Social Security also needs to change. As it stands now, the trust fund for the program will run out in 16 years, leaving anyone who retires after 2035 with checks that only pay 80% of the total they should be getting.
Social Security presents the greatest threat to the status quo currently. As soon as the imaginary “fund” is needed to supplement benefit payments any third rate accountant who understands sectoral balances and dual entry spreadsheet accounting will be able to see the greatest scam ever perpetrated on Americans.
No tax can be carried forward in time to be spent at a later date with our current monetary system. This includes “dedicated” taxation such as Social Security and Medicare deductions. The Treasury bonds claimed to hold those deductions and earning interest are nothing but accounting entities, empty of any “real” wealth or savings. Bonds have never been a method of storing value because it is not possible for the government to “have” money in any form. This is going to take a bit of background economics that goes to the basics of our monetary system, so please attempt to discard what you “think” you know about that and bear with me.
Our monetary system was designed around two important functions. The primary of those being defending a now non-existent gold reserve, and secondarily, complying with dual entry spreadsheet accounting used around the world to track money and error check accounting. The gold standard made it difficult to account for “money” in the same sector that held the gold that money represented. Also, because every dollar created was convertible to gold the economy was disadvantaged by any dollars the government held away from the private sector.
Congress was always empowered to create as much money in the private sector as it wished (Article 1: Section 8) but self-imposed constraints that enabled the gold reserve to dictate spending to stabilize the value of the dollars in circulation. The way this was accomplished was by creating a negative entry in the government sector for every dollar created in the private sector. This satisfied the need for a method of error checking and tracking of dollars in circulation as each dollar entering the government sector in any form was canceled by, and canceled, the corresponding negative entry that created it.
The total of these negative entries was labeled “debt” (as in we are “owed” a dollar of tax credit for each unit of debt) and any spending above the value of the gold reserve was “in deficit”. Deficits were resolved by mandating that they be “matched” (not funded) by issuing Treasury bonds to remove currency temporarily until taxes could be collected to do so permanently. It’s important to recognize that spending must precede bond sales or there are no excess reserves to purchase bonds.
Bonds are sold at auction to investors for a discount from their face value and replaced at face value when they mature with new currency created as “debt service” in the non-discretionary budget. Their purpose is not to generate “revenue” for the government that neither needs nor uses revenue from any source to spend. They simply created “policy space” below the gold reserve’s value to enable the government to spend without incurring inflation.
As the bonds comprising the Social Security “fund” mature they, like any other Treasury instrument, are returned to reserves with “new” currency creation, meaning that benefit payments could be made directly to beneficiaries just as easily without the bonds, or the payroll deductions. Accounting entities are not “money”.
The primary function of the bonds at present is propaganda, not to serve any real purpose other than drawing down the total currency supply (“debt”) without inconveniencing the wealthy in any way. The deductions that fund the imaginary “fund” are the most regressive tax in history and do not apply to those who make their money from money or investments.
The basic fallacy of this method of funding future benefits was only obscured by elaborate accounting that presented the fund as both an asset and a liability to Treasury, correctly balancing to zero, and the general econ ignorance about our monetary system that has become so well entrenched that structures of our government have been distorted to it: IE the fear of deficits and debt.
Those fears are generally only drummed up when some spending initiative to benefit the people is presented in Congress or when the right feels it needs to frighten voters around election time and to gain their acceptance for even more austerity (for the wage earners, never the wealthy), such as a reduction in retirement benefits because an imaginary “fund” isn’t sufficient to cover promised benefits.
