Backfire at “America Speaks” Propaganda Campaign vs. Social Security and Medicare

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For those who did not catch wind of it, the Peterson Foundation, which has long had Social Security and Medicare in its crosshairs, held a bizarre set of 19 faux town hall meetings over the previous weekend to scare participants into compliance and then collect the resulting distorted survey data, presumably to use in a wider PR campaign. It’s important to keep tabs on this propaganda effort, since its big budget (the Foundation has a billion dollars to its name), means it will keep hammering away on this topic. But it appears that they overestimated how much public opinion expensively produced and stage-managed presentations can buy.

The brazenness and ham handedness of these so-called “America Speaks” sessions, which have garnered well deserved criticism on the Internet, is probably due to at least two factors: deluded confidence that the average person will fall into line when a confident and well-credentialed presenter makes a pitch and a stunningly naive belief that aggressive efforts to manipulate opinion and mislabel it as polling would not be called out.

Anyone who has come within hailing distance of any kind of polling or survey development or implementation knows well how susceptible the results are to subtle, much the less overt, influence. People are extremely suggestible; that’s why drug trials are double-blind, placebo controlled: the mere knowledge by a researcher that a study participant is getting real meds instead of a placebo is too often signaled to the patient, and the placebo effect (which varies tremendously, but seems to average around 30%) greatly distorts findings. For surveys, a small change in question wording can a surprisingly large impact on results. For instance, “How do you rate the job Obama is doing” will elicit markedly lower marks than “How do you rate the job Obama is doing as President.” Apparently, the second version of the question elevates Obama’s status and reminds respondents of the difficulty of his role. No doubt the “AmericaSpeaks” designers were confident they could use this suggestibility to their advantage.

Several Web accounts by participants have discussed the format of the meetings and the various ways the Peterson crowd tried to stack the deck : David Dayen at FireDogLake (hat tip reader Doug Smith), letsgetitdone at Corrente (here, here, here, and here), and Suzie Madrak. But the most serious salvo came from Benjamin Page and Lawrence Jacobs, who produced a working paper discussing the considerable shortcomings of “deliberative forums” like AmericaSpeaks. From its abstract:

Deliberative forums – including the America Speaks version — are subject to serious pitfalls that make them unreliable as measures of “true” public opinion or as guides to future opinion. Expert analysis of evidence from many sources makes clear that large majorities of Americans strongly support Social Security, oppose benefit cuts (even for the sake of deficit reduction), and prefer to strengthen Social Security finances by raising the payroll tax “cap” or otherwise using progressive taxes. Officials who ignore these views will do so at their peril.

I suggest you read some of these posts, but to give you a flavor, some excerpts, first from FireDogLake:

The entire event was absolutely designed to create a panic about the deficit among the participants.

Slickly produced scare videos talking about the dire straits of the budget were prevalent. Multiple charts and graphs without precise numbers or percentages were handed out. Speakers discussed how “most Americans are concerned about the deficits and debt,” and how we cannot grow our way out of the problem. The current state of the economy, which needs an increase in aggregate demand, mostly in the form of government spending, to avoid a relapse into recession, got a short mention at the beginning of the discussion, an inclusion which seemed forced and tacked-on. Overall, there was about 15 minutes of discussion of the current economic problems, and 5 hours on the deficit. Organizers stressed that their solutions are designed to kick in after the country hits recovery, but the compounded effect of stressing deficits over and over is undeniable. There was no slick video about the need for economic recovery, put it that way….

“Everything must be on the table,” …But all the solutions were very prescribed and very narrow. An authoritative “Options Workbook” sets out potential budget solutions, on the spending and revenue side. 28 pages cover spending cuts, 15 pages cover revenue solutions. And the very first pages of the workbook talk about cuts to Medicare, Medicaid and Social Security.

