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The flip side of Social Security owning the US national debt is that Social Security's solvency is entirely dependent upon the USA being able to pay. If you as

by btilly 5y ago

The flip side of Social Security owning the US national debt is that Social Security's solvency is entirely dependent upon the USA being able to pay. If you assume that, then Social Security is fine for decades to come. Unfortunately once the Baby Boom retires and their SS payments come due, there is no reasonable path to the US government being able to actually pay. Doubly not when expenses from Medicare is projected to double in the next decade. And yes, I know it is popular to say that we can just cut the military. But that is not enough. In fact if we eliminated all government programs except social security, medicare and medicaid, by the middle of this century our federal budget still can't add up. :-(

lotsofpulp 5y ago
Any government with the ability to print its own currency can always pay a debt denominated in its own currency. The only question is whether or not the currency can retain its ability to procure labor and materials. I have no qualms about getting the numbers I am owed from social security deposited into my account. I do wonder how much I will be able to buy with it though.
- umvi 5y ago
  Yeah let's just print trillion dollar bills to pay off the debt. Zimbabwe had trillion dollar bills if I remember correctly.
  - alangibson 5y ago
    Google Modern Monetary Theory. The jist is that printing money is only inflationary when the nations productive capacity is fully utilized.
    - blowski 5y ago
      MMT does say that, but MMT is far from being widely accepted as correct.
      - alangibson 5y ago
        OK. No theory is widely accepted before it is.
        blowski 5y ago
        That doesn’t mean “all theories are eventually correct”.
        alangibson 5y ago
        No it doesn't. I was just pointing out that you weren't really saying anything in your comment.
      - CraigJPerry 5y ago
        Of the 5 tennets of MMT, only 1 is disputed by mainstream economics i think? As i understand it, more or less everyone (excluding fringe groups) agrees that: 1. All money is created by the state or other banks acting under state licence 2. Money only has value because the government promises to back it 3. because taxes must be paid in government-issued money 4. Therefore government spending comes before taxation The bone of contention as i understand it is the 5th tennet: 5. Government deficits are necessary and good because without them the means to make settlement would not exist in our economy As i understand the argument, it boils down to a disagreement about whether public investment can crowd out private. EDIT: points from https://www.google.com/amp/s/criticalfinance.org/2019/02/06/misunderstanding-mmt/amp/ https://www.google.com/amp/s/criticalfinance.org/2019/02/06/...
        alangibson 5y ago
        5 is really only debated by academics. I think the actions of policy makers prove they think it's true. Does anyone remember the debate during the Clinton years over whether or not they should start paying back government debt given a surplus?
        stephen_g 5y ago
    - godelski 5y ago
      One interesting thing about this is that the effect of printing money (how it influences inflation) highly depends on perception. Radio Lab talked about this in a recent episode[0]. This has been a measured effect too and so it is interesting that fearing inflation can be a self fulfilling prophesy. [0] https://www.wnycstudios.org/podcasts/radiolab/articles/more-money-less-problems https://www.wnycstudios.org/podcasts/radiolab/articles/more-...
      - btilly 5y ago
        The best example of how perception matters was how the careful introduction of the Brazilian real ended hyperinflation merely by creating a perception that it wouldn't inflate. (It was pegged to the old currency at a rate that inflated at the same rate that the old currency did. All stores had to post prices in both old and real. After people were used to seeing real standing still, Brazil started printing them and continued indexing them at inflating rates to the old. And the price stayed constant as the old currency was replaced by the new.
    - ardit33 5y ago
      MMT is a junk theory created by silver spooned academics with no real life experience. It has not been proven in practice, or when something close to it is practices it does lead to inflation or devaluation of the country’s currency (Think Argentina, Turkey and today Lebanon). When communism fell, I remember how the west promoted the ‘shock therapy’ to former communist countries, which was devastating to them. Another junk science that lead to a ‘lost decade’ and misery in eastern countries. It was a ‘rip the Bandaid’ type of approach, which failed as it didn’t account that some countries needed time to adjust to the new capital system and it led to the closure of many lines of production that were actually profitable, as it was a ‘hard reset’ Be very wary when someone peddles a new ‘theory’ which is unproved, as a magical cure. Communism was one of them as well.
      - alangibson 5y ago
        I'm gonna guess you know much about the history of MMT, because it was created as a description of how money works in the US by a guy that spent his career on a trading desk.
      - criddell 5y ago
        If it isn’t shrewd application of MMT, then what explains Japans economy?
    - toomanydoubts 5y ago
      MMT is just something the ones in control of the printing press made up to convince gullible people that they're not being outright robbed by quantitative easing.
      - alangibson 5y ago
        Factually incorrect. Mosler spent most of his career in a hedge fund. MMT was a description of how he thought money actually worked in the modern age.
      - dv_dt 5y ago
        Most MMT economists I follow on the topic would say MMT is independent of QE as a policy. But also as an outlay of currency, QE is one of the least effective uses to support or generate productive capacity.
      - alangibson 5y ago
        MMT people tend to support major direct spending to people on the bottom, not things like QE
      - stephen_g 5y ago
        Yeah, no - basically all MMT economists think QE is a bad policy.
    - trts 5y ago
      Does this mean I don’t need to pay taxes until the productive capacity is at 100%, because we can print it? How do we know when we’re getting close to full utilization
      - alangibson 5y ago
