Today’s note is a follow-on to the one I published yesterday. In yesterday’s post, I wrote about the near-universal obsession with program “solvency” and the idea that we need to deal with looming shortfalls in order to protect Social Security (and Medicare Part A) for future generations. In one sense, that is true.
"As you might expect, [Senator Sanders] proposes to “pay for” these changes by raising taxes on high-earning individuals ..."
It concerns me that Sanders persists in using the "pay for" framing to discuss this, since that merely reinforces the (fallacious) notion that Social Security is "insolvent." The payroll tax will *always* be more regressive than the income tax. Progressive forces in the U.S. should not be reinforcing a spurious connection between the health of Social Security and the existence of the payroll tax-funded trust funds.
Kelton, you continue to think of an economy in terms of money. It's not about money, although as Friedman noted money is important sometimes. An economy is about production, not of money, but of valued goods and services.
Government is lousy at production of valued goods and services. By having the Fed keep filling up the government's bank account all we are treated to is an ever increasing waste of resources. Whether impoverishment arrives by taxation, funds or rather resources confiscated from the productive class and then wasted by government, or resources wasted in an inflationary frenzy via borrowed funds created by the Fed and spent by government, the noxious effect is the same.
Briefly, MV = PT in taxation sees M and V remain the same as P or Prices rise and T or Production falls.
If funded by the Fed , M rises and P or Prices rise as V and T remain the same.
You are taking a lot of flak these days for the inflation created by 2 years of production diminished Covid lockdowns. It's exactly like WW2 and its aftermath.
To simply say the Fed can print up more dollars to meet Social Security demands adds to the money supply without adding to valued production.
MMT has some interesting insights, but its reliance upon the idea that government can produce is its great failing.
I never thought I would agree with Mr. Sanders, but I do here. Getting rid of the tax cap could be a great thing, but it shouldn't be billed as another tax for the rich. It's a way for the wealthy to help their fellow Americans. Wealthy people always talk about taking giving pledges and philanthropy. I think contributing to Social Security could be the same thing. Here is a blog I wrote about Social Security: https://www.jonathangreeson.com/2021/03/23/will-social-security-run-out/
I’ve been a FDR fan forever, as a flawed and yet an amazing leader. I very much appreciate your points. Thank you!
"As you might expect, [Senator Sanders] proposes to “pay for” these changes by raising taxes on high-earning individuals ..."
It concerns me that Sanders persists in using the "pay for" framing to discuss this, since that merely reinforces the (fallacious) notion that Social Security is "insolvent." The payroll tax will *always* be more regressive than the income tax. Progressive forces in the U.S. should not be reinforcing a spurious connection between the health of Social Security and the existence of the payroll tax-funded trust funds.
Kelton, you continue to think of an economy in terms of money. It's not about money, although as Friedman noted money is important sometimes. An economy is about production, not of money, but of valued goods and services.
Government is lousy at production of valued goods and services. By having the Fed keep filling up the government's bank account all we are treated to is an ever increasing waste of resources. Whether impoverishment arrives by taxation, funds or rather resources confiscated from the productive class and then wasted by government, or resources wasted in an inflationary frenzy via borrowed funds created by the Fed and spent by government, the noxious effect is the same.
Briefly, MV = PT in taxation sees M and V remain the same as P or Prices rise and T or Production falls.
If funded by the Fed , M rises and P or Prices rise as V and T remain the same.
You are taking a lot of flak these days for the inflation created by 2 years of production diminished Covid lockdowns. It's exactly like WW2 and its aftermath.
To simply say the Fed can print up more dollars to meet Social Security demands adds to the money supply without adding to valued production.
MMT has some interesting insights, but its reliance upon the idea that government can produce is its great failing.
Without the money creating Fed, MMT is toast.
I never thought I would agree with Mr. Sanders, but I do here. Getting rid of the tax cap could be a great thing, but it shouldn't be billed as another tax for the rich. It's a way for the wealthy to help their fellow Americans. Wealthy people always talk about taking giving pledges and philanthropy. I think contributing to Social Security could be the same thing. Here is a blog I wrote about Social Security: https://www.jonathangreeson.com/2021/03/23/will-social-security-run-out/