by Mark Dempsey
Today’s Sacramento Bee (April 2, 2023) has a story with the headline “Social Security insolvency coming earlier than expected” (p.A10, by Tony Pugh, of Bloomberg). The story issues similar dire warnings about Medicare, too.
Apparently, the story’s reporter believes dollars grow on billionaires—why, the Federal government cannot produce dollars! Yet the U.S. has trillions for bank bailouts and trillions more for overseas wars, but grandparents will have to suck it up, because—hey! we’re out of money!
I wonder how many people resent this obvious scam. A similar mystery for the media: why people vote for a guy promising to sabotage the U.S. system of governance—Trump.
The Bloomberg story blandly states the grandparent-unfriendly solutions: “Congress has varied and assorted options—like increasing taxes and reducing benefits—that could reduce or eliminate both programs’ long-term financing shortfalls.”
But even Alan Greenspan (“The Maestro”) debunks this myth. After Paul Ryan, in a Congressional hearing, asks Greenspan about the “insecurity” of Social Security, touting private accounts as a remedy, Greenspan answers “I wouldn’t say that the pay-as-you-go benefits are insecure, in the sense that there’s nothing to prevent the federal government from creating as much money as it wants and paying it to somebody. The question is, how do you set up a system which assures that the real assets are created which those benefits are employed to purchase?” [emphasis added]
One suggested solution to Greenspan’s question: a real-asset-creating system would favor producing real, well-distributed goods and services over speculation in financial assets.
As “The Maestro” says, the genuine constraints on Social Security are not financial, they’re related to the productivity of the whole economy. Nothing prevents the federal government from “creating as much money as it wants and paying it to somebody.” Nothing prevents government from creating infrastructure that enhances productivity, either, but that’s not been happening.
And let’s not attribute this mythical thinking to Republicans only. In his book Listen Liberal, Thomas Frank says Bill Clinton and Newt Gingrich proposed something similar to Ryan’s agenda—privatizing Social Security. This was just before the subprime/derivatives meltdown would have decimated such private accounts, but Monica Lewinsky put a halt to that. We owe her!
There’s no indication the Bloomberg reporter appreciates the absurdity of juxtaposing Social Security’s “insolvency” next to the stories of bank scandals. Bloomberg is apparently irony deficient.
Meanwhile, the Silicon Valley Bank bailout is now estimated to be $25 billion.
President Bush created a $700 billion bailout fund more than a decade ago, and the Federal Reserve—the Fed is our central bank—extended $16 – $29 trillion in credit to the financial sector in 2007-8. That last figure is from a congressionally-mandated audit that the Fed resisted. Where did that money come from? What a mystery!
Now everyone knows that money creation without limit can magically appear for the bankers but not for grandma’s pension and healthcare. What’s next? A report that the Bureau of Weights and Measures is running out of inches?
Bloomberg would probably assert that government money for Social Security and Medicare will cause inflation. Inflation couldn’t stem from COVID, supply chain difficulties, the sanctions on Russian energy production, or the recent OPEC oil production reductions. Nope.
It’s not a shortage of goods, it must be that darn government printing press that causes inflation! And please ignore the subsidies for the financial sector and military-industrial-prison-media complex! Those can’t be inflationary! Just grandparents are inflationary. Yeah, that’s the ticket!
Precisely. The scam is the idea that there is some fixed pot of money where our social security taxes go and await our withdrawal like a savings account or an individual retirement account and that if it is drawn down, the money isn’t “there” to pay out. The fact is, Social Security is a revolving fund, an accounting mechanism, and making good on any shortfall can be done exactly in the same manner as paying for one more stinger missile: just pay for it out of the Treasury. The difference is, people on Social Security spend their money locally at businesses in town, not with a large corporation headquartered who knows where and who happen to sell stinger missiles. It’s a better deal all the way around. Social Security and Medicare are only in trouble as a matter of policy. If the Congress decides to not spend on Social Security it’s a policy decision, not an economic one, just as it is a policy decision to spend the same money from the same source on stinger missiles or on any other item the government purchases.