        MMT says that taxes exist primarily to create demand for a currency. The government doesn't need you to give it money because it is the source of money. You'll know the economy is neat 100% because inflation will kick in.
        trts 5y ago
        but there has always been inflation?
        alangibson 5y ago
        When the productive capacity is at a high level of utilization, yes. There hasn't been much inflation in the West for years now. Also, deflation.
      - gghhzzgghhzz 5y ago
        Taxes are required to give the currency value, to counter inequality and produce a stable society, to take money out of unproductive or overheating parts of the economy, and to discourage harmful (to individuals or society) behaviour.
        alangibson 5y ago
        That's a pretty good rundown of MMTs thinking. The government spends money into existence. When inflation starts to tick up, tax the money back out of existence.
  - jyounker 5y ago
    Zimbabwe's debts were not held in its own currency.
  - xcdfgvd 5y ago
    https://en.wikipedia.org/wiki/Zero_stroke https://en.wikipedia.org/wiki/Zero_stroke
  - addicted 5y ago
    That’s not why Zimbabwe’s economy and currency collapsed. Zimbabwe’s economy and currency collapsed because the government stole productive assets and gave them to people who did not know how to do anything with them, basically destroying the productive capacity of the nation within a few weeks.
    - TMWNN 5y ago
      >Zimbabwe’s economy and currency collapsed because the government stole productive assets and gave them to people who did not know how to do anything with them, basically destroying the productive capacity of the nation within a few weeks. Recent history of Zimbabwe (<http://imgur.com/a/VdQdD http://imgur.com/a/VdQdD>)
  - pjc50 5y ago
    The important thing about inflation is to realize you can't print foreign money. So if your trade + investment balance remains favourable, it's not a problem. If there's a major flight of investors (to where?), capital, or a thing you must import at any price (usually oil), then inflation kicks in even without money printing. The US need not worry about inflation until a bigger more stable economy comes along, which is a long way off.
    - OnlineGladiator 5y ago
      > The US need not worry about inflation until a bigger more stable economy comes along, which is a long way off. You raised a good point about inflation not necessarily being tied to printing money, but you ignored the fact that if you print more money (without an obvious productive place for it to go) then you simply increase supply without increasing demand which causes inflation. It's happening right now in the US by just about every metric, and there is good reason to believe it is about to go up a lot more. So no, the US not only is currently experiencing inflation like it has not seen for decades but there is likely to be a lot more in the near future. The Fed is printing money like crazy (I believe we've printed approximately 30% of our total money supply in the past ~2 years, so in ~2 years we've printed approximately half as much money as we did in the previous ~200 years) which deflates the value of our currency. I actually rounded all the numbers down to make it seem less problematic than it is - I encourage you to check the data for yourself.
      - alangibson 5y ago
        The Fed has been printing money like crazy for over a decade. Prices are rising due to supply chain breakdowns.
      - ubercow13 5y ago
        >I believe we've printed approximately 30% of our total money supply in the past ~2 years Doesn't that money start disappearing as soon as the QE stops?
      - dv_dt 5y ago
        Many people including the Fed chair as well as hedge funds like Bridgewater, do not believe the current inflation is fundamentally due to issue of currency. They believe it has to do with supply side shocks driven by covid and climate events worldwide.
- gitfan86 5y ago
  This is exactly what has happened during the pandemic. In 2015 if you paid $15/hour for entry level physical work you would get a lot of applications with some high quality applicants. In 2021 you need to remove the weed drug testing provision and then hope that you will get applicants. Printing 3T dollars and handing out 3k/month to everyone has caused the cost of labor to double or triple in some areas. In other words the way out of the social security insolvency is to reduce the quality of labor a dollar buys. In 2040 you should expect to get 4k/month from social security and for that to cover your food and housing, but hiring a person to replace your gutters will cost $90/hour
  - jimbob45 5y ago
    Do you have data to back up mass drug test failing? The general consensus is that you have to be both outstandingly stupid and an actual addict to fail the well-telegraphed drug tests at most minimum wage places.
    - nostromo 5y ago
      Amazon dropped drug testing for delivery drivers. Maybe they’re just feeling kind. More likely: they’re having trouble finding people to become delivery drivers. https://www.aboutamazon.com/news/operations/update-on-our-vision-to-be-earths-best-employer-and-earths-safest-place-to-work https://www.aboutamazon.com/news/operations/update-on-our-vi...
      - lotsofpulp 5y ago
        Amazon does not employ delivery drivers. They recently suggested to the delivery companies they pay to deliver packages to homes not drug test in order to find drivers. I assume the drivers Amazon employs are actual truck drivers under the purview of the Department of Transportion, and are probably still drug tested to satisfy whatever federal requirements they have to satisfy. > We will no longer include marijuana in our comprehensive drug screening program for any positions not regulated by the Department of Transportation, and will instead treat it the same as alcohol use.
- msandford 5y ago
  Right exactly. I fully expect to pay in enough purchasing power for a house or two and to get out enough purchasing power for a car or two.
- roenxi 5y ago
  In what world is a currency crisis a better outcome than people being honest about what is happening and either defaulting or raising taxes? Sovereign countries that go down the road of emergency devaluation are routinely found at the start of the worst stories. It shows that not only can't a country pay its bills, it also doesn't have the political fibre to engage with its problems.
  - hakfoo 5y ago