While the workbook has pages and pages describing the health care system, the final menu of solutions simply list amounts of percentage cuts to Medicare and Medicaid, without mentioning how to achieve those cuts. The options to “achieve savings” in the program include means-testing, raising deductibles and co-pays, increasing the Medicare eligibility age, limiting Medicaid eligibility and voucher-izing Medicare. There are no progressive solutions nor is there anything close to the potential savings achieved in the Affordable Care Act, things like health IT and bundled payments and increased efficiency.

Letsgetitdone pointed to bias at all levels of the process:

The framing of exercises in the decision process continually restricted choices to ones that bring participants back to the supposed problem of a deficit and debt crisis. The web-streamed talks about national conference proceedings and orientations, and the brief constricted discussions of major values issues all worked to fit participants’ thinking to the ideas and frames presented in worksheets and the Federal Budget 101 presentations. Lines of discussion that would have led outside of the intended framing were politely aborted by the facilitators, pleading limited time, and the need to get through the agenda, and give everyone a chance to speak, so that any person developing counter-themes to the major narrative did not have a chance to develop these counter-themes and counter-narratives in the context of the supposedly unbiased process.

He also described them in detail. For instance:

The meeting began in earnest with the facilitator asking the participants:

”Share your name, where you are from, and complete the phrase: And in a sentence, I’d like you to share your greatest hope for the future of the country that your children, grandchildren and future generations will inherit.”

….The question served to orient everyone to think in terms of the future, and also to think of others and the country rather than of themselves. The bias in the question toward collective rather than individual concerns is palpable. But also the question connects up easily to one of the favorite arguments of deficit hawkism, namely that deficits lead to accumulating debts that our children and grandchildren will have to pay off. This proposition is a myth, but clearly, AmericaSpeaks, was trying to connect up to it here.

The amusing part is that the event moderators had trouble force feeding the geese they had thought to stuff with their message. For instance, from Letsgetitdone:

When the primary facilitator stated the agenda and explained its purpose, a number of people immediately called for a discussion of the purpose of the event and questioned whether there really was a fiscal crisis. I pointed to the Government’s option to deficit spend without issuing debt and pointed out that doing this would save nearly $1.4 Trillion in interest costs in 2025, alone, and that, the cumulative effect of a no debt issuance policy would be to eliminate a good part of the deficits projected between now and then. Another participant, active, in the DC non-profit world, mentioned the continuing recession and high levels of unemployment. She pointed out that SS had no immediate fiscal problems, and that the “crisis” was caused by people in the financial industry, who are not the ones being asked to sacrifice, but who are now asking others to do so. Yet another, an economist at the Bureau of Labor Statistics, talked about most of the difficulties being due to health care cost increases and the current recession. He denied that there was any long-term fiscal problem. Still others also questioned whether the topic of the meeting was appropriate.

From Suzie Madrak:

For the first time in a long time, I might have some faith in America. Because no matter how many times the facilitators of this event (which was funded heavily by Pete Peterson, the conservative billionaire who wants to cut Social Security) tried to steer us toward cutting Social Security and Medicare, the 3500 or so people who took part in this national town hall weren’t buying it. Sure, there were Fox News junkies here and there, and some cautious, low-information voters who kinda-sorta disagreed, but the majority who attended seemed to have their own ideas about how to solve the deficit “problem.”

You know what most of them wanted to do? Soak the rich — and cut defense spending. (Are you listening, President Obama?)

A post by Page and Jacobs made clear that any objective research on the questions of Social Security and Medicare would find rock-solid support among Americans:

Remarkably, however, AmericaSpeaks got lucky (or perhaps, from Peterson’s point of view, unlucky.) Despite all the biases, on several issues town hall participants came up with opinions not very different from those that have been expressed by majorities of Americans in dozens of well-designed national surveys. Participants opposed cuts in Social Security benefits, insisting that benefits must be preserved when balancing the budget. They wanted to strengthen the economy, favoring the current stimulus bill (stalled in the Senate) by a margin of 51% to 38%. In order to reduce budget deficits, most favored cutting defense spending and enacting progressive tax measures: raising the payroll tax “cap” so that incomes over $106,800 are subject to the tax (85% in favor); raising high-end corporate and personal income taxes; and imposing new taxes on carbon and on securities transactions. Only on the Social Security retirement age did the results conspicuously stray from actual public opinion…

