Twitter-en haria: finantzaketaz, legalitateaz eta ahalmen produktiboaz

Stephanie Kleton-ek dioena in https://twitter.com/StephanieKelton/status/1229782999081914369

Stephanie Kelton@StephanieKelton

One of my all-time favorite threads. It’s an evergreen, really.

Segida:

(https://twitter.com/stf18/status/1005131097297113089

Scott Fullwiler@stf18

1/n There are 3 separate issues regarding ability to provide SS/Medicare in future yearsfinancial ability to pay, legal authority to pay, & productive capacity to provide increasing standard of living to future workers & non-workers.

2018 eka. 8

Scott Fullwiler@stf18

2018 eka. 8@stf18

2/n Unfortunately, these 3 separate issues are not kept separate in public discourse by journalists, policy makers, SS/Medicare trustees, and even economists.

Scott Fullwiler@stf18

2018 eka. 8

3/n First, though, let’s understand that the SS/Medicare trust funds are about the LEGAL authority to provide benefits. They are not about FINANCIAL ability to provide benefits . . .

Scott Fullwiler@stf18

2018 eka. 8

4/n . . . In the future, when/if the payroll tax does not cover legal authority to pay all benefits & SS/Medicare “cash in” the bonds owned by trust funds, govt will get legal authority to pay benefits via general revenues or selling securities (deficit).

Scott Fullwiler@stf18

2018 eka. 8

5/n But this is exactly what govt would do WITHOUT trust funds–get legal authority to pay benefits beyond payroll tax revenues either from general revenues or selling securities (deficit)

Scott Fullwiler@stf18

2018 eka. 8

6/n Because govt does same thing w/ or w/o trust funds, trust funds do not provide FINANCIAL ability to pay, only LEGAL ability. But just as sufficient balances in trust funds provides no FINANCIAL ability to pay shortfall is not a legit argument against FINANCIAL ability to pay

Scott Fullwiler@stf18

2018 eka. 8

7/n FINANCIAL ability to provide future benefits is NEVER in question for a monetary sovereign. FINANCIAL ability to pay is a POLICY CHOICE, not a constraint. Greenspan explains this here very clearly in first 18 seconds

Greenspan Schools Paul Ryan On Future Retiree Benefits and SOLVENCY

Video Posted by Alberto Veronese COMMITTEE ON THE BUDGET, HOUSE OF REPRESENTATIVES, MARCH 2, 2005 Paul Ryan: Having personal retirement accounts is another w…

youtube.com

Bideoa: Greenspan Schools Paul Ryan On Future Retiree Benefits and SOLVENCY

https://www.youtube.com/watch?v=m6MGX1AKFm4&feature=emb_logo

Scott Fullwiler@stf18

2018 eka. 8

8/n LEGAL authority to pay is also a POLICY CHOICE, not a constraint. For example, Govt could pass law giving trust funds 100% interest/year (remember, trust funds aren’t about FINANCE, so not a problem FINANCIALLY), which would provide LEGAL authority to pay SS/Medicare FOREVER

Scott Fullwiler@stf18

2018 eka. 8

9/n Another example of providing LEGAL authority to pay future benefits is to pass a law saying govt will pay full benefits.

@StephanieKelton

explains here that we already do this in some cases

4 Trust Funds, 3 Problems: Why is the Other one so “Healthy”?

By Stephanie Kelton

Every year, the Trustees of Social Security and Medicare issue an annual report that examines the financial status of the various “trust funds” that purportedly sustain these vital programs .

neweconomicperspectives.org

http://neweconomicperspectives.org/2011/04/4-trust-funds-3-problems-why-is-other.html

Scott Fullwiler@stf18

2018 eka. 8

10/n So, FINANCIAL ability to pay and LEGAL authority to pay future benefits are POLICY CHOICES. They are UNCONSTRAINED by anything other than policy makers simply writing a law saying the benefits will be paid. Anyone who says otherwise is muddling the 3 separate issues

Scott Fullwiler@stf18

2018 eka. 8

11/n However, ability to provide future standards of living to retirees and rest of population w/o cutting benefits IS a constraint. If you just run deficits to pay benefits in future, if productive capacity is insufficient you will get inflation, not more real goods/services.

Scott Fullwiler@stf18

2018 eka. 8

12/n Greenspan again explains this clearly here starting at 45 seconds in

Greenspan: “There is nothing to prevent the government from creating…

Committee on the Budget, House of Representatives, March 2, 2005 Paul Ryan: “Having personal retirement accounts is another way of making a future retiree’s …

youtube.com

Bideoa: Greenspan: “There is nothing to prevent the government from creating as much money as it wants.”

https://www.youtube.com/watch?v=DNCZHAQnfGU&feature=emb_logo

Scott Fullwiler@stf18

2018 eka. 8

13/n Lastly, some are talking about Fed simply transferring its govt bonds to trust funds as way to ensure future entitlements. This is simply a transfer of assets from one agency of govt to another, and shows clearly that LEGAL authority to pay is always a POLICY CHOICE

Scott Fullwiler@stf18

2018 eka. 8

14/n BUT, Fed transfer of its securities does not work under current law because to debit Fed assets you have to debit Fed capital (equity). Fed is legally required to send its retained earnings to Tsy, so they are part of govt budget position . . .

Scott Fullwiler@stf18

2018 eka. 8

15/n So, if Fed transfers its securities and debits its capital, under current law, this would increase current and future govt deficits by same amount until Fed’s capital was built back up.

Scott Fullwiler@stf18

2018 eka. 8

16/n Of course, yet again, you could simply change the law and do some creative accounting on Fed’s balance sheet for this debit of assets and capital. So, again, LEGAL authority to pay is a POLICY CHOICE.

Scott Fullwiler@stf18

2018 eka. 8

17/n In sum, always remember that govt ability to LEGAL authority and FINANCIAL ability to pay benefits are NOT CONSTRAINTS, they are CHOICES, just like govt chooses to pay for wars, cut corporate taxes, etc., all the time. It can ALWAYS choose to authorize and pay SS/Medicare

Scott Fullwiler@stf18

2018 eka. 8

18/n The only actual hard constraint on future entitlements is PRODUCTIVE CAPACITY to pay these benefits and maintain standards of living for others at same time.

Scott Fullwiler@stf18

2018 eka. 8

19/n Thus it is NOT useful for informed policy debates to have CBO & SS/Medicare trustees to forecast “solvency” of trust funds in the manner they do now.

Scott Fullwiler@stf18

2018 eka. 8

20/20 However, it WOULD BE useful for them to say “our analysis shows govt has CHOSEN not to legally fund these programs in full after 20XX; if it CHOOSES to do so w/o taxes/spending cuts, given assumptions in our econ model we forecast inflation to be X%.”

DONE!

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