in this.

Per capita wealth of the country rises over time because of this dynamic. Innovation creates wealth. Wealth is reflected in the equity ownership of the economy.

 

[Toddsterpatriot]

I fundamentally disagree with this.

The duration of govies in the Barclay's Agg is, what, 5 years? What's 5 year debt yielding? Less than 2%? The long-term average is 3%-4%. Reinvested, that's all recipients invested in SS will receive. Investing in stocks over the next 100+ years will generate for greater returns, even if stocks are over-valued today. The equity risk premium is 3%-4%. Equities will do much better than government debt, especially at the end of a 35-year bull market in debt.

The composition of savings matters.

All fair points, but handing over SS to Wall Street is another nightmare waiting to happen. The profit motive is involved. On the other hand, the public sector serves everyone, which is why I'm a proponent as SS being turned into a retirement program (part of the social contract).

The vast majority can't even afford to adequately fund their IRAs or 401k since their incomes are too low to begin with. The old corporate pensions have went the way of the dinosaur with the evisceration of the industrial economy.

Which is why I think participation in SS should be compulsory. People simply don't save enough.

However, the structure should be different IMHO. FICA taxes would go into a defined benefit pension plan, a United States Pension Plan, and receive benefits upon retirement drawn from the plan. Or people could have the option to opt out but still have FICA taxes deposited into an IRA-like structure. Or, acknowledging that people generally are bad investors, if someone decides to pull out, a portion of the taxes remain in the USPP and the individual can invest only a portion of his contributions.

Or people could have the option to opt out but still have FICA taxes deposited into an IRA-like structure. <<<<<<This!

Or, acknowledging that people generally are bad investors, if someone decides to pull out, a portion of the taxes remain in the USPP and the individual can invest only a portion of his contributions.

Perhaps a limited number of target date type choices?
We would need to watch for political influence leading to Solyndra type funds.

 

[Toddsterpatriot]

Net financial assets of all the aforementioned sectors in the economy must add up to zero. The is a fact as a matter of accounting identity alone.

Are you trying to say assets=liabilities?

 

[Kimura]

I fundamentally disagree with this.

The duration of govies in the Barclay's Agg is, what, 5 years? What's 5 year debt yielding? Less than 2%? The long-term average is 3%-4%. Reinvested, that's all recipients invested in SS will receive. Investing in stocks over the next 100+ years will generate for greater returns, even if stocks are over-valued today. The equity risk premium is 3%-4%. Equities will do much better than government debt, especially at the end of a 35-year bull market in debt.

The composition of savings matters.

All fair points, but handing over SS to Wall Street is another nightmare waiting to happen. The profit motive is involved. On the other hand, the public sector serves everyone, which is why I'm a proponent as SS being turned into a retirement program (part of the social contract).

The vast majority can't even afford to adequately fund their IRAs or 401k since their incomes are too low to begin with. The old corporate pensions have went the way of the dinosaur with the evisceration of the industrial economy.

Which is why I think participation in SS should be compulsory. People simply don't save enough.

However, the structure should be different IMHO. FICA taxes would go into a defined benefit pension plan, a United States Pension Plan, and receive benefits upon retirement drawn from the plan. Or people could have the option to opt out but still have FICA taxes deposited into an IRA-like structure. Or, acknowledging that people generally are bad investors, if someone decides to pull out, a portion of the taxes remain in the USPP and the individual can invest only a portion of his contributions.

You're still operating under convertible currency paradigm. It's okay. Most portfolio managers do.

If we get a funding guarantee from Congress, out of the general revenue, FICA is simply not needed. I really don't see inflation as a problem barring full employment and full capacity utilization of the economy. And if we did reach a full employment scenario, we turn on the taxes to regulate any excess demand.

You're a wonkish finance guy like myself. Look into Warren Mosler (my mentor) and Marshall Auerback. My entire masters thesis was based off his work. I did my MS on the monetary circuit from an MMT perspective at NYU.

 

[Listening]

I fundamentally disagree with this.

