What social security/medicare solvency problem?

[HiPointDem]

For years now, economists using the ideas of Modern Money Theory (MMT) have been telling us that the so-called long-term “funding” problems of Social Security (SS) and Medicare emphasized incessantly by supporters of austerity are faux problems...There are other economists who also believe these are faux problems, even though they don’t subscribe to the view that the government can’t become insolvent...

Still other economists and fiscal policy analysts, believe, or say they believe, that the Federal Government does have fiscal limits...These “austerians” suggest that this last fate be avoided by cutting deficits now, and, even more, by implementing long term deficit reduction plans that cut entitlements...This conflict has created the present situation where the sequester and recent increases in Social Security taxes have set the stage for a “grand bargain” that would begin deep cuts in entitlements by implementing the Administration’s “chained CPI” proposal. But, a number of things have now happened to slow down the austerity train and even threaten its derailment...

This past week saw a recent important defection from the ranks of advocates for austerity. The Center for American Progress (CAP) published a report by Michael Linden...It is good to see this beginning of wisdom, and even implied opposition to entitlement cuts, in a report from an organization with direct lines to the White House. But it’s important not to mistake this report, with its fine rhetoric, for actual opposition to the Federal Government continuing to pursue an inadequate level of deficit spending...

Progressives and Centrists like CAP still don’t understand that austerity is destroying private sector net financial assets...Right now the trade deficit is 3.5% of GDP. That means Government deficits must be at least 3.5% of GDP to prevent contraction in net private sector financial assets. That’s a roughly a $560 B deficit in 2013, just to remain in place. CBO’s latest projections are for a deficit of $642 Billion this year, a bit higher than break even; but not by very much. The deficit could well be smaller than that, however, since it’s dropping fast.

If the economy recovers further, it’s likely that the trade deficit will grow larger as a proportion of GDP. If the Government deficit isn’t allowed to grow, then the result will mean declining net financial assets and greater inequality since the scramble for declining net financial assets will favor the economically well-positioned over most of the rest of us.

And most “progressives” don’t see it because while they joyously proclaim that “austerity is dead,” they also, with equal joy, plan for austerity-level deficits of 3% or less for the foreseeable future. Now hear this CAP, Campaign for America’s Future, and other “village” DC/New York progressive organizations: Warren Buffett’s 3% deficits are the very essence of austerity, as the Eurozone well knows... So, when you tell us that “austerity is dead,” please don’t tell us at the same time that you’re planning to maintain deficits at the 3% level or below, and with them austerity for the indefinite future.

http://www.nakedcapitalism.com/2013/06/joe-firestone-what-social-securitymedicare-solvency-problem.html

[Egalitarian Thug]

1. K&R So few people have any idea... n/t

[SammyWinstonJack]

2. rec.