Social Security and the Big Lie
November 13th, 2011
in Op Ed
by Roger Erickson, a letter to The Washington Post
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....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." ' http://www.jstor.org/pss/4538614
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."
Here is one of the articles in question (and the other is here):
Did a Social Security story go too far?
By Patrick B. Pexton, 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.
References
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 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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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.
To those who may be confused by the comment by indi007, please read http://en.wikipedia.org/wiki/United_States_Note
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,
http://econintersect.com/b2evolution/blog2.php/2011/07/24/coin-seigniorage-one-solution-to-debt-ceiling
and
http://econintersect.com/wordpress/?p=11554
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
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?