The duration of govies in the Barclay's Agg is, what, 5 years? What's 5 year debt yielding? Less than 2%? The long-term average is 3%-4%. Reinvested, that's all recipients invested in SS will receive. Investing in stocks over the next 100+ years will generate for greater returns, even if stocks are over-valued today. The equity risk premium is 3%-4%. Equities will do much better than government debt, especially at the end of a 35-year bull market in debt.

The composition of savings matters.

All fair points, but handing over SS to Wall Street is another nightmare waiting to happen. The profit motive is involved. On the other hand, the public sector serves everyone, which is why I'm a proponent as SS being turned into a retirement program (part of the social contract).

The vast majority can't even afford to adequately fund their IRAs or 401k since their incomes are too low to begin with. The old corporate pensions have went the way of the dinosaur with the evisceration of the industrial economy.

Which is why I think participation in SS should be compulsory. People simply don't save enough.

However, the structure should be different IMHO. FICA taxes would go into a defined benefit pension plan, a United States Pension Plan, and receive benefits upon retirement drawn from the plan. Or people could have the option to opt out but still have FICA taxes deposited into an IRA-like structure. Or, acknowledging that people generally are bad investors, if someone decides to pull out, a portion of the taxes remain in the USPP and the individual can invest only a portion of his contributions.

Several "experts" (and I do think they are pretty good) have suggested a two tiered system.

I agree with your position if it basically says that you get a statement that says "you have put this much in and this is what you can expect". The same as any other investment vehicle. If you retire and it runs out before you die, then you go on "welfare" (and it won't pay for much and you won't get it if you live in a large, paid for, house...in short it would be pretty stingy....but that's what you get for not saving enough).

The system would operate according to some modified banking practices (meaning we won't lend to the federal government like they do now). Reserves would be kept on hand and there would be an outside oversight committee.

Freeloaders would be kicked off the system.

 

[Listening]

Again, for a second time, privatization will have zero effect on the economy or actual savings. As I explained quite clearly, these instruments will simply change hands, and no new money enters the economy. The only beneficiaries are the financial sectors due the potential for significant transaction costs. Over the next 40 years, quite frankly, I rather see an expansion of the economy and an increased standard of living for the majority of Americans, not for money manger capitalism (the very people that are responsible for the crisis).

I fundamentally disagree with this.

The duration of govies in the Barclay's Agg is, what, 5 years? What's 5 year debt yielding? Less than 2%? The long-term average is 3%-4%. Reinvested, that's all recipients invested in SS will receive. Investing in stocks over the next 100+ years will generate for greater returns, even if stocks are over-valued today. The equity risk premium is 3%-4%. Equities will do much better than government debt, especially at the end of a 35-year bull market in debt.

The composition of savings matters.

All fair points, but handing over SS to Wall Street is another nightmare waiting to happen. The profit motive is involved. On the other hand, the public sector serves everyone, which is why I'm a proponent as SS being turned into a retirement program (part of the social contract).

The vast majority can't even afford to adequately fund their IRAs or 401k since their incomes are too low to begin with. The old corporate pensions have went the way of the dinosaur with the evisceration of the industrial economy. And even if someone does manage to save, ZIRP prevents a decent yield. I can even make the argument the modern 401k is a Ponzi Scheme.

This where the government can step in and give retirees and the disabled significantly more spending power. It's more efficient from the macro balcony.

Please explain this point. I don't see it. If this the Keynesian approach, forget it.

 

[Norman]

All fair points, but handing over SS to Wall Street is another nightmare waiting to happen. The profit motive is involved. On the other hand, the public sector serves everyone, which is why I'm a proponent as SS being turned into a retirement program (part of the social contract).

How does the government serve everyone? And how does the market not serve you if it's specific goal is to give you profit for your retirement investment?

I think I want the profit motive to be involved when investing my retirement money... Rather than loss motive or something like that.

