Joe Weisenthal is Right About Social Security – It’s Not Running Out

Joe Weisenthal has a good piece on Business Insider regarding the truth about the Social Security trust fund.  Unfortunately, the comments on the article display the extraordinary level of misconception surrounding this subject.  The myth that the trust fund is “unfunded” or “running out” is one of the great myths we confront on a regular basis.  Of course, it’s silly to talk about the USA not being able to “fund” Social Security.  As an autonomous currency issuer there is no such thing as the USA not being able to fund its expenditures.  There’s no such thing as the USA not being able to print more money to meet every obligation it has.  So there’s no solvency constraint for the USA.

There is, however, an inflation constraint.  The USA could print so much money in an attempt to provide particular benefits for its citizens that it reduces the living standards of those citizens.  But this is a very different phenomenon than the solvency constraint that is often trotted out to scare everyone about Social Security.  Of course, we all know that with inflation near 40 year low it’s not as sexy or effective to try to use the inflation scare tactic on people these days.  That’s not to say that inflation won’t ever become a problem, but when discussing constraints it’s important to frame the discussion correctly.  Not surprisingly, Joe gets this right.  Hopefully more in the media will begin to catch on….

About

Mr. Roche is the Founder of Orcam Financial Group, LLC. Orcam is a financial services firm offering asset management, private advisory, institutional consulting and educational services. He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance and Understanding the Modern Monetary System.

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Guest
4 years 4 months ago

“There is, however, an inflation constraint. The USA could print so much money in an attempt to provide particular benefits for its citizens that it reduces the living standards of those citizens. But this is a very different phenomenon than the solvency constraint that is often trotted out to scare everyone about Social Security. ”

Deficit spending and printing money go together so tightly that I am not sure it is fair to say it is a “very different phenomenon”.

Guest
beowulf
4 years 4 months ago

“Neutral money was a fundamental axiom of nineteenth-century classical theory. By the early twentieth century, this neutrality of money presumption became one of the basic axioms of the prevailing orthodoxy in economics…In 1933 Keynes explicitly indicated that the ‘monetary theory of production’ that he was developing explicitly rejected the classical neutrality of money”
http://books.google.com/books?id=88XA6OHxVAcC&pg=PA41&lpg=PA41&dq#v

Guest
hangemhi
4 years 4 months ago

Deficit spending in the ONLY “real” kind of money printing there is. And we’re not doing enough of it right now…. certainly not enough to cause an even remotely scary inflation number. We’re trillions in deficit spending away from that right now

Guest
Dunce Cap Aficionado
4 years 4 months ago

Neither deficit spending nor ‘printing money’ are related to a solvency issue, so I’m missing you here.

Guest
just an auditor
4 years 4 months ago

The comments at BI are very disheartening. Forget about the MMT/MMR policy debate, we have a long way to go before the masses first understand the operational realities before we discuss which tools are best to use.

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