The Village Still Ignores the Most Important Point
In recent posts I reviewed two commentaries by Abby Huntsman on Social Security and other entitlements, also noting points made in other critiques of her narratives. Abby’s commentaries are here, and here, and my critiques are here and here. The most important point I emphasized in my two rebuttals is that there are no fiscal solvency or sustainability issues related to Social Security, or other parts of the safety net, but that the issues involve only the willingness of Congress to appropriate entitlement spending, and either the removal of current constraints on Treasury to spend appropriations such as the debt limit, or the willingness of the Executive Branch to use its current legislative authority either to a) generate sufficient seigniorage from platinum coins to spend such appropriations; or b) use a type of debt instrument, such as consols, which aren’t counted toward the debt limit.
The day before I posted my second reply to Abby Huntsman, Richard J. Eskow and WeActRadio posted this video clip from Eskow’s radio broadcast. In his critique, Richard shows that Abby Huntsman’s treatment of Social Security and entitlements is full of misleading information and hews closely to the narrative offered by Alan Simpson, Pete Peterson, and organizations supported by Peterson funding, and he calls for the MSNBC producers of “The Cycle” to issue statements correcting the facts, and to give Abby’s co-hosts on The Cycle a chance to reply to her about social security.
Richard points out that he’s not calling for anyone to change their opinions about SS, or to change their values, or to be fired, or sanctioned. But he is saying that it is the responsibility of MSNBC to set the record straight on the facts, and to recognize that while its commentators are entitled to their own opinions; they are not entitled to their own different set of facts. Here’s Richard’s video appealing to basic rationality.
In the video, at about 1 minute and 59 seconds in, he says:
I do want to emphasize because it’s important now is that Abby Huntsman said there will be nothing left when it comes time for Millennials to retire. The fact is that even under concurrent projections more than three quarters of the program will be left and the remainder is easily fixed by lifting the payroll tax cap and having the extremely wealthy pay more and/or with a Wall Street Tax. So she misled the viewers in that and a number of other respects, as well.
I agree with this, but I also think that it is not nearly a complete answer to the faux problem raised by the projections stating that Social Security is projected to be able to pay the full benefits due under current law until 2033, but that thereafter it will be able to pay only 75% of benefits due. Richard and Abby both assume as a baseline that Congress will appropriate benefits each year from now through 2033, and thereafter, and also that Treasury will not spend appropriated benefits exceeding the available credits in the SS “Trust Fund” accounting record. They then add their respective solutions of cutting benefits, or removing the payroll tax cap and enacting a Wall Street tax.
However, both these assumptions are problematic, because just as Congress can fix the faux “pay for” shortfall problem by removing the payroll tax cap and enacting a Wall Street tax, or by cutting benefits, it can, as I wrote in my earlier discussion of Abby’s first commentary, even more easily fix the problem by passing legislation providing for annual automatic funding of expected costs for all SS and Medicare trust funds.
Congress does that now for Supplementary Medical Insurance (Medicare Part B), and Prescription Drug Benefits (Medicare Part D), and the same practice, using similar legislative language, can be extended to the SS Old Age and Survivors Insurance (OASI) and Disability Insurance (DI) trust funds. This can be done in an afternoon if Congress really wants to do it. End of faux problem; almost end of story, apart from possible debt limit problems.
Once that is done, no gaps between SS revenue and benefits can be projected by institutions, such as CBO. Because under current law, once those appropriations are set on automatic renewal annually, the Treasury will then have the obligation to spend those appropriations by using one or more of the various tools it has to generate credits in the Treasury General Account (TGA).
The Treasury has no fiscal solvency problem, under current law, provided it has an appropriation mandating it to spend, since it can always use its authority to create the reserves in the Treasury spending accounts to pay all its bills including all those exceeding its revenues. The customary way of creating such reserves is to sell Treasury debt instruments, destroying reserves in the private sector, while adding the financial asset of Federal debt to that sector, and getting the Fed to place an equal amount of reserves in its accounts. But, this way of getting the necessary reserves can be interrupted by debt ceiling crises.