    Why are those the only options? Nationalization is also a potential and underrated part of the toolbox. A nationalized-health-care system could be a huge lever on inflation. On a basic level, it would enjoy near or full monopsony status on many products and labour categories, so it would be easy to say "our reimbursement rates rise 2% per annum, and if you want to sell ANY product, you'll take it and like it." An even more aggressive process could take medical education and supply production directly under a state umbrella, further reducing market pressure for ever-growing margins. Similarly, a "free state universities for all" program could come with strict restrictions on program costs to clamp down on spiraling costs. Other forms of state intervention-- subsidized goods, for example, or even WWII-style ration books-- could help to mitigate the negative consumer-facing effects of inflation. You might have to pay $100 per kilo of ground beef on the open market, but if we had a functional ration system, everyone still gets sufficient coupons to have a hamburger once or twice a week. If the only things you need "dollars" for are luxury nonsubsidized/nonrationed goods, then the dollar can crash and burn every few decades with minimal quality-of-life impact.
    - cherrycherry98 5y ago
      Won't these new services require rather significant increases in taxes? Not to mention government takeover of industry to impose price fixing and rationing raises some red flags for me.
      - dragonwriter 5y ago
        > Won't these new services require rather significant increases in taxes? No, because there are no new services, just nationalization of services people are already paying for, and removing to the extent the industry has profits (or surplus revenues in the nonprofit components), nationalization would provide free revenue in first-order effect.
- manquer 5y ago
  The inflation has already happened, the price of daily commodities has not changed. You will still be able to buy a carton of milk at same prices. However the price of assets like blue chip stock or a house has increased massively, we cannot really afford them anymore. Today there is no way make back principal after even 30 years with returns/dividend on most blue chip stock or rent on a house you buy/invest in. The returns are mostly based on the asset appreciating even more. This wealth inflation has resulted in being priced out of housing or generate retirement savings etc and the wealth inequality has widened so much already.
zz865 5y ago
If you define baby boomers as born 1946 to 1964, that matches ages 57 to 75 so I'd imagine over half are retired already and we're already in the dying out stage. The biggest problem isn't boomers but the life expectancy of gens X, Z. Luckily(?) they look less healthy than their parents. SS can be boosted by charging SS on unearned income and income over the limit.
- RobRivera 5y ago
  please define unearned income. afaik - other types of income ARE taxed ie. capital gains, etc. EDIT: Asking a question to be more specific is being downvoted leads me to believe there is a party that hates these particular questions being asked, and is antithetical to the idea of community dialogue and shared ideas. I really think the whole internet forum thing has much to be desired.
  - zz865 5y ago
    Yes they are income taxed but dont pay social security or medicare taxes. If you earn $100 wages you pay 6.2 percent SS taxes and 1.45% medicare (employer pays more than this too). If you earn $100 dividends you dont pay either.
  - valleyer 5y ago
    No, Social Security and Medicare (collectively, FICA) taxes are not levied on capital gains.
quickthrower2 5y ago
Does this debt ever get paid back? Most likely it is sold onto someone else or a bank.
- lotsofpulp 5y ago
  A debt being sold from the original lender to another entity has nothing to do with whether or not the debt will be paid back.
  - quickthrower2 5y ago
    That's my point. You can 'get your money out' without 'getting your money back'.
    - lotsofpulp 5y ago
      The US government (hence the people of the US) repay their debts all the time, and issue new debts all the time. Just like a home mortgage gets sold from the original lender to subsequent lenders, the borrower still usually pays back the mortgage. If the debts were not paid back, then why would anyone want to buy the debts from the original lender?
      - quickthrower2 5y ago
        I didn't mean the debts were not paid back. I used clumbsy language before. What I mean is as an owner of bonds you are not expecting to get your money back from the lendee necessary. Most likely your timelines wont match. Say I lend you $1000 and you agree by contract to pay be back $1000 in 2030. I want my $1000 now. You have no obligation to give it back to me now. If you decide you wont, I will consider selling the debt it on. If you are a government there is a market for me to sell it on easily.
        lotsofpulp 5y ago
        >What I mean is as an owner of bonds you are not expecting to get your money back from the lendee necessary. Yes, because purchasing a bond is just purchasing cash flow at various points in time. It does not matter who makes that cash flow happen, as long as you receive the cash. > If you are a government there is a market for me to sell it on easily. There only exists a market for you to sell on easily because similar debts have been previously paid back.
rmah 5y ago
More than half of the "baby boom" generation has already retired. The "baby boom" was born between 1946 and 1964. They are now 57 to 75 years old.
- falcolas 5y ago
  Given that Boomers are called such due to the baby boom that occurred from WW2 vets coming home, most literal boomers are 75 or so. Calling anyone in the following 18-20 years part of the one-year boom has always felt contrived, though I’m clearly swimming against the tide here. As someone on the tail end of a “generation”, its odd being lumped together with people who could easily be my parents - with people who weren’t exposed to computers until over a decade into their professional careers.
  - dragonwriter 5y ago
    > Calling anyone in the following 18-20 years part of the one-year boom has always felt contrived, It wasn't a one-year boom; demobilization wasn't immediate, and anyhow its wasn't just a soldiers-returning effect. Birth rate didn't drop to the pre-war level until the late 1960s.
  - Zandikar 5y ago
    The boom lasted about 30 years, not 1 year. Source: https://www.statista.com/statistics/1033027/fertility-rate-us-1800-2020/ https://www.statista.com/statistics/1033027/fertility-rate-u...
addicted 5y ago
If the US is in a situation where it’s defaulting on its debts then social security would have been dead long before that ever happened. Besides, the choice to default on dollar denominated debt is completely the US government’s.
