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Late Night: A Case for Increasing Social Security Benefits

Some time ago, in the pages of USA Today, Duncan Black, better known to some as Atrios voiced the immediate need for increased Social Security benefits of 20% or more even if it means raising taxes on high incomes, or removing the payroll tax cap on salaries.

Black is right about the need for increased benefits; but legislating that increase doesn’t require increasing taxes. In fact, Congress should both increase benefits and remove the payroll tax entirely.

But how is that possible without greatly increasing “the national debt”? The answer to that one is easy. Don’t tax or borrow to pay for it. Just mint a single one oz. platinum coin at the beginning of each fiscal year with a face value large enough to cover expected the cost of SS payments. Doing it that way will both take care of retirement needs and also provide a huge shot in the arm for employment, since the increase in Social Security benefit payments and the ending of the payroll tax won’t be offset by tax increases elsewhere that will depress aggregate demand.

How many times have you heard that the Government can only spend money after it raises revenue by either taxing or borrowing? Nearly every time someone talks or writes about the US’s public deficit/debt problem?

Why is it that nobody asks why, since Congress has unlimited authority to create coins and currency, it doesn’t just create money when it deficit spends? The short answer is that Congress in 1913, constrained both itself and the Executive Branch from creating currency or bank reserves, delegating its power to do that to the Federal Reserve System.

But coins, it turns out are different. They’re the province of the Executive Branch, and the Treasury. And Congress provided the authority, in legislation passed in 1996, for the US Mint to create one oz. platinum bullion or proof platinum coins with face values to be specified at the discretion of the Secretary of the Treasury, having no relationship to the market value of the platinum used in the coins.

These coins are legal tender. That is, they are tax credits, which the Treasury is obligated to accept in payment of taxes, if they ever fell into private hands. And when the Mint deposits them in its Public Enterprise Fund (PEF) account, the Fed must credit it with the face value of these coins, because the asset value of the coin is, legally, its face value. The difference between the Mint’s costs in producing the coins, and the reserves provided by the Fed in return for a deposit of such coins is the US Mint’s “coin seigniorage” or profit from the transaction.

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Yes, We Can Pay for Increasing Social Security Benefits

Some time ago, in the pages of USA Today, Duncan Black, better known to some as Atrios voiced the immediate need for increased Social Security benefits of 20% or more even if it means raising taxes on high incomes, or removing the payroll tax cap on salaries.

Black is right about the need for increased benefits; but legislating that increase doesn’t require increasing taxes. In fact, Congress should both increase benefits and remove the payroll tax entirely.

But how is that possible without greatly increasing “the national debt”? The answer to that one is easy. Don’t tax or borrow to pay for it. Just mint a single one oz. platinum coin at the beginning of each fiscal year with a face value large enough to cover expected the cost of SS payments. Doing it that way will both take care of retirement needs and also provide a huge shot in the arm for employment, since the increase in Social Security benefit payments and the ending of the payroll tax won’t be offset by tax increases elsewhere that will depress aggregate demand.

How many times have you heard that the Government can only spend money after it raises revenue by either taxing or borrowing? Nearly every time someone talks or writes about the US’s public deficit/debt problem? (more…)

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