The problem with the SS is that it doesn't invest but spends. And that tends to not be good for the long term prospects of the system, you know, when it's actually time to pay the retirement. Pay as you go plans are in trouble all around the world. Funded retirement plans on the other hand are at least more solvent.

The problem is it's much harder fund a plan than it is to defund one.

 

[Kimura]

All fair points, but handing over SS to Wall Street is another nightmare waiting to happen. The profit motive is involved. On the other hand, the public sector serves everyone, which is why I'm a proponent as SS being turned into a retirement program (part of the social contract).

How does the government serve everyone? And how does the market not serve you if it's specific goal is to give you profit for your retirement investment?

I think I want the profit motive to be involved when investing my retirement money... Rather than loss motive or something like that.

The problem with the SS is that it doesn't invest but spends. And that tends to not be good for the long term prospects of the system, you know, when it's actually time to pay the retirement. Pay as you go plans are in trouble all around the world. Funded retirement plans on the other hand are at least more solvent.

The problem is it's much harder fund a plan than it is to defund one.

It boils down to discretionary versus necessary. I think all discretionary goods should be left to the private sector. Like I said to toddsterpatriot, on the other hand, necessary goods are inherently public goods, such as public utilities, which tend to be heavily regulated, and are managed in a superior fashion through public control.

We don't need to fund SS with FICA. This was done by FDR to ensure people felt like they had a moral, economic, and political right to these payments.

All we need to do is obtain a funding guarantee from Congress, much the same way we have one for Medicare. We eliminate FICA and raise minimum payments for the disabled and retirees, which will give them, as well as average Americans, more spending power for real goods and services, thus increasing demand.

My plan:

1) Get a funding guarantee for SS in perpetuity from Congress (much like Medicare)
2) Fund SS out of the general revenue
3) increase minimum payments to $2000 per month minimum (COLA increases)
3) Eliminate FICA (it's regressive)

By the way, there isn't a nominal SS crisis. There would be a crisis if we didn't have the real resources needed by the disabled and retirees, such as food, clothing, shelter, medical technology, medicine, hospitals, etc. If the reactionary Right and neoliberals get their way, and we destroy the rest of our productive capacity, this could become a reality.

 

[RKMBrown]

All fair points, but handing over SS to Wall Street is another nightmare waiting to happen. The profit motive is involved. On the other hand, the public sector serves everyone, which is why I'm a proponent as SS being turned into a retirement program (part of the social contract).

How does the government serve everyone? And how does the market not serve you if it's specific goal is to give you profit for your retirement investment?

I think I want the profit motive to be involved when investing my retirement money... Rather than loss motive or something like that.

The problem with the SS is that it doesn't invest but spends. And that tends to not be good for the long term prospects of the system, you know, when it's actually time to pay the retirement. Pay as you go plans are in trouble all around the world. Funded retirement plans on the other hand are at least more solvent.

The problem is it's much harder fund a plan than it is to defund one.

It boils down to discretionary versus necessary. I think all discretionary goods should be left to the private sector. Like I said to toddsterpatriot, on the other hand, necessary goods are inherently public goods, such as public utilities, which tend to be heavily regulated, and are managed in a superior fashion through public control.

We don't need to fund SS with FICA. This was done by FDR to ensure people felt like they had a moral, economic, and political right to these payments.

All we need to do is obtain a funding guarantee from Congress, much the same way we have one for Medicare. We eliminate FICA and raise minimum payments for the disabled and retirees, which will give them, as well as average Americans, more spending power for real goods and services, thus increasing demand.

My plan:

1) Get a funding guarantee for SS in perpetuity from Congress (much like Medicare)
2) Fund SS out of the general revenue
3) increase minimum payments to $2000 per month minimum (COLA increases)
3) Eliminate FICA (it's regressive)

By the way, there isn't a nominal SS crisis. There would be a crisis if we didn't have the real resources needed by the disabled and retirees, such as food, clothing, shelter, medical technology, medicine, hospitals, etc. If the reactionary Right and neoliberals get their way, and we destroy the rest of our productive capacity, this could become a reality.