Spooky23 5y ago
Sure there is, the government will print money, as always.
ojbyrne 5y ago
Massive immigration is one solution.
drdec 5y ago
You seen to be confusing two different issues. The current situation with social security is that the expenditures for benefits exceed the revenues from taxes. The difference is being made up by the social security reserve fund. This fund consists of the US Treasuries referenced in the article. There had not been any issue with the government paying these debts. They are an expected part of the budget. The point at which we get into trouble is when the reserve fund is exhausted. Then the government will have to spend more money to keep social security benefits at their current levels. This additional expense is not currently budgeted for.
- throwaway6734 5y ago
  Or cut social security payouts
- tcmart14 5y ago
  Isn't there more to the story though? For decades IOUs were made to social security because there was a large surplus, that if untouched, would have gained interest providing for a lot more runway and wiggle room for social security well into the future.
  - drdec 5y ago
    We are currently running through that surplus. Current estimate project the surplus will last (and make up for the deficit between revenues and benefits) until the early 2030s.
throwaway6734 5y ago
Social security is a pay as you go program. The amount of money going out is limited by the amount coming in plus what's in the trust
- kmonsen 5y ago
  Not really, the government can also fund extra to the payouts. Preload with deficit spending.
- rswail 5y ago
  That's a legal fiction. The "trust" is just US treasuries that the Social Security trust buys with the taxes it collects. The fact that your social security taxes are "hypothecated" to be for your retirement is a nonsense designed to confuse.
deleted 5y ago
[deleted]
davidgay 5y ago
> The flip side of Social Security owning the US national debt is that Social Security's solvency is entirely dependent upon the USA being able to pay. The obvious counterpart here is: assuming social security was invested in non-govermnent US-based assets, and the USA was no long able to pay its debts, how much would those assets actually be worth (i.e., the economy/country is likely in a very bad shape)? [My personal conclusion is that really, at the end of the day, the currently-retired people are intrinsically supported by the currently-working people, and all the money-tracking is about keeping this exchange reasonably fair. But if the currently-working people are unable to support the retired ones, no financial magic is going to fix that.]
- fuoqi 5y ago
  >But if the currently-working people are unable to support the retired ones, no financial magic is going to fix that. Well, there is a way to work around this: to invest into foreign assets. In other words, domestic retirees will be supported by people working abroad. This approach certainly has its risks, but even before that the modern US is the biggest world debtor, not creditor.
lugged 5y ago
Cutting the military isn't really an option like that. They're the largest employer of people in the country. You'd create mass unemployment of young people to pay out the unemployment of old people.
- rswail 5y ago
  This is because the military behemoth is the biggest socialist experiment in job creation of all time. It's not only the actual military members serving and veterans, it's the contractors, the VA and all of the surrounding infrastructure. You (I'm not in the US) should cut your military not to lower taxes, but to increase spending in actually productive areas of the economy. Military spending is not productive, by definition, most of what it spends is buying stuff and people that are supposed to be disposable via war.
  - manquer 5y ago
    Any spending as long it is domestic is productive locally. the stuff the miltary buys needs to be made,the manufacturer in turn buys parts or raw material and employees people and so on etc. There is certainly a case that military spending is not the most effective way to multiply the economic effect that other kinds of spending like infrastructure, education or healthcare, research etc . All of these have huge secondary effects in simulating the economy that military probably does not have .
cheriot 5y ago
> In fact if we eliminated all government programs except social security, medicare and medicaid, by the middle of this century our federal budget still can't add up. :-( Citation Needed From what I've seen SS can be fixed by either - raising the retirement age (originally, life expectancy was barely older than retirement) - applying SS tax to all income and even capital gains The social security time bomb is a political invention.
nicoffeine 5y ago
Social Security is solvent if you remove the income cap. Right now, if you make $140k annually, you pay into social security as much as Jeff Bezos does. You'd also have to figure out how to eliminate other tax loopholes at the same time, like taxing unearned income from investment at a far lower rate than earned income from actual work.
dpweb 5y ago
The is no such thing as Social Security “solvency”. If Social Security cannot pay it’s obligations to recipients, it is funded by the general treasury. The treasury doesn’t have the funds either, so is funded by treasuries.
- kmonsen 5y ago
  Or you know payments are reduced. The taxes were not a contract, the government can change the terms at any time. If at all possible it would probably be best to freeze payouts and let inflation solve the issue.
rswail 5y ago
You left out raising taxes.
specialist 5y ago
> ...I know it is popular to say that we can just cut the military. The US dollar is whatever the US military says it is. This system is not right, moral, proper, ethical, just, or in any other way virtuous. It just is. Philip & Alexander, Genghis Khan, Augustus, Pax-Brittanica, ad nauseam. They all worked the same. Empires consume humans to feed growth. Grow or die. Money is a shared hallucination. While the USA's military industrial complex is an unqualified evil, the alternative is worse. No empire means chaos, world war, all against all. Just a guess.
- kamaal 5y ago
  >>No empire means chaos, world war, all against all. I think it will be more like a dozen+ regional powers scattered all over the world. And their economies tied up through a mesh of trade and military ties/enmities. Only people who really suffer from the collapse of an empire is the citizens of that empire. Everybody else just moves on.

