platinum coin seigniorage
This is the last post in my analysis and commentary on Bruce Bartlett's testimony to the Senate Budget Committee. There's one very significant issue left to discuss, and that is the issue of fiscal gap and generational accounting and whether it should be institutionalized in legislation. I'll begin this post with that discussion and then end the series with my overall evaluation of his effort.
Fiscal Gap and Generational Accounting
15. Generational accounting exaggerates the burden of debt. Intergenerational accounting attempts to assess financial burdens through time, especially with a view to claiming that financial decisions taken in one generation can impose burdens on another. But this argument refuses to count as real assets the infrastructure and other national assets that the current generation will leave for future generations, and it does not understand that federal government debt never needs to be retired. In real terms, there obviously are no intergenerational transfers, except for the knowledge, the physical assets and the larger environment, which the present leaves to the future. The real goods produced in 2050 will be distributed to those alive in 2050, regardless of the public debt in existence at that time. Meanwhile, the U.S. government can always meet its payments when they come due. . . .
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. Read more about Yes We Can Pay for Increasing Social Security Benefits
Recently, I've been writing about oligarchs advocating for entitlement cuts and austerity. I've discussed attacks on entitlement benefits for the elderly from Abby Huntsman (of MSNBC's The Cycle) and Catherine Rampell (a Washington Post columnist), both the children of well-off individuals. These posts have come in the context of the English language release of Thomas Piketty's Capital in the Twenty-First Century, and the more recent pre-publication release of a study by Martin Gilens and Benjamin I. Page using quantitative methods and empirical data to explore the question of whether the US is an oligarchy or a majoritarian democracy. They conclude:
”What do our findings say about democracy in America? They certainly constitute troubling news for advocates of “populistic” democracy, who want governments to respond primarily or exclusively to the policy preferences of their citizens. In the United States, our findings indicate, the majority does not rule -- at least not in the causal sense of actually determining policy outcomes. When a majority of citizens disagrees with economic elites and/or with organized interests, they generally lose. Moreover, because of the strong status quo bias built into the U.S. political system, even when fairly large majorities of Americans favor policy change, they generally do not get it.”
With this as a backdrop, today I want to de-construct a recent statement by Michael A. Peterson, President and COO, of one of the centers of American oligarchy, the Peter G. Peterson Foundation (PGPF), and the son of the multi-billionaire Peter G. Peterson, commenting on the CBO's Report earlier this month, on its updated budget projections for 2014 - 2024. Read more about Peterson/CBO Beat for Austerity Goes On!
Some of the favored children of the economic elite who have a public presence, work hard in their writing and speaking to divert attention from inequality and oligarchy issues by raising the issue of competition between seniors and millennials for “scarce” Federal funds. That's understandable. If millennials develop full consciousness of who, exactly, has been flushing their prospects for a decent life down the toilet, their anger and activism might bring down the system of wealth and economic and social privilege that benefits both their families and the favored themselves in the new America of oligarchy and plutocracy.
Here and here, I evaluated Abby Huntsman's arguments for entitlement “reform,” and, of course, Pete Peterson's son, Michael fights a continuing generational war against seniors in pushing the austerian line of the Peterson Foundation. Now comes Catherine Rampell, who, in a recent column, sets forth the position that seniors haven't paid for their Social Security and Medicare because they “generally receive” more in benefits out of these programs than they pay into them.
I'll reply to all of the main points in Rampell's argument, by quoting liberally and then replying to the points she makes in each quote. She says: Read more about Misdirection: Rampell Views Entitlements Through the Generational War Lens
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. Read more about The Village Still Ignores the Most Important Point
Abby Huntsman's first rant about entitlements soliciting generational warfare got a lot of pushback from defenders. I reviewed the main points made in defense of entitlements, and then added “the most important point of all” as well. Abby made a second try, however, this time singling out Michael Hiltzik's reply to her to respond to and adding a few more points, while withdrawing a bit from her claim that life expectancy has changed very much for seniors since the New Deal period. Hiltzik took issue with that one too. Let's review Huntsman's reply to Hiltzik by analyzing the MSNBC transcript of her second rant against entitlements.
. . . the need for entitlement reform. there was a firestorm of reaction. an article in the " l.a. times" went as far as to say i want to lead my generation into poverty. come on, man. this isn't about me. it's about the major problem.
MSNBC's right wing representative on The Cycle, Abby Huntsman, got a lot of pushback from Social Security defenders after her rant last week. They made points similar to the following in countering Huntsman:
Today, John Boehner bowed to the inevitable logic of the impending political season and placed a “clean” debt ceiling increase bill on the floor of the House. At this writing, the bill passed with 28 Republican and 193 Democratic votes. Now it moves on to the Senate, where it is expected to pass in time to allow the Treasury to keep issuing debt instruments.
So, now we have had agreement on a budget partially rolling back the sequester, and the Republican leadership appears to have decided not to have another debt ceiling crisis. I wrote a post called “What Happens Now?” just after the Government shutdown ended last October. There I analyzed the political situation and made a number of predictions about the short-term future. Here's how I answered the question: “Growth and Jobs or Shutdowns and Debt Ceiling Crises?” Read more about What Now?
Lately, the word out of Washington, DC from the plugged in people is that there will be no debt ceiling crisis coming up before the election. Politico says so, and so does the National Journal. MSNBC also agrees.
But not so fast, says the Washington Post, echoing the Wall Street Journal provided the House Republicans can agree on “. . . an extortion demand.” If they can, then we wll have another debt ceiling crisis.