Support for Social Security is found in virtually all segments of the American population. The opinion that “too little” is being spent on Social Security is shared by majorities of Republicans, Democrats, and Independents; by majorities of men as well as women; by whites as well as African Americans or Latinos; by people with a lot of formal education as well as people with little. Most important, support is very strong among young (age 18-29) Americans, fully 63% of whom told the most recent GSS that we are spending “too little” on Social Security. The supposed generation gap on Social Security is mostly a myth. There is no intergenerational war between “greedy geezers” and the young.

Yves here. It is refreshing that this effort failed, but it is a given that the Peterson crowd will go back to the drawing board and figure out a way to credibly produce the answer it wants.

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  1. a

    “Soak the rich — and cut defense spending.”

    Looks to me like we can balance the budget…

    1. Glen

      Amen, brother. Very straight forward, pretty easy to do.

      Now if we can just get the Democratic and Republican dumb fucks in DC to do what we tell them to do, as in “We, the people’, then we can get our country back.

  2. attempter

    The attempts to force thinking into the old “sacrifice today, utopia tomorrow” rut of lies betrays the conscious totalitarian intent, since that’s the characteristic totalitarian lie with which we’ve become so familiar.

    By now we know that anyone who tells you to sacrifice today for some vague dubious tomorrow will always tell you that on every today, for an infinite line of todays, while tomorrow will always be the same tomorrow it is today.

    The austerity-mongers (themselves already personally rich) are common housebreaking thieving vermin who should be dealt with as such.

    1. Tom Crowl

      and P.S.

      While attempter can get pretty hot… he has some great perceptions and does his homework!

      His post today ( ) has some great background on debt, debtors, indentured servitude and their use in the Colonial period.


      I’m not religious but this Jesus guy had a point…

      Do you know when ‘the meek’ are gonna inherit the earth?

      When they understand inheritance doesn’t mean waiting around for a gift from some angel…

      The meek will inherit the earth when they grow-up and take responsibility for it!

      Don’t let yourself be made a child by systems that find it beneficial for you to be a child…

      (P.S. the ‘deficit’ clown-show isn’t the only one going on by a long shot… while people are upset by the issue of undocumented residents… and they have some right to feel that way… they also recognize WHO has benefited from that system… and while most people want secure borders… they ALSO favor a path to citizenship! And they want citizenship to mean something.

      Our ‘leaders’ for all their rhetoric… don’t really want citizens PERIOD! (including us…)

      They want docile workers and easily manipulated ‘consumers.’

      I, for one, am not going to co-operate.

      Consider me a troublemaker.
      And, it seems, I have plenty of time for it.

    2. dave

      “sacrifice today, utopia tomorrow”

      Has worked pretty well for me. I worked hard in school, saved instead of spent, and didn’t abuse harmful substances. As a result of those sacrifices I’m doing well today.

      1. S Brennan

        There are literally millions who “worked hard in school, saved instead of spent, and didn’t abuse harmful substances.” who “As a result of those sacrifices” are doing very poorly today. Luck, connections and being born at the right time matters. The Ayn Randian idiocy of Dave’s post can be seen by supposing Dave was born 10,000 years ago and “worked hard in school, saved instead of spent, and didn’t abuse harmful substances.” he’d be poorer than guttersnipe in spite of his “great efforts”.

        The paraded stupidity of the “Ayn Randian” crowd is a never ending demonstration of delusional thinking.

        1. ayn

          “The question isn’t who is going to let me; it’s who is going to stop me.”
          (Ayn Rand)

      2. attempter

        I’d be willing to bet anything that you never “sacrificed” a thing in your life, but on the contrary have been heavily subsidized by those more poor than you.