However, there are other ways it can be done, if it wants to fulfill its obligations and pay all the SS benefits guaranteed by the change in the law to provide automatic appropriations, that would solve this faux problem. The best way any gap appropriated by Congress can be closed under current law, is to use Platinum Coin Seigniorage (PCS) to do it. I’ve explained how this would work in my kindle e-book, as well as http://neweconomicperspectives.org/category/joe-firestone-2 in many blog posts.
The basic idea is that its platinum coin seigniorage authority can be used by the Treasury to require the Fed to use its reserve creation authority to place reserves in Treasury accounts, without Treasury engaging in any additional taxing or borrowing. If Treasury doesn’t want to do this, then it can use a type of debt instrument which isn’t counted toward the debt limit such, as consols (See here).
So, these Treasury capabilities coupled with Congress providing for annual automatic funding would end the Huntsman, Peterson, Bowles, Simpson, Ryan, Obama, and even Eskow revenue gap problems with Social Security and all other entitlements, for that matter, without having to worry about either taxing the rich, or increasing the debt. And, if Congress doesn’t like these alternative ways of placing reserves in Treasury’s accounts so it can spend Congressional appropriations, then it can always just go ahead and place the Fed within the Treasury Department, giving the Secretary the direct authority to order the Fed to fill its accounts with enough reserves to cover any revenue shortfalls, without either raising taxes or issuing more debt instruments.
So, these are easy ways to end the faux SS/entitlements crisis and also any debt ceiling crises that may be manufactured in the future. And now I’d like to ask Richard Eskow some questions. We both agree that Abby Huntsman misled the pubic with her treatment of Social Security’s supposed fiscal problems. And we both agree that MSNBC has an obligation to correct the record and get the facts right.
And one of the major sins of Abby Huntsman called out by Richard Eskow, and myself also in previous posts, is her incompleteness in mentioning solutions to her impending catastrophe, in that she mostly referred to entitlement cuts, only in passing to lifting the payroll tax cap, and never to other possible alternatives in offering a solution to her fiscal sustainability faux problem such as a Wall Street tax. Richard, on the other hand, cited only Abby’s alternatives while placing emphasis on lifting the payroll tax cap and enacting a Wall Street tax.
So, my question is: doesn’t Richard Eskow have the same problem of distorting reality through incompleteness in addressing solutions to the Social Security “crisis” that Abby Huntsman has? He juxtaposes the Peterson solution, to his own, but isn’t he misleading readers in not mentioning other alternative solutions to the projected SS revenue gap?
Why won’t “progressives” like Richard, in pushing back against Abby Huntsman and/or other Petersonian deficit/debt propagandists mention solutions like the ones I just proposed? Are they afraid to let people know that the Federal Government isn’t like a household and doesn’t have the same financial solvency problems the rest of us have, just written large? Are they afraid of facing the idea that the Government (Congress, the Executive, the Fed system, and the Courts taken together) does have the authority to create whatever reserves it needs to spend appropriations and repay debt instruments?
I call upon Richard and others at the Campaign for America’s Future, and also on other DC progressive organizations, to stop misleading the public by writing only about their own favored solutions to the SS solvency “crisis” and about the Petersonian solutions in the process of critiquing them. I call upon them to recognize and discuss the alternatives I’ve proposed here and others that are out there. The public deserves as complete a consideration of “solutions” to this “problem” as it can get, so that no one is panicked into supporting outcomes like chained CPI or a “Grand Bargain” to resolve a faux entitlement crisis.
And in restricting the discussion only to the Petersonian and “progressive” solutions, “village progressives” are just as guilty of misleading the public by ignoring a reasonably complete consideration of the facts as Abby Huntsman and the other austerians are, because it is fact that there are other solutions out there. Over the past four years, there’s been plenty of exposure of Modern Money Theory (MMT) approaches and factual accounts of how Federal spending occurs in the mainstream media for DC-linked progressives to be fully aware of MMT views on fiscal sustainability and SS solvency. There’s no excuse for Richard and the rest of the progressive villagers to continue to ignore these solutions. Politics has to stop at the edge of the river of truth!
(Cross-posted from New Economic Perspectives.)