by btilly 5y ago

lotsofpulp 5y ago

Any government with the ability to print its own currency can always pay a debt denominated in its own currency. The only question is whether or not the currency can retain its ability to procure labor and materials. I have no qualms about getting the numbers I am owed from social security deposited into my account. I do wonder how much I will be able to buy with it though.

umvi 5y ago
Yeah let's just print trillion dollar bills to pay off the debt. Zimbabwe had trillion dollar bills if I remember correctly.
- alangibson 5y ago
  Google Modern Monetary Theory. The jist is that printing money is only inflationary when the nations productive capacity is fully utilized.
  - blowski 5y ago
    MMT does say that, but MMT is far from being widely accepted as correct.
    - alangibson 5y ago
      OK. No theory is widely accepted before it is.
      - blowski 5y ago
        That doesn’t mean “all theories are eventually correct”.
        alangibson 5y ago
        No it doesn't. I was just pointing out that you weren't really saying anything in your comment.
    - CraigJPerry 5y ago
      Of the 5 tennets of MMT, only 1 is disputed by mainstream economics i think? As i understand it, more or less everyone (excluding fringe groups) agrees that: 1. All money is created by the state or other banks acting under state licence 2. Money only has value because the government promises to back it 3. because taxes must be paid in government-issued money 4. Therefore government spending comes before taxation The bone of contention as i understand it is the 5th tennet: 5. Government deficits are necessary and good because without them the means to make settlement would not exist in our economy As i understand the argument, it boils down to a disagreement about whether public investment can crowd out private. EDIT: points from https://www.google.com/amp/s/criticalfinance.org/2019/02/06/misunderstanding-mmt/amp/ https://www.google.com/amp/s/criticalfinance.org/2019/02/06/...
      - alangibson 5y ago
        5 is really only debated by academics. I think the actions of policy makers prove they think it's true. Does anyone remember the debate during the Clinton years over whether or not they should start paying back government debt given a surplus?
        stephen_g 5y ago
  - godelski 5y ago
    One interesting thing about this is that the effect of printing money (how it influences inflation) highly depends on perception. Radio Lab talked about this in a recent episode[0]. This has been a measured effect too and so it is interesting that fearing inflation can be a self fulfilling prophesy. [0] https://www.wnycstudios.org/podcasts/radiolab/articles/more-money-less-problems https://www.wnycstudios.org/podcasts/radiolab/articles/more-...
    - btilly 5y ago
      The best example of how perception matters was how the careful introduction of the Brazilian real ended hyperinflation merely by creating a perception that it wouldn't inflate. (It was pegged to the old currency at a rate that inflated at the same rate that the old currency did. All stores had to post prices in both old and real. After people were used to seeing real standing still, Brazil started printing them and continued indexing them at inflating rates to the old. And the price stayed constant as the old currency was replaced by the new.
  - ardit33 5y ago
    MMT is a junk theory created by silver spooned academics with no real life experience. It has not been proven in practice, or when something close to it is practices it does lead to inflation or devaluation of the country’s currency (Think Argentina, Turkey and today Lebanon). When communism fell, I remember how the west promoted the ‘shock therapy’ to former communist countries, which was devastating to them. Another junk science that lead to a ‘lost decade’ and misery in eastern countries. It was a ‘rip the Bandaid’ type of approach, which failed as it didn’t account that some countries needed time to adjust to the new capital system and it led to the closure of many lines of production that were actually profitable, as it was a ‘hard reset’ Be very wary when someone peddles a new ‘theory’ which is unproved, as a magical cure. Communism was one of them as well.
    - alangibson 5y ago
      I'm gonna guess you know much about the history of MMT, because it was created as a description of how money works in the US by a guy that spent his career on a trading desk.
    - criddell 5y ago
      If it isn’t shrewd application of MMT, then what explains Japans economy?
  - toomanydoubts 5y ago
    MMT is just something the ones in control of the printing press made up to convince gullible people that they're not being outright robbed by quantitative easing.
    - alangibson 5y ago
      Factually incorrect. Mosler spent most of his career in a hedge fund. MMT was a description of how he thought money actually worked in the modern age.
    - dv_dt 5y ago
      Most MMT economists I follow on the topic would say MMT is independent of QE as a policy. But also as an outlay of currency, QE is one of the least effective uses to support or generate productive capacity.
    - alangibson 5y ago
      MMT people tend to support major direct spending to people on the bottom, not things like QE
    - stephen_g 5y ago
      Yeah, no - basically all MMT economists think QE is a bad policy.
  - trts 5y ago
    Does this mean I don’t need to pay taxes until the productive capacity is at 100%, because we can print it? How do we know when we’re getting close to full utilization
    - alangibson 5y ago
      MMT says that taxes exist primarily to create demand for a currency. The government doesn't need you to give it money because it is the source of money. You'll know the economy is neat 100% because inflation will kick in.
      - trts 5y ago
        but there has always been inflation?
        alangibson 5y ago
        When the productive capacity is at a high level of utilization, yes. There hasn't been much inflation in the West for years now. Also, deflation.
    - gghhzzgghhzz 5y ago
      Taxes are required to give the currency value, to counter inequality and produce a stable society, to take money out of unproductive or overheating parts of the economy, and to discourage harmful (to individuals or society) behaviour.
      - alangibson 5y ago
        That's a pretty good rundown of MMTs thinking. The government spends money into existence. When inflation starts to tick up, tax the money back out of existence.
- jyounker 5y ago
  Zimbabwe's debts were not held in its own currency.
- xcdfgvd 5y ago
  https://en.wikipedia.org/wiki/Zero_stroke https://en.wikipedia.org/wiki/Zero_stroke
- addicted 5y ago
  That’s not why Zimbabwe’s economy and currency collapsed. Zimbabwe’s economy and currency collapsed because the government stole productive assets and gave them to people who did not know how to do anything with them, basically destroying the productive capacity of the nation within a few weeks.
  - TMWNN 5y ago
    >Zimbabwe’s economy and currency collapsed because the government stole productive assets and gave them to people who did not know how to do anything with them, basically destroying the productive capacity of the nation within a few weeks. Recent history of Zimbabwe (<http://imgur.com/a/VdQdD http://imgur.com/a/VdQdD>)
