A Meeting With Al Gore

Exerpted from The 7 Deadly Innocent Frauds of Economic Policy
by Warren Mosler

Early in 2000, in a private home in Boca Raton Florida, I was seated next to then Presidential Candidate Al Gore at a fundraiser/dinner to discuss the economy. 

The first thing he asked was how I thought the next president should spend the coming $5.6 trillion surplus forecast for the next 10 years.  I explained that there wasn’t going to be a $5.6 trillion surplus, because that would mean a $5.6 trillion drop in non government savings of financial assets, which was a ridiculous proposition.  At that time the private sector didn’t even have that much in savings to be taxed away by the government, and the latest surpluses of  several hundred billion dollars had already removed more than enough private savings to turn the Clinton boom to the soon to come bust. 

I pointed out to Candidate Gore how the last 6 periods of surplus in our 200+ year history had been followed by the only 6 depressions in our history, and how the coming bust due to allowing the budget to go into surplus and drain our savings would result in a recession that would not end until the deficit got high enough to add back our lost income and savings, and deliver the aggregate demand needed to restore output and employment.  I suggested the $5.6 trillion surplus forecast for the next decade would more likely be a $5.6 trillion deficit, as normal savings desires are likely to average 5% of GDP over that period of time.

And that’s pretty much what happened.  The economy fell apart, and President Bush temporarily reversed it with his then massive deficit spending of 2003, but after that, and before we had enough deficit spending to replace the financial assets lost to the Clinton surplus years (a budget surplus takes away exactly that much savings from the rest of us), we let the deficit get too small again, and after the sub-prime debt driven bubble burst we again fell apart due to a deficit that was and remains far too small for the circumstances. 

For the current level of government spending, govt is over taxing us and we don’t have enough after tax income to buy what’s for sale in that big department store called the economy.

Anyway, Al was a good student, and went over all the details, and agreed it made sense and was indeed what might happen, but said he couldn’t ‘go there.’  And I said I understood the political realities, as he got up and gave his talk about how he was going to spend the coming surpluses. 

Subway Tokens and Social Security

A tale of two trusts

Austerity kills. This image was taken of a tree near the place where 77 year old retired pharmacist publicly killed himself. His final words are reported to be "So I won't leave debt for my children." Here is the best analogy as to why social security is not/can not be bankrupt, yet there are those who would like us to believe it is.

Subway Tokens and Social Security
Policy Note No. 99/02
L. Randall Wray

There is a wide-spread belief that Social Security surpluses must be "saved" for future retirees. Most believe that this can be done by accumulating a Trust Fund and ensuring that the Treasury does not "spend" the surplus. The "saviors" of Social Security thus insist that the rest of the government’s budget must remain balanced, for otherwise the Treasury would be forced to "dip into" Social Security reserves.

Can a Trust Fund help to provide for future retirees? Suppose the New York Transit Authority (NYTA) decided to offer subway tokens as part of the retirement package provided to employees—say, 50 free tokens a month after retirement. Should the city therefore attempt to run an annual "surplus" of tokens (collecting more tokens per month than it pays out) today in order to accumulate a trust fund of tokens to be provided to tomorrow’s NYTA retirees? Of course not. When tokens are needed to pay future retirees, the City will simply issue more tokens at that time. Not only is accumulation of a hoard of tokens by the City unnecessary, it will not in any way ease the burden of providing subway rides for future retirees. Whether or not the City can meet its obligation to future retirees will depend on the ability of the transit system to carry the paying customers plus NYTA retirees.

Note, also, that the NYTA does not currently attempt to run a "balanced budget", and, indeed, consistently runs a subway token deficit. That is, it consistently pays-out more tokens than it receives, as riders hoard tokens or lose them. Attempting to run a surplus of subway tokens would eventually result in a shortage of tokens, with customers unable to obtain them. A properly-run transit system would always run a deficit—issuing more tokens than it receives.

Accumulation of a Social Security Trust Fund is neither necessary nor useful. Just as a subway token surplus cannot help to provide subway rides for future retirees, neither can the Social Security Trust Fund help provide for babyboomer retirees. Whether the future burden of retirees will be excessive or not will depend on our society’s ability to produce real goods and services (including subway rides) at the time that they will be needed. Nor does it make any sense for our government to run a budget surplus—which simply reduces disposable income of the private sector. Just as a NYTA token surplus would generate lines of token-less people wanting rides, a federal budget surplus will generate jobless people desiring the necessities of life (including subway rides).

Thanks to my MMT pal, 

Tschäff Reisberg, for providing the content of this post.

Think for Yourself -please!

Democrats who avidly listen to liberal biased mainstream media and Republicans who avidly listen to conservative biased mainstream media (Glenn Beck, Sean Hannity, Fox News..) are not thinking for themselves.  Don't be like that.

The Debt Debate

I've been a fan of the renowned author/debator, Dinesh D'Souza, since watching 'The God Debate' on youtube.  In the new movie 2016 Obama's America Dinesh refers to our National Debt as Obama's "weapon of choice".   The purpose of this post is to WARN you that, although Mr. D'Souza is an expert on Christian apologetics, he does not understand monetary economic theory. 

Mr. D'Souza, the key to growing liberty and growing the U.S. economy so liberty can grow is understanding the difference between a currency issuer and a currency user.

       Because we believe we can become the next Greece we're becoming the next Japan.

"One of these things is not like the others.."