Here's a statement from Dave Johnson at the Center for the American Future (CAF) characterizing the possible crisis from a “progressive” point of view. Read more about Does the Debt Ceiling Have to Be Raised?
The New Populism, if it exists, and isn't just a creation of Washington villagers wanting to give an attractive name to the new feint of the Administration toward the progressive base of the Democratic Party, can be a turning point for America's domestic economy, but only if it can avoid certain tropes, shibboleths, and myths that people associated with it, such as Bernie Sanders, and various other supposedly “left” members of the Democratic Party in Congress seem to delight in reinforcing. Again, Robert Borosage's little piece on “The New Populism” provides more examples of such tropes:
Much of this debate has been framed around the faltering recovery, as the Congress perversely punted on the opportunity to rebuild America when we could borrow money for virtually nothing, with construction workers idle and eager to work. But in the end, this is a question of making the public investments we need, and paying for it by ending the tax dodges and tax breaks that enable the rich and the multinationals to avoid paying their fair share of taxes. The Congressional Progressive Caucus budget shows what is possible, while still bringing our long-term debt under control.
Well, Congress did that, and the Treasury certainly could have borrowed “money for virtually nothing,” and spent it on infrastructure and the public commons while creating many millions of new jobs and cutting greatly into our massive unemployment problem. However, why should Borosage and others writing about the new populism assume that such deficit spending has to be accompanied by borrowing money? Read more about More Tropes of the New Populism
Let's look again at the new populism through the lens provided by Robert Borosage in his recent attempt to tell us what it is about. He says:
The apostles of the new inequality have unrelenting sought to starve the public sector. President Reagan opened the offensive against domestic investments. Perhaps the hinge moment was in the final years of the Clinton administration when the budget went into surplus, and Clinton, the finest public educator of his time, pushed for paying down the national debt rather than making the case for public investment. He left the field open for George W. Bush to give the projected surpluses away in tax cuts skewed to the top end.
The hinge moment wasn't then. It was when he decided, either early in his first term, or even before he took office, to rely on deficit reduction coupled with low interest rates from Alan Greenspan, on the advice of Robert Rubin and Larry Summers, rather than on deficit spending on human capital investments as advocated by Robert Eisner and Robert Reich. Rubin's victory in the internal debates within the Administration was well-known at the time (1993), and set the deficit reduction course that played along with the Fed's bubbles to create the private sector debt-fueled “goldilocks” prosperity, and surpluses of his second term. By the time Clinton faced the choice Borosage refers to, the die had already been cast. It was very unlikely that Clinton would turn away from further Government austerity policy, and turn instead toward investments in infrastructure, public facilities and “human capital.”
But this is a side point, the real focus of this passage is the notion that the Clinton surpluses were good because they created an opportunity for public investment by using those surpluses. The trouble with this, is that it is a point purely about politics and communications which neglects the economic fact that the surpluses of the Clinton's term, as well as his deficit reduction policies, were bad for the US because they reduced or eliminated private sector surpluses causing a growth in private sector debt in Clinton's “goldilocks” economy. Read more about The New Populism Needs to Get This Straight
I gotta love Bernie Sanders, because he seems so much like people I grew up with and like myself too, and he also seems to have that passion for equality and democracy that is so important for the future of America. Sometimes I think Bernie is one of the few champions of the people left in Congress. But I also think that along with other progressives he has constructed chains for himself that prevent him from being as effective a champion of the people as he otherwise might be.
His chains are the chains of either false beliefs or a decision not to speak the truth about fiscal matters for fear that the “very serious people” in the Washington village will marginalize him even more than they do right now. I can't say which of these is true, but I think whichever reason is operative, his self-shackling reduces his effectiveness. Read more about Bernie Sanders: Self-shackled Champion of the People
Yesterday on Fox, Senator Dick Durbin said:
WALLACE: I'm going to talk about ObamaCare on a second, but you're not answering my question. Why does taxes -- why do taxes have to be on the table? Why can't you just make a deal, short-term spending for long-term entitlement reform -- which, Senator, you support and President Obama support. You have supported the idea of some entitlement reform.
DURBIN: That's right. I do, and I'll tell you why -- because Social Security is going to run out of money in 20 years. I want to fix it now, before we reach that cliff.
Medicare may run out of money in 10 years, let's fix it now. And that means addressing the skyrocketing cost of health care. That's what ObamaCare is focused on, and yet, the Republicans want nothing to do with it.
If we don't focus on the health care and dealing with the entitlements, the baby boom generation is going to blow away our future. We don't want to see that happen. We want to make sure that Social Security and Medicare are solid.
The “. . . may run out of money. . . . ” and “. . . dealing with entitlements. . . “ memes, in reply to Chris Wallace's question suggests that a deal trading increased revenues for Social Security and other entitlement cuts is acceptable to him. So, Durbin's argument is that because Social Security Trustee and CBO projections, based on very pessimistic economic growth projections for the whole period, show a shortfall in the Social Security “Trust Fund” in 20 years, it is acceptable to make entitlement cuts now if the Democrats can get increased revenue from higher taxes, as if entitlement “reform” were the only way to meet the perceived Social Security solvency problem. But who would it be acceptable to? Read more about Dick Durbin Insults Everyone Else's Intelligence About Social Security
It is actually a good thing that the Obama's spin doctors feel a need to keep tramping down the platinum coin solution. Obviously, it is having an impact. The thing is that the coin absolutely destroys the case for austerity, which is why it is such a threat. The coin is like Toto pulling back the curtain. Once people understand about fiat currency, they understand the deception that is being practiced against them. Read more about Platinum spin