- pjc50 5y ago
  The important thing about inflation is to realize you can't print foreign money. So if your trade + investment balance remains favourable, it's not a problem. If there's a major flight of investors (to where?), capital, or a thing you must import at any price (usually oil), then inflation kicks in even without money printing. The US need not worry about inflation until a bigger more stable economy comes along, which is a long way off.
  - OnlineGladiator 5y ago
    > The US need not worry about inflation until a bigger more stable economy comes along, which is a long way off. You raised a good point about inflation not necessarily being tied to printing money, but you ignored the fact that if you print more money (without an obvious productive place for it to go) then you simply increase supply without increasing demand which causes inflation. It's happening right now in the US by just about every metric, and there is good reason to believe it is about to go up a lot more. So no, the US not only is currently experiencing inflation like it has not seen for decades but there is likely to be a lot more in the near future. The Fed is printing money like crazy (I believe we've printed approximately 30% of our total money supply in the past ~2 years, so in ~2 years we've printed approximately half as much money as we did in the previous ~200 years) which deflates the value of our currency. I actually rounded all the numbers down to make it seem less problematic than it is - I encourage you to check the data for yourself.
    - alangibson 5y ago
      The Fed has been printing money like crazy for over a decade. Prices are rising due to supply chain breakdowns.
    - ubercow13 5y ago
      >I believe we've printed approximately 30% of our total money supply in the past ~2 years Doesn't that money start disappearing as soon as the QE stops?
    - dv_dt 5y ago
      Many people including the Fed chair as well as hedge funds like Bridgewater, do not believe the current inflation is fundamentally due to issue of currency. They believe it has to do with supply side shocks driven by covid and climate events worldwide.
gitfan86 5y ago
This is exactly what has happened during the pandemic. In 2015 if you paid $15/hour for entry level physical work you would get a lot of applications with some high quality applicants. In 2021 you need to remove the weed drug testing provision and then hope that you will get applicants. Printing 3T dollars and handing out 3k/month to everyone has caused the cost of labor to double or triple in some areas. In other words the way out of the social security insolvency is to reduce the quality of labor a dollar buys. In 2040 you should expect to get 4k/month from social security and for that to cover your food and housing, but hiring a person to replace your gutters will cost $90/hour
- jimbob45 5y ago
  Do you have data to back up mass drug test failing? The general consensus is that you have to be both outstandingly stupid and an actual addict to fail the well-telegraphed drug tests at most minimum wage places.
  - nostromo 5y ago
    Amazon dropped drug testing for delivery drivers. Maybe they’re just feeling kind. More likely: they’re having trouble finding people to become delivery drivers. https://www.aboutamazon.com/news/operations/update-on-our-vision-to-be-earths-best-employer-and-earths-safest-place-to-work https://www.aboutamazon.com/news/operations/update-on-our-vi...
    - lotsofpulp 5y ago
      Amazon does not employ delivery drivers. They recently suggested to the delivery companies they pay to deliver packages to homes not drug test in order to find drivers. I assume the drivers Amazon employs are actual truck drivers under the purview of the Department of Transportion, and are probably still drug tested to satisfy whatever federal requirements they have to satisfy. > We will no longer include marijuana in our comprehensive drug screening program for any positions not regulated by the Department of Transportation, and will instead treat it the same as alcohol use.
msandford 5y ago
Right exactly. I fully expect to pay in enough purchasing power for a house or two and to get out enough purchasing power for a car or two.
roenxi 5y ago
In what world is a currency crisis a better outcome than people being honest about what is happening and either defaulting or raising taxes? Sovereign countries that go down the road of emergency devaluation are routinely found at the start of the worst stories. It shows that not only can't a country pay its bills, it also doesn't have the political fibre to engage with its problems.
- hakfoo 5y ago
  Why are those the only options? Nationalization is also a potential and underrated part of the toolbox. A nationalized-health-care system could be a huge lever on inflation. On a basic level, it would enjoy near or full monopsony status on many products and labour categories, so it would be easy to say "our reimbursement rates rise 2% per annum, and if you want to sell ANY product, you'll take it and like it." An even more aggressive process could take medical education and supply production directly under a state umbrella, further reducing market pressure for ever-growing margins. Similarly, a "free state universities for all" program could come with strict restrictions on program costs to clamp down on spiraling costs. Other forms of state intervention-- subsidized goods, for example, or even WWII-style ration books-- could help to mitigate the negative consumer-facing effects of inflation. You might have to pay $100 per kilo of ground beef on the open market, but if we had a functional ration system, everyone still gets sufficient coupons to have a hamburger once or twice a week. If the only things you need "dollars" for are luxury nonsubsidized/nonrationed goods, then the dollar can crash and burn every few decades with minimal quality-of-life impact.
  - cherrycherry98 5y ago
    Won't these new services require rather significant increases in taxes? Not to mention government takeover of industry to impose price fixing and rationing raises some red flags for me.
    - dragonwriter 5y ago
      > Won't these new services require rather significant increases in taxes? No, because there are no new services, just nationalization of services people are already paying for, and removing to the extent the industry has profits (or surplus revenues in the nonprofit components), nationalization would provide free revenue in first-order effect.
manquer 5y ago
The inflation has already happened, the price of daily commodities has not changed. You will still be able to buy a carton of milk at same prices. However the price of assets like blue chip stock or a house has increased massively, we cannot really afford them anymore. Today there is no way make back principal after even 30 years with returns/dividend on most blue chip stock or rent on a house you buy/invest in. The returns are mostly based on the asset appreciating even more. This wealth inflation has resulted in being priced out of housing or generate retirement savings etc and the wealth inequality has widened so much already.

