("They" being the managers of the money system, who know what they're doing, the politicians, most of whom don't, and the ruling class both groups work for.)
It's a fiction, a pretext, per Galbraith, a farce. There is no necessary economic relation between the numbers on spreadsheet 1 and the activity in 2. Paraphrasing Eisner: The government can pay out all the benefits in 2, while the accountants declare 1 in deficit. Forever.
The alleged need for the numbers in 1 to equal the numbers in 2 is their "construal" of how "social democratic benefits" are financed, which guarantees there will never actually be such things. It's a politically-confected correlation, not an economic causality. As FDR himself, who did the confecting, stated.
As long as we accept this framework, we are in an economically senseless and politically losing battle. We'll be constantly insisting on drawing enough "payroll tax" numbers from workers' paychecks into the Trust Fund spreadsheet to equal the amount of benefits paid. In other words, running Social Security in a way that "embod[ies] to as great an extent as possible the principles of capitalism"you know, like a business. Exactly the neo-liberal austerity mandate that we reject from RepubliDems in every other instance.
Everyone complaining about how unfair it is to ask USPS to hold adequate reserves to cover benefit obligations over a 75-yr horizon knows this is the same (dumb) standard we use to evaluate the "solvency" of Social Security and Medicare right?
Stephanie Kelton (@Stephanie Kelton) August 16, 2020
The left should refuse this debate and replace it with a framework that dispenses with the notion that a social program must be run like a business i.e., on the condition that it doesn't "lose" money. We must finally say that the "Trust Fund" spreadsheet is unnecessary, that 2 has nothing to do 1, and that we absolutely should terminate payroll taxes and set SS&M benefits however we want.
Because we can.
We have a fiat money system. Within that system, the federal government cannot "lose" money by paying for social programs. It creates money as much as it wants, without "collecting" anything in advance. It does this through a political decision, by passing a law saying, "the following sums are allocated," thereby directing the Treasury to mark up those amounts in the accounts of citizens, businesses, and organizations.
Money is thus created by spending, and before any of it is retrieved (actually, cancelled out) through taxation. It's not tax-and-spend, but spend-then-tax. And it's an entirely political process. It's time to recognize this "fundamental fact."
Understanding the spend-then-tax public money system does away with trust finds and payroll taxes and balancing spreadsheets as the canards that they are. It concentrates the mind right where it should be for leftists, on the entirely political questions about of the government doing the spending: Who controls it? Whom does it serve? For what purposes does it spend/create money into society and tax/retrieve it out?
Consider the logic of the alternative the common-wisdom, dominant paradigm of the left and right: If government spending depends on tax revenue, on dollars that come from "taxpayers," that means public wealth depends on private wealth. It means public programs can't be considered a "right." They have to be purchased by the private money of taxpayers. That gives those who pay more taxes a prima facie claim to demand more influence on how "their" "taxpayer money" is spent i.e., more political power. They are, in effect, society's donors.
It also means that the programs you can "pay for" with taxes on the rich are limited to the amount of money the rich have, which means we have to keep the rich around, and have to make sure they stay rich. Look at Bernie Sanders's "Make Billionaires Pay Act." It says that, "By taxing 60 percent of the wealth gains made by just 467 billionaires during this horrific pandemic, we could guarantee healthcare as a right for an entire year."
Wow, one whole year! So, "Tax them some more!" the taxes-pay-for-SS&M progressives will say. Well, exactly. Drain 'em dry! But don't you then dry up the tax well from which you extract the "taxpayer dollars" to "pay for" everything? Where are you going to get the money then? Higher payroll taxes, maybe?
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