        I’d bet you’ve never been anything but a total leech since the day you were born. I bet you’ve never worked a day or contributed a thing in your life. I bet your every action has been worthless at best and more often destructive or even criminal.

        And, my favorite part in replying to sociopathic wretches like you, I bet you’re lying or deluded when you say you’re “doing well”. (Otherwise why are you heckling an opposition forum? You’re evidently such a loser you can’t even fit in at the fascist forums! Why are you online at all, for that matter? Don’t you have more important things to do in your brilliant “career” in your brilliant “U.S.A.!!”? I know if I were living in what I considered a human society I’d hardly be online at all.)

        I bet you’re doing a lot worse than you expected from all your brainwashing. I bet you’re struggling to maintain whatever pathetic little place you ever attained, but you’re still sinking, ever lower, ever downward.

        But worst of all, rather than learn a lesson and change your ways, you’re going to cling all the more pathetically and with ever greater meanness to your wretched little pack of lies, because that’s all you have left.

        You’re going to fight for the same criminals who stole everything from you, and you’re going to do it as a cut rate thug. Because in the end that’s all you are and all you ever were.

    3. sgt_doom

      Especially when it comes from a tax-dodging, debt-financed multi-billionaire like Petey G. Peterson, who devoutly wishes his mentor, Davy Rockefeller, was really his blood father.

      Poor, poor tax-dodging, debt-financed multi-billionaire, Petey Peterson.

      Soon to be the next debt-financed multi-billionaire, his spawn, of course.

  3. Taylor

    Yet my sense is that Obama is already planning to trade cuts in SS for allowing the Bush tax cuts to lapse.

    Which means, with this master negotiator, we’ll get SS cuts and then the Bush tax cuts will get reinstated. After all, “you can’t raise taxes in a recession” is the latest Keynesian rant from Republicans.

    1. eric anderson


      if you raise taxes — during a recession or otherwise — where does that money come from? The money would be otherwise spent in the private sector economy, or it would be invested, possibly even in Treasury debt or state/municipal bonds. Therefore a hike in taxes results in lower consumer spending and less investment.

      Is this what you really want in a recession?

      OK, if the government took the tax money and spent it wisely, nationally it would be a neutral as far as the economy goes. Government spending and “investment” (I have to LOL even typing the two words gov’t and investment together in the same sentence) then replaces private spending and investment. Will the government spend it wisely? I rest my case.

      1. psychohistorian

        Deep breath.

        Your first paragraph assumes that the “tax” is regressive instead of progressive on the rich which would not reduce consumption. Lets go after most of the inheritance also, thank you.

        Your specious last paragraph says that government investing in its unemployed citizens has no chance of being positive.

        You speak of private investment as some god when it has in fact destroyed employment in the US in search of profit for the rich.

        I rest my case…. time to paint my house.

        1. Traderjoe

          1. Just because a tax is “progressive” doesn’t mean it has no impact on consumption.
          2. If you reduce the incentives to accumulate wealth, you will get less capital investment. Sure, there is an appropriate level of taxation on wealth accumulation, but you seem to be suggesting a confiscatory/punitive rate.
          3. The poster said nothing about unemployment benefits.
          4. Private investment has destroyed employment? HUH? The recession has been caused by many different factors, and I’m not suggesting some unfettered laissez-faire unicorns and purple sky private investment, but the reality is that if you tax something you get less of it. If private investment falls to zero you will have no jobs at all.
          5. How do you feel about the average government worker getting paid upwards of 100% more than the average private sector worker, with better pensions and benefits to boot.

          I don’t think you proved anything at all…

          1. Yves Smith Post author

            This is the best you can do?

            Per your:

            1. Huh? This is bizarre. Yes, progressive taxes leave proportionately more income in the hands of people with greater propensity to spend. You seem to be suggesting the reverse. Please.