zz865 5y ago

If you define baby boomers as born 1946 to 1964, that matches ages 57 to 75 so I'd imagine over half are retired already and we're already in the dying out stage. The biggest problem isn't boomers but the life expectancy of gens X, Z. Luckily(?) they look less healthy than their parents. SS can be boosted by charging SS on unearned income and income over the limit.

RobRivera 5y ago
please define unearned income. afaik - other types of income ARE taxed ie. capital gains, etc. EDIT: Asking a question to be more specific is being downvoted leads me to believe there is a party that hates these particular questions being asked, and is antithetical to the idea of community dialogue and shared ideas. I really think the whole internet forum thing has much to be desired.
- zz865 5y ago
  Yes they are income taxed but dont pay social security or medicare taxes. If you earn $100 wages you pay 6.2 percent SS taxes and 1.45% medicare (employer pays more than this too). If you earn $100 dividends you dont pay either.
- valleyer 5y ago
  No, Social Security and Medicare (collectively, FICA) taxes are not levied on capital gains.

quickthrower2 5y ago

Does this debt ever get paid back? Most likely it is sold onto someone else or a bank.

lotsofpulp 5y ago
A debt being sold from the original lender to another entity has nothing to do with whether or not the debt will be paid back.
- quickthrower2 5y ago
  That's my point. You can 'get your money out' without 'getting your money back'.
  - lotsofpulp 5y ago
    The US government (hence the people of the US) repay their debts all the time, and issue new debts all the time. Just like a home mortgage gets sold from the original lender to subsequent lenders, the borrower still usually pays back the mortgage. If the debts were not paid back, then why would anyone want to buy the debts from the original lender?
    - quickthrower2 5y ago
      I didn't mean the debts were not paid back. I used clumbsy language before. What I mean is as an owner of bonds you are not expecting to get your money back from the lendee necessary. Most likely your timelines wont match. Say I lend you $1000 and you agree by contract to pay be back $1000 in 2030. I want my $1000 now. You have no obligation to give it back to me now. If you decide you wont, I will consider selling the debt it on. If you are a government there is a market for me to sell it on easily.
      - lotsofpulp 5y ago
        >What I mean is as an owner of bonds you are not expecting to get your money back from the lendee necessary. Yes, because purchasing a bond is just purchasing cash flow at various points in time. It does not matter who makes that cash flow happen, as long as you receive the cash. > If you are a government there is a market for me to sell it on easily. There only exists a market for you to sell on easily because similar debts have been previously paid back.

rmah 5y ago

More than half of the "baby boom" generation has already retired. The "baby boom" was born between 1946 and 1964. They are now 57 to 75 years old.

falcolas 5y ago
Given that Boomers are called such due to the baby boom that occurred from WW2 vets coming home, most literal boomers are 75 or so. Calling anyone in the following 18-20 years part of the one-year boom has always felt contrived, though I’m clearly swimming against the tide here. As someone on the tail end of a “generation”, its odd being lumped together with people who could easily be my parents - with people who weren’t exposed to computers until over a decade into their professional careers.
- dragonwriter 5y ago
  > Calling anyone in the following 18-20 years part of the one-year boom has always felt contrived, It wasn't a one-year boom; demobilization wasn't immediate, and anyhow its wasn't just a soldiers-returning effect. Birth rate didn't drop to the pre-war level until the late 1960s.
- Zandikar 5y ago
  The boom lasted about 30 years, not 1 year. Source: https://www.statista.com/statistics/1033027/fertility-rate-us-1800-2020/ https://www.statista.com/statistics/1033027/fertility-rate-u...

addicted 5y ago

If the US is in a situation where it’s defaulting on its debts then social security would have been dead long before that ever happened. Besides, the choice to default on dollar denominated debt is completely the US government’s.