Always interesting to watch Marxists at work attempting to redistribute our income.

 

[oldfart]

If SS had a DC option, given the size of SS, fees would almost certainly run below 50 bps, and most likely run in the 20-30 bps range. That's the cost for DC plans at the state level for public pension plans.

Re-reading the thread, I noticed that I have been unintentionally vague in my argument. There are two different possibilities here.

PLAN A: Social Security would allow a portion of Social Security contributions to be placed in a separate fund or funds much like public pension funds do now. Choosing among several of the funds offered would be a choice of the participant, but the administration of the funds would be as a pool which could get the benefit of the low costs you mention. We could argue about what fund alternatives should be available and if there should be limits on amounts in the riskier options, but I think that is the fine tuning. I could easily support the concept.

PLAN B: Taxpayers would be allowed to establish something very close to a current IRA in the private sector and SSA could rebate a portion of FICA or SECA to those accounts. This is a more "Wild West" version. I think that fee structure in this case would be closer to IRA accounts and managed portfolios today, there would be no market mechanism to drive investment costs down. It would be a windfall to Wall Street, especially when you consider that most of the money going into the new accounts would not be new money into the system, just money diverted from either FICA/SECA or current investments.

I think that only 15--20% of workers (but probably 30--50% of the retirement money) would go into either of these plans. Most folks would stick to traditional Social Security. I have big misgivings about Plan B and would oppose it now, although I think I could be convinced if a few problems could be resolved. Those problems are:

1. IRAs allow some investments that I think are a bad idea for a "substitute Social Security". I would include gold and commodities, options, real estate trusts, leveraged investments, non-traded stocks, and foreign assets. Some of these I might live with if there were a limitation on how much could be put in them.

2. As previously discussed, there are life and disability benefits in Social Security. I would want any substitute program to either be sufficiently limited or required to provide similar benefits to prevent a focus on retirement benefits from gutting the other benefits.

3. We have ****, but that protects against fraud, not simple risky investment gone wrong. FDIC insures only cash-like deposits. We might need something like PBGC coverage.

 

[Kimura]

How does the government serve everyone? And how does the market not serve you if it's specific goal is to give you profit for your retirement investment?

I think I want the profit motive to be involved when investing my retirement money... Rather than loss motive or something like that.

The problem with the SS is that it doesn't invest but spends. And that tends to not be good for the long term prospects of the system, you know, when it's actually time to pay the retirement. Pay as you go plans are in trouble all around the world. Funded retirement plans on the other hand are at least more solvent.

The problem is it's much harder fund a plan than it is to defund one.

It boils down to discretionary versus necessary. I think all discretionary goods should be left to the private sector. Like I said to toddsterpatriot, on the other hand, necessary goods are inherently public goods, such as public utilities, which tend to be heavily regulated, and are managed in a superior fashion through public control.

We don't need to fund SS with FICA. This was done by FDR to ensure people felt like they had a moral, economic, and political right to these payments.

All we need to do is obtain a funding guarantee from Congress, much the same way we have one for Medicare. We eliminate FICA and raise minimum payments for the disabled and retirees, which will give them, as well as average Americans, more spending power for real goods and services, thus increasing demand.

My plan:

1) Get a funding guarantee for SS in perpetuity from Congress (much like Medicare)
2) Fund SS out of the general revenue
3) increase minimum payments to $2000 per month minimum (COLA increases)
3) Eliminate FICA (it's regressive)

By the way, there isn't a nominal SS crisis. There would be a crisis if we didn't have the real resources needed by the disabled and retirees, such as food, clothing, shelter, medical technology, medicine, hospitals, etc. If the reactionary Right and neoliberals get their way, and we destroy the rest of our productive capacity, this could become a reality.

Always interesting to watch Marxists at work attempting to redistribute our income.

How does this redistribute income? Like I told Polticalchic, the federal government doesn&#8217;t have or not have $$$$ at any point in time. The federal government spends by creating new $$$$ (printing) and destroys $$$$ through taxation (unprinting).