            2. As we have said here (and you will see more soon) corps around the world ex China have been NET SAVING, not investing. This is a well established trend, not a function of the global financial crisis, started as early as mid 1990s in some countries, as late as early in this decade in emerging Asia ex China. So this “less capital investment” worry is a canard, in fact it suggests were need more government capex (if you missed it, US infrastructure sucks) to offset the reluctance of corps to spend even at a time of unprecedented corporate profit share of GDP.

            3. Your point here?

            4. Private investment has actually been negative, corps have been disinvesting. So a generous tax regime has not incentivized investing (well it sorta has, there is some wrinkle I’m not quite on top of, but US international corps are effectively incentivized to invest offshore).

            5. I’d like to see a source, and I’d like to see that figure adjusted for the exclusion of low end retail jobs. WalMart is effectively subsidized by the state, many of its workers get food stamps and rely on emergency rooms for medical care. And tell me how many government jobs, even low end clerical, are as low end (skill wise) as WalMart. Don’t try bus drivers, they have safety responsibilities that WalMart greeters lack.

          2. bob

            Location is also an issue. How many government employees are living and working in the middle of nowhere Iowa? Most are in large metropolitan areas with a high cost of living. NYC and DC come to mind.

            Most of the increase in federal employment is also due to security theater. Again, this falls into more populated areas with higher costs of living.

            I’ve seen the study you reference(USA TODAY), it is hardly something to be proud of. 10k a year in benefits for the average private sector employee? I am a 30 something single male and I pay more than 12k a year for health insurance alone.

          3. Traderjoe

            @Yves below –

            “This is the best you can do?” – Not sure that this sort of opening keeps an honest debate going. The point I was trying to make was that the author was making absolute statements, while going so far as to partly misquote the previous author.

            1. Huh? This is bizarre. Yes, progressive taxes leave proportionately more income in the hands of people with greater propensity to spend. You seem to be suggesting the reverse. Please. – I agree with your statement. Read the arguments above again. The author was suggesting there would be NO impact. That cannot be correct that a tax would have NO impact, even if imperceptibly marginal.

            2. As we have said here (and you will see more soon) corps around the world ex China have been NET SAVING, not investing. This is a well established trend, not a function of the global financial crisis, started as early as mid 1990s in some countries, as late as early in this decade in emerging Asia ex China. So this “less capital investment” worry is a canard, in fact it suggests were need more government capex (if you missed it, US infrastructure sucks) to offset the reluctance of corps to spend even at a time of unprecedented corporate profit share of GDP. – I agree that valued government infrastructure investments need to be made. I wish that these investments were vetted and spent in a “better” process, since so much of our government spending goes to “pork” projects like the Bridge to Nowhere and the John Murtha airport. How do you design a process that legitimately decides quality v. quantity of government spending? How much of our budget discussions could be solved by allocating spending according to an agreed upon set of priorities and principles? I.e., do we really need that spare fighter engine?

            3. Your point here? – Exactly as stated. The original argument said nothing about unemployment benefits, but the counter one impugned that it did.

            4. Private investment has actually been negative, corps have been disinvesting. So a generous tax regime has not incentivized investing (well it sorta has, there is some wrinkle I’m not quite on top of, but US international corps are effectively incentivized to invest offshore). – I agree that the corporate tax structure is too generous, not because of rates, but structure. See transfer pricing and taxes. Companies set up large offshore subsidiaries in low-tax regimes and then transfer technology there, and their profits. Hundreds of corporations reside in single offices in Bermuda, etc. Our tax code pushes companies offshore. Read here about GE’s tax return: So, perhaps a lower rate but no exclusions and exemptions would actually raise more money? And save money and time for the legions of small businesses that can’t afford to have gigantic accounting departments?