Spooky23 5y ago

Sure there is, the government will print money, as always.

ojbyrne 5y ago

Massive immigration is one solution.

drdec 5y ago

You seen to be confusing two different issues. The current situation with social security is that the expenditures for benefits exceed the revenues from taxes. The difference is being made up by the social security reserve fund. This fund consists of the US Treasuries referenced in the article. There had not been any issue with the government paying these debts. They are an expected part of the budget. The point at which we get into trouble is when the reserve fund is exhausted. Then the government will have to spend more money to keep social security benefits at their current levels. This additional expense is not currently budgeted for.

throwaway6734 5y ago
Or cut social security payouts
tcmart14 5y ago
Isn't there more to the story though? For decades IOUs were made to social security because there was a large surplus, that if untouched, would have gained interest providing for a lot more runway and wiggle room for social security well into the future.
- drdec 5y ago
  We are currently running through that surplus. Current estimate project the surplus will last (and make up for the deficit between revenues and benefits) until the early 2030s.

throwaway6734 5y ago

Social security is a pay as you go program. The amount of money going out is limited by the amount coming in plus what's in the trust

kmonsen 5y ago
Not really, the government can also fund extra to the payouts. Preload with deficit spending.
rswail 5y ago
That's a legal fiction. The "trust" is just US treasuries that the Social Security trust buys with the taxes it collects. The fact that your social security taxes are "hypothecated" to be for your retirement is a nonsense designed to confuse.

deleted 5y ago

[deleted]

davidgay 5y ago

> The flip side of Social Security owning the US national debt is that Social Security's solvency is entirely dependent upon the USA being able to pay. The obvious counterpart here is: assuming social security was invested in non-govermnent US-based assets, and the USA was no long able to pay its debts, how much would those assets actually be worth (i.e., the economy/country is likely in a very bad shape)? [My personal conclusion is that really, at the end of the day, the currently-retired people are intrinsically supported by the currently-working people, and all the money-tracking is about keeping this exchange reasonably fair. But if the currently-working people are unable to support the retired ones, no financial magic is going to fix that.]

fuoqi 5y ago
>But if the currently-working people are unable to support the retired ones, no financial magic is going to fix that. Well, there is a way to work around this: to invest into foreign assets. In other words, domestic retirees will be supported by people working abroad. This approach certainly has its risks, but even before that the modern US is the biggest world debtor, not creditor.

lugged 5y ago

Cutting the military isn't really an option like that. They're the largest employer of people in the country. You'd create mass unemployment of young people to pay out the unemployment of old people.

rswail 5y ago
This is because the military behemoth is the biggest socialist experiment in job creation of all time. It's not only the actual military members serving and veterans, it's the contractors, the VA and all of the surrounding infrastructure. You (I'm not in the US) should cut your military not to lower taxes, but to increase spending in actually productive areas of the economy. Military spending is not productive, by definition, most of what it spends is buying stuff and people that are supposed to be disposable via war.
- manquer 5y ago
  Any spending as long it is domestic is productive locally. the stuff the miltary buys needs to be made,the manufacturer in turn buys parts or raw material and employees people and so on etc. There is certainly a case that military spending is not the most effective way to multiply the economic effect that other kinds of spending like infrastructure, education or healthcare, research etc . All of these have huge secondary effects in simulating the economy that military probably does not have .

cheriot 5y ago

> In fact if we eliminated all government programs except social security, medicare and medicaid, by the middle of this century our federal budget still can't add up. :-( Citation Needed From what I've seen SS can be fixed by either - raising the retirement age (originally, life expectancy was barely older than retirement) - applying SS tax to all income and even capital gains The social security time bomb is a political invention.

nicoffeine 5y ago

Social Security is solvent if you remove the income cap. Right now, if you make $140k annually, you pay into social security as much as Jeff Bezos does. You'd also have to figure out how to eliminate other tax loopholes at the same time, like taxing unearned income from investment at a far lower rate than earned income from actual work.

dpweb 5y ago

The is no such thing as Social Security “solvency”. If Social Security cannot pay it’s obligations to recipients, it is funded by the general treasury. The treasury doesn’t have the funds either, so is funded by treasuries.

kmonsen 5y ago
Or you know payments are reduced. The taxes were not a contract, the government can change the terms at any time. If at all possible it would probably be best to freeze payouts and let inflation solve the issue.

rswail 5y ago

You left out raising taxes.

specialist 5y ago

> ...I know it is popular to say that we can just cut the military. The US dollar is whatever the US military says it is. This system is not right, moral, proper, ethical, just, or in any other way virtuous. It just is. Philip & Alexander, Genghis Khan, Augustus, Pax-Brittanica, ad nauseam. They all worked the same. Empires consume humans to feed growth. Grow or die. Money is a shared hallucination. While the USA's military industrial complex is an unqualified evil, the alternative is worse. No empire means chaos, world war, all against all. Just a guess.

kamaal 5y ago
>>No empire means chaos, world war, all against all. I think it will be more like a dozen+ regional powers scattered all over the world. And their economies tied up through a mesh of trade and military ties/enmities. Only people who really suffer from the collapse of an empire is the citizens of that empire. Everybody else just moves on.