For example, the federal government cuts my grandfather a SS check every month for $1250. Like clockwork, on the 1st or 2nd, his checking account receives a credit of $1250. All that's occurred, operationally, is that some numbers in his checking account have been marked up. Do you think the government used any of our tax revenue to pay my grandfather? Of course not, all the federal government did was increase the numbers in his checking account which created new $$$$. My grandfather then does his taxes and gets everything out to the IRS by April 15th. When the federal government receives his check, it simply debits the $$$$ in his checking account, which destroys $$$$. Numbers are simply marked down. This is how it works.

 

[Listening]

How does this redistribute income? Like I told Polticalchic, the federal government doesn&#8217;t have or not have $$$$ at any point in time. The federal government spends by creating new $$$$ (printing) and destroys $$$$ through taxation (unprinting).

For example, the federal government cuts my grandfather a SS check every month for $1250. Like clockwork, on the 1st or 2nd, his checking account receives a credit of $1250. All that's occurred, operationally, is that some numbers in his checking account have been marked up. Do you think the government used any of our tax revenue to pay my grandfather? Of course not, all the federal government did was increase the numbers in his checking account which created new $$$$. My grandfather then does his taxes and gets everything out to the IRS by April 15th. When the federal government receives his check, it simply debits the $$$$ in his checking account, which destroys $$$$. Numbers are simply marked down. This is how it works.

Are you saying that your grandfather pays out as much in taxes as he takes in from SS ?

Or are you admitting to the inflationary pressures this kind of practice will bring on.

 

[Kimura]

How does this redistribute income? Like I told Polticalchic, the federal government doesn&#8217;t have or not have $$$$ at any point in time. The federal government spends by creating new $$$$ (printing) and destroys $$$$ through taxation (unprinting).

For example, the federal government cuts my grandfather a SS check every month for $1250. Like clockwork, on the 1st or 2nd, his checking account receives a credit of $1250. All that's occurred, operationally, is that some numbers in his checking account have been marked up. Do you think the government used any of our tax revenue to pay my grandfather? Of course not, all the federal government did was increase the numbers in his checking account which created new $$$$. My grandfather then does his taxes and gets everything out to the IRS by April 15th. When the federal government receives his check, it simply debits the $$$$ in his checking account, which destroys $$$$. Numbers are simply marked down. This is how it works.

Are you saying that your grandfather pays out as much in taxes as he takes in from SS ?

Or are you admitting to the inflationary pressures this kind of practice will bring on.

I'm saying that spending precedes taxation and borrowing under our fiat system. Before we can get our hands on the $$$$, the national government has to spend it into existence. The funds for purchasing US government securities and tax payments come from the very act of government spending itself.

Inflationary pressures? I seriously doubt it, unless we were at fully employment and the economy was at full capacity.

 

[Listening]

How does this redistribute income? Like I told Polticalchic, the federal government doesn’t have or not have $$$$ at any point in time. The federal government spends by creating new $$$$ (printing) and destroys $$$$ through taxation (unprinting).

For example, the federal government cuts my grandfather a SS check every month for $1250. Like clockwork, on the 1st or 2nd, his checking account receives a credit of $1250. All that's occurred, operationally, is that some numbers in his checking account have been marked up. Do you think the government used any of our tax revenue to pay my grandfather? Of course not, all the federal government did was increase the numbers in his checking account which created new $$$$. My grandfather then does his taxes and gets everything out to the IRS by April 15th. When the federal government receives his check, it simply debits the $$$$ in his checking account, which destroys $$$$. Numbers are simply marked down. This is how it works.

Are you saying that your grandfather pays out as much in taxes as he takes in from SS ?

Or are you admitting to the inflationary pressures this kind of practice will bring on.

I'm saying that spending precedes taxation and borrowing under our fiat system. Before we can get our hands on the $$$$, the national government has to spend it into existence. The funds for purchasing US government securities and tax payments come from the very act of government spending itself.