            5. I’d like to see a source, and I’d like to see that figure adjusted for the exclusion of low end retail jobs. WalMart is effectively subsidized by the state, many of its workers get food stamps and rely on emergency rooms for medical care. And tell me how many government jobs, even low end clerical, are as low end (skill wise) as WalMart. Don’t try bus drivers, they have safety responsibilities that WalMart greeters lack. – One of the points I am trying to make, which I think you will agree with, is that private sector wage growth is negative, especially when you look at the destruction of benefits over time. But, when you look at the pension plans of state/local workers, you have to agree that the promises are not sustainable. There’s clearly been a disconnect between the relative earnings of the two parties. My belief is that they need to meet somewhere in the middle, and that government workers, in exchange for more relative security (since governments don’t typically go bankrupt or offshore) should be willing to accept less compensation (since security is part of the consideration).

    2. sgt_doom

      As Social Security is a pay-ahead tax, and those who are already vested have pre-paid, there won’t technically be “cuts” in SS, but it will be confiscated.

      That’s called stealing where I come from, and those debt-financed billionaires do that on a daily basis.

  4. koshem Bos

    America Speaks is the latest salvo of the oligarchy against the working people. It’s great to hear that the people have their thumbs down on eliminating or even reducing SS.

    I agree with Taylor that Obama is the worst negotiator possible at the time he controls the purse for the midterm campaigns. Otherwise America Speaks may be a killer for Republican in the coming midterms. Hopefully, individual Democratic candidates should scare the crap out of voters with Republican elimination of SS, worsening education, hurting the unemployed and starting more wars.

  5. lambert strether

    Obama is the best negotiator possible on behalf of his owners, the banksters.

    Just as “only Nixon can go to China,” “only Obama can gut Social Security.”

    1. sgt_doom

      Just so….as only Clinton and Gore could pass NAFTA, GATT, the WTO Financial Services Agreement, the National Telecommunications Act, etc., etc., etc.

      Yup, old Gore has reinvented himself, but plenty of us still remember his evil and stupid grin and bullying tactics to get NAFTA passed for the banksters.

      And don’t forget where those funds came from for the Gore family tobacco plantations; a company called Occidental Petroleum, funded by what Eastern European power, since dissolved?

      Oh, I’m sorry, carbon trader hedge fund manager Gore has reinvented hisself as an E-n-v-i-r-o-m-e-n-t-a-l-i-s-t!

      Ain’t reinvention grand…..

  6. aet

    Some are yet waiting for the “benefit” of the early 1980s Reagan-era “austerity” to emerge.

    You know, in places now called the “rust belt”.

    The real answer is to tax Petersen et al. and his Fopundations until they do not have surplus capital to spend on these political dog-and-pony shows touring the country.

  7. Jmd

    I saw Peterson speak at a private club – off-the-record – to several hundred elderly women. It was shocking how little self-awareness he has…how can a billionaire try to undo (or at least mutilate) the little security that older people in our country have, and for which they have paid? He mentioned that in UK hospitals the ICUs aren’t filled with the elderly but with motorcyle accident victims and infants born with health problems. What does he think we do with those accident victims and infants, the same thing that the U.K does with the elderly? If he had lived in the U.K. for most of his life, he would not be around to lecture on this latest folly. He should just huddle back up with Schwarzman from whom he seems so hell-bent on distancing himself and come up with some real-world solutions hopefully including unwinding their own foundations and doing some good in the world as mentioned above. He is a big fan of putting the elderly out of their misery as soon as possible, it was very disturbing.

    1. sgt_doom

      Great points, but then it was Peterson, if you’ll recall, who bought and then shut down those refineries to jack up the price of oil.

      It was Peterson who purchased those privatized prisons, and aided in further prison privatization (Gee Whiz! Their very own pool of psychotics for whatever they wish to do with them?? Go figure?).

      It was Peterson who LBO’d an extraordinary number of jobs — and companies — out of existence!

      Yup, and it is Peterson who wants to privatize (steal) Social Security and public education.

  8. Bruce

    Yves why dont you comment on life expectancies when SS was originally put in place -vs- now. I am quite sure that FDR didn’t advocate that SS begin at age 50 for a reason.

