Social Security and the Big Lie

November 13th, 2011
in Op Ed

by Roger Erickson, a letter to The Washington Post

Your firm's two recent articles did indeed go too far, in deliberately misleading readers on what is actually a very simple point. One article is (partially) reprinted below, the other is  here.

In contrast to the digressions propagated in the Post's two articles, Social Social-Security-card Security is a simple policy decision made by the electorate of the USA, to help efficiently care for it's aging and infirm citizens. Despite the added artifices of pretending to have workers pay into and receive payouts from a segregated sub-account purporting to separate some of our fiat currency from the rest, the program known as Social Security is no different from any other public policy decision. Social Security can no more go bankrupt than the DoD or Congress itself can.

Follow up:

This was thoroughly examined by Robert Eisner in the 1990s and earlier.  See References, end of article. The entire fabric of public discussion about fiat budgets, including sub-components like Social Security, all reduce to narrow policy tactics masquerading as national goals. As simultaneously discussed in another article from your paper, propagating  Big Lies only hastens systemic degradation, rather than helping our nation.

If you are really serious about talking to credible "Social Security experts" you couldn't honestly avoid re-reading Robert Eisners comments. May I suggest three excerpts from his writing?

1) 'The notion that Social Security faces bankruptcy begins with a fundamental misconception, that payment of benefits somehow depends upon the OASDI (Old Age and Survivors and Disability Insurance) trust funds. The trust funds are merely accounting entities....
...Our payroll taxes or "contributions" go directly to the United States Treasury. Our benefit checks come from the Treasury-and those receiving them can verify on those checks that the payer is the Treasury of the United States, and not any trust fund. Social Security payments are an obligation under law of the U.S. government. Our government and its Treasury will not,indeed cannot, go bankrupt. As Federal Reserve Chairman Alan Greenspan has recently put it, "[A] government cannot become insolvent with respect to obligations in its own currency." '

2) "Almost everybody talks about budget deficits. Almost everybody seems in principle to be against them. And almost no one, literally, knows what [they are] talking about."

3) The Great Deficit Scare: The Federal Budget, Trade, and Social Security
"American politics often seems to be focused on three deficits, real and potential: the federal budget, the Social Security Trust Fund, and the trade balance. Robert Eisner, past president of the American Economic Association, explains why this is an unhealthy situation as well as a source of much misunderstanding. He argues that simply looking at the raw numbers creates misimpressions about the country's real economic situation, as well as provoking potentially damaging ideas for " remedies." Eisner points out that Social Security Trust Fund deficits can be " fixed" by simple changes in accounting procedures or funding requirements. And America's trade deficit will not bankrupt the country--servicing America's foreign obligations will take only a tiny share of its national wealth. As with any other loan, Eisner reminds us, it is what deficits are spent on that counts: tax cuts or investments in education, research, or the nation's capital stock. Eisner maintains that the economic dragons the American nation should be attempting to slay do not entail mythically measured budget or current account deficits. The real economic troubles that America faces are those of poverty, income inequality, and a failure to invest in human capital and public infrastructure."

Patrick, if you would spend just a moment reflecting on the logic of Robert Eisner's advice, you would question the utility of advising US citizens to try to save "fiat", instead of investing in real national capabilities via education, training and output. With that re-orientation firmly in hand, perhaps you'd be willing to revisit the topic of Social Security, this time talking with experts who really DO know what they are talking about? Anything less than that step, sadly, falls into the category of aiding and abetting treason to country, by innocent fraud if nothing else.

Here is one of the articles in question (and the other is

Did a Social Security story go too far?

By , Published: November 4

If I ever had doubts that Social Security is the proverbial third rail of American politics, they were dispelled this week by readers who criticized a front-page story last Sunday on the subject by Post economic policy reporter Lori Montgomery.

Paul Krugman, the Nobel Prize-winning economist and columnist for the New York Times, criticized the story in his blog, saying it was “negative journalistic value added.” Dean Baker, an economist and co-founder of the Center for Economic and Policy Research, said on his“Beat the Press” blog that the story “discards all journalistic standards.” And dozens of readers said the story was misleading, inaccurate and intended to sensationalize, not to analyze.

I spent a couple of days last week talking to Social Security experts across the ideological spectrum. Some, mainly those on the left, didn’t like the story, while those on the right did. But some in the middle, like Jonathan Cowan of the Third Way, declared it realistic and on point.  Continue reading at The Washington Post.


1.  Eisner, Robert. 1986. How Real is the Federal Deficit? New York: The Free Press

2.  Eisner, Robert. 1994. The Misunderstood Economy. Cambridge: Harvard Business School Press

Related Articles

Other Articles by Roger Erickson

About the Author

roger-erickson Roger Erickson is a systems entrepreneur based in Maryland. He worked for years in neurophysiology system research, at the Humboldt Stiftung, MIT, Yale, and NIMH before becoming more interested in community, business and market systems. Roger's newest interests are being pursued through several startups, as well as pilot agriculture commercialization projects with the USDA.

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  1. indi007 says :

    Only only have a comment on the Greenspan quote.

    "[A] government cannot become insolvent with respect to obligations in its own currency."

    The US doesn't have obligations in it's own currency other than US Notes. The US is an only an endorser on Federal Reserve Notes. Federal Reserve Notes are not "US" currency.

  2. Admin (Member) Email says :

    To those who may be confused by the comment by indi007, please read

    The argument is one of semantics, in my opinion. While the statement that

    "Federal Reserve Notes are not "US" currency"

    might be correct by a parsing of language, the following statement is also correct:

    Federal Reserve Notes are currency of the US.

    The US government has assigned the responsibility for issuing currency (which is reserved to the Treasury by the US Constitution) to the banks. It is splitting hairs to say that the currency authorized by the government and issued by the banks is not US currency. In effect it is the only currency of the US. The US Notes (greenbacks) have not been printed for years and very few are in circulation today. (See Wikipedia, citation above). However, the government still has the constitutional right, responsibility and authority to create US currency. The most recent law in this regard (not yet implemented) is the platinum coin currency authorized in 1996 which several authors have discussed on our blogs. See, for example,

    There are a number of good articles for further reading listed at the end of each of the above.

    I will stand with the author and ask the question: How can the US become insolvent when it has the constitutional right, responsibility and authority to create US currency?

    John Lounsbury

  3. Scott Baker says :

    Federal Reserve Notes come with a price tag in treasuries. That is, we must sell Treasuries to obtain Federal Reserve Notes, and we must pay interest (albeit small, at the moment) on the Treasuries too, thereby requiring we sell NEW Treasuries to obtain the money to pay the old Treasury interest and on and on.
    With U.S. Notes, Congress just tells Treasury to issue them directly, in any amount, at any time, for any reason. It is, by design, inflationary, and just the right thing to put towards those parts of the economy that are in deflation - like infrastructure. We've already allowed the Fed to re-inflated the Banking system, why not try re-inflating the real economy too?



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