Inflationary pressures? I seriously doubt it, unless we were at fully employment and the economy was at full capacity.

O.K. I get what you are saying. Just needed to make sure it wasn't totally out of context.

So, if the economy can absorb the additional dollars (essentially expanding the money supply...correct ?), you are suggesting that it go to people for SS ?

 

[Kimura]

Let me give you guys another example: look at what would occur if you went to the FED to pay your taxes with $$$$ in hand. First, you give them a wad of $$$$ as payment.

The FED counts it, give you a receipt, and send you on your way, with a thank you pin for helping fund SS, overseas military operations, interest on the public debt, etc. You leave, the FED takes you $$$$ and basically puts it into a paper shredder or burn it.

Yup, they chuck it. Why? They don&#8217;t need your $$$$. It&#8217;s the same as a ticket to the World Series. You go the World Series, they take your ticket and chuck it, even though you may have paid upwards of $4000 for some prime seating.

Logically, if the government shreds our $$$$ after collecting it, how does the government fund SS or defense or whatever? They don&#8217;t, it&#8217;s another mechanism entirely.

Let&#8217;s look at my example at what happened when we pay our taxes by writing a check. It&#8217;s the same mechanism. The check clears and the government simply debits (subtracts) the $$$$ from your checking account balance.

Do they receiving anything in the process? No, they don&#8217;t get a piece of gold or silver to spend. All that occurred was a debit in your checking account.

So what does the federal government spend if they never really have $$$$? Let&#8217;s say I&#8217;m expecting $1200 in an SS payment to hit my checking account, but my account already has $8,000 in it. Let&#8217;s say we&#8217;re watching the LCD at Wells Fargo as this occurs.

Wow! Suddenly my checking account statement reads $9,200. How did the government give me this $$$$? All it did was credit my checking account from $8,000 to $9,200.

Government spending is basically data entry on a spreadsheet called the US monetary system. We don&#8217;t need to obtain tax $$$$ to borrow or create a spread sheet entry we refer to as spending.

When the federal government decides to spend, these funds aren&#8217;t sourced from anywhere more than the points used to keep score at a baseball game, card game, or football game. We don&#8217;t sit around asking where the points on the scoreboard came from or if Yankee Stadium keeps points in reserve or in a vault.

Also, the collection of taxes or borrowing doesn't increase the pool of funds available for spending. The monetary system simply doesn&#8217;t operate like a recycling plant.

 

[Kimura]

Are you saying that your grandfather pays out as much in taxes as he takes in from SS ?

Or are you admitting to the inflationary pressures this kind of practice will bring on.

I'm saying that spending precedes taxation and borrowing under our fiat system. Before we can get our hands on the $$$$, the national government has to spend it into existence. The funds for purchasing US government securities and tax payments come from the very act of government spending itself.

Inflationary pressures? I seriously doubt it, unless we were at fully employment and the economy was at full capacity.

O.K. I get what you are saying. Just needed to make sure it wasn't totally out of context.

So, if the economy can absorb the additional dollars (essentially expanding the money supply...correct ?), you are suggesting that it go to people for SS ?

As long as there is an increase in real goods and services along w/these increased SS payments inflation won't be a problem. It's REALLY difficult to get a sustained inflation under today's conditions. The FED has used every policy tool under the sun for the last 4-5 years and utterly failed.

These increased payments will result in more spending power, along w/the FICA suspension, thus increasing aggregate demand, which will result in more real goods and services being sold. This will send a signal to entrepreneurs and firms as well.

 

[Listening]

I'm saying that spending precedes taxation and borrowing under our fiat system. Before we can get our hands on the $$$$, the national government has to spend it into existence. The funds for purchasing US government securities and tax payments come from the very act of government spending itself.

Inflationary pressures? I seriously doubt it, unless we were at fully employment and the economy was at full capacity.

O.K. I get what you are saying. Just needed to make sure it wasn't totally out of context.