    1. Skippy

      I really love that one, in my top 5. Refresh my memory but how long have life expectancy’s moved on a upward trend. Now if you are telling me that the government was so remiss, as not to included the one most important factor/calculation in a living will, I might agree with you.

    2. LeeAnne

      There’s some old geezer clown on the TV claiming that Social Security was created based on life expectancy of 56 years-of-age; therefore, ZERO benefits payout –elderly all gone.

      Amazing how clever the founders of the program had to be to sell a program like that; that workers would pay all their lives and die without ever realizing a dime’s worth of benefits from the program -practically guaranteed.

      It would be like proposing a similar program today that would withhold retirement for 30 or 40 years from every paycheck with benefits to begin at age 85.

    3. stf

      So . . . as a country gets richer and more productive, people shouldn’t be able to enjoy longer retirements? Why don’t you also go back and look at how productive we were when SS was introduced. You’re still thinking backwards if you think there’s a SS crisis to avoid by tweaking the program with increases in retirement, etc.

      1. eric anderson

        “… as a country gets richer… ”

        News flash. We’re broke, buddy. Total debt 375% of GDP. Higher than Great Depression 1.0. Say hello to 2.0.

        1. psychohistorian

          News Flash – Think of how much money government would have if tax rates on the rich moved back up into the 90+ range like in Depression 1.0. That income along with mostly confiscatory inheritance tax would make us pond scum feel significantly better as we deal with Depression 2.0 which is under way.

        2. sgt_doom

          Newsflash, dood! A phony economy (where 95% of GDP is fantasy finance and war spending) cannot support nor sustain thieving DEBT-financed billionaire thieves who swindled the rest of us.

          Time to take their ill-gotten gains back…..

    4. Glen

      You’re a little behind the curve, life expectancy is moving down in the US due to a number of factors: the rising cost of health care, the lapse of public health spending and poor food/eating habits of middle class and poor (i.e healthy food costs more).

      See, you’re getting what you wanted – the poor and middle class are dying younger and broke!

    5. purple

      Life expectancy is mostly a function of decreased infant mortality. If you contrast working lifespans even farther back than 1930, with the present, they haven’t changed nearly that much.

      At any rate, it’s very difficult to be a nurse or truck driver past 65.

    6. Yves Smith Post author

      Please look at data before giving right wing talking points.

      Childhood mortality was MUCH higher in the 1930s, remember?

      Life expectancy at birth in 1930 was 62 for a white male, and for someone who survived to 20, meaning voting age, an additional 48 years, or total life of 68, meaning a reasonable expectation of receiving Social Security. And don’t forget that wives (and men typically marry same age or younger women) continue to receive benefits even after their sole earner husband dies. Life expectancy for women at that time was only about a half-year longer than men, but marriage age differentials would have left some women continuing to receive SS after their husbands had died.

      1. purple

        In this era of working women, many people don’t realize how SS has saved the dignity of many widowed women of past generations who didn’t work outside the home/farm. It allows them to be somewhat independent on their kids. In low-cost rural areas, and allowing home ownership, SS goes a long way to covering the bills.

  9. Skeptical


    You criticise the (admittedly obvious) self interest of the Peterson Foundation, without commenting on the just-as-obvious bias of Page/Jacobs. The wealthy rentiers that Peterson flacks for, would rather their wealth not be appropriated by the politicians who administer the Social Security System. The 85% of voters (all who presumably earn less than $106,800) are just as biased – instead of benefit cuts, they prefer (surprise, surprise) wealth transfers to them, by the better off. Each side of the debate, is biased in favor of the other side solving the problem. The motives of the latter group are not intrinsically noble or sensible.

    1. LeeAnne

      I claim noble motives and compassion for wanting Social Security to continue in its present form with a reduction in contributions from workers earning under $95,000 a year and an increase in contributions on everything over that amount including passive income and inheritance taxes.

      Oh, and is there anything more passive than the deceased? I’ve never quite understood the inheritance vs death tax vernacular. EITHER ONE HAS PASSED FROM THIS EARTH. THEY DON’T NEED THE MONEY.

      1. Traderjoe

        Tax, tax, tax. “Noble and compassionate” – but I thought you wanted SS to be self-sufficient (see your comment below)? So, if I’m a doctor and make $200,000 – that’s subject to SS. Fair enough – working wages. But then I’m diligent and save and then buy a building and earn rent – that’s taxed for SS too? And then I die, and that’s taxed for SS too? You are noble and compassionate to your favored class – but not so much to the doctor and his family. The trouble with governments, especially big ones, is that when they start to pick winners and losers, they create inefficiencies in the economy. At some marginal point, less people will become doctors and save and buy buildings, because the incentives are not there, and simply make sure they earn less than $105,000 in order to be a part of the favored class. In many countries the most prestigious jobs are government jobs – stable, perks, etc. How is that good?

    2. Yves Smith Post author


      This is an ad hominem attack. Peterson has a clear bias, AND as detailed AD NAUSEUM, his foundation did its utter best to conduct a study with persistent biases in the research methods to produce results that served their agenda. That makes discussion of his ideological position germane, it drove and continues to drive the actions of the group he sponsored.

      Did you bother reading the Page/Jacobs paper?They happen to be respected academics. Do you find any substantive flaws with their work? There is not mention of a single one. Not only did you probably not bother to look, I suspect you’ll have trouble finding any if/when you DO look.

      1. psychohistorian

        Damn, woman, you are one amazing intellect. I bow to your written word.

        Please let me know if you should ever need cannon fodder for your efforts.

        All I ask is that you change the motto of the US back to the founders original words and intent…E Pluribus Unum!

    3. Joe Firestone

      I don’t recall Page and Jacobs claiming they were unbiased. But AmericaSpeaks says:

      ”AmericaSpeaks takes pride in its reputation as an honest and neutral advocate for public participation. We play a unique role in the policy making process by serving as a non-partisan convener of forums that provide the public with an opportunity to make decisions about important issues without fear of manipulation or bias. Our ability to help citizens and elected officials come together around tough public issues is dependent on our commitment to maintaining this neutral role. . . .

      ”AmericaSpeaks does not take positions on policy issues. AmericaSpeaks strives to ensure that only balanced and neutral facts are used to inform discussions on policy issues. We stand by these basic principles that protect the integrity of our process and the faith that participants and decision-makers place in our work.”

      So, not to put to fine a point on it, AmericaSpeaks lies.

      1. purple

        I personally am wary of any group or study that feels the need to drape itself in the flag – i.e. AmericaSpeaks.

      2. quartz

        That’s great “balanced and neutral facts”! No “biased” or “partisan” facts allowed. If a fact does not pass muster as neutral or tends to support one point of view, it gets excluded, yesiree.

    4. sgt_doom

      You’d want to rephrase that sonny, as cretins like Peterson, utilizing offshore finance centers and faux financial constructs such as SPVs, SPCs, SPEs, SPACs, etc., avoid paying as much in taxes as possible, in other words next to nothing.

      On top of that, when the Blackstone Group went public, they were legally required to pay the going rate of corporate taxation at 35% — instead they purchased a couple of congress critters and still only pay 15% — when they bother to actually pay anything.

    5. Joe Firestone

      Skeptical, you can be a relativist if you want, but the last 40 years have been a period of the continual growth of inequality in the United States. That inequality now threatens political democracy itself, since the accumulated wealth is being used to buy politicians so that they always vote to protect and reinforce inequality.

      Either we stop this now or very shortly, we will have reached the point of no non-violent return from plutocracy. If we keep going down this road it will lead us eventually only to the guillotine.

  10. LeeAnne

    Thank you Suzie Madrak, ‘For the first time in a long time, I might have some faith in America.’

    ME TOO.

    ‘Because no matter how many times the facilitators of this event (which was funded heavily by Pete Peterson … but the majority who attended