So, if the economy can absorb the additional dollars (essentially expanding the money supply...correct ?), you are suggesting that it go to people for SS ?

As long as there is an increase in real goods and services along w/these increased SS payments inflation won't be a problem. It's REALLY difficult to get a sustained inflation under today's conditions. The FED has used every policy tool under the sun for the last 4-5 years and utterly failed.

These increased payments will result in more spending power, along w/the FICA suspension, thus increasing aggregate demand, which will result in more real goods and services being sold. This will send a signal to entrepreneurs and firms as well.

Which is just another way of saying we have the supply capability already (can't think of the term so I'll just say capacity). What you are looking to do is put money into the market to use up that capacity.

Correct ?

But why through SS recipients. Why not tax breaks ?

 

[Kimura]

O.K. I get what you are saying. Just needed to make sure it wasn't totally out of context.

So, if the economy can absorb the additional dollars (essentially expanding the money supply...correct ?), you are suggesting that it go to people for SS ?

As long as there is an increase in real goods and services along w/these increased SS payments inflation won't be a problem. It's REALLY difficult to get a sustained inflation under today's conditions. The FED has used every policy tool under the sun for the last 4-5 years and utterly failed.

These increased payments will result in more spending power, along w/the FICA suspension, thus increasing aggregate demand, which will result in more real goods and services being sold. This will send a signal to entrepreneurs and firms as well.

Which is just another way of saying we have the supply capability already (can't think of the term so I'll just say capacity). What you are looking to do is put money into the market to use up that capacity.

Correct ?

But why through SS recipients. Why not tax breaks ?

#1. Current SS payments are simply inadequate.

#2. FICA is a tax break. And I'd like to see more tax breaks for lower and middle income folks

We have a ton of excess capacity, that's a very good point. I'd also like to see a Job Guarantee, but that's another animal altogether

 

[RKMBrown]

It boils down to discretionary versus necessary. I think all discretionary goods should be left to the private sector. Like I said to toddsterpatriot, on the other hand, necessary goods are inherently public goods, such as public utilities, which tend to be heavily regulated, and are managed in a superior fashion through public control.

We don't need to fund SS with FICA. This was done by FDR to ensure people felt like they had a moral, economic, and political right to these payments.

All we need to do is obtain a funding guarantee from Congress, much the same way we have one for Medicare. We eliminate FICA and raise minimum payments for the disabled and retirees, which will give them, as well as average Americans, more spending power for real goods and services, thus increasing demand.

My plan:

1) Get a funding guarantee for SS in perpetuity from Congress (much like Medicare)
2) Fund SS out of the general revenue
3) increase minimum payments to $2000 per month minimum (COLA increases)
3) Eliminate FICA (it's regressive)

By the way, there isn't a nominal SS crisis. There would be a crisis if we didn't have the real resources needed by the disabled and retirees, such as food, clothing, shelter, medical technology, medicine, hospitals, etc. If the reactionary Right and neoliberals get their way, and we destroy the rest of our productive capacity, this could become a reality.

Always interesting to watch Marxists at work attempting to redistribute our income.

How does this redistribute income? Like I told Polticalchic, the federal government doesn’t have or not have $$$$ at any point in time. The federal government spends by creating new $$$$ (printing) and destroys $$$$ through taxation (unprinting).

For example, the federal government cuts my grandfather a SS check every month for $1250. Like clockwork, on the 1st or 2nd, his checking account receives a credit of $1250. All that's occurred, operationally, is that some numbers in his checking account have been marked up. Do you think the government used any of our tax revenue to pay my grandfather? Of course not, all the federal government did was increase the numbers in his checking account which created new $$$$. My grandfather then does his taxes and gets everything out to the IRS by April 15th. When the federal government receives his check, it simply debits the $$$$ in his checking account, which destroys $$$$. Numbers are simply marked down. This is how it works.

Your a liar, an idiot, or just plain FOS. We've discussed this dozens of times. No it's not how it works. The treasury most certainly does have a balance. Moving money from one account to another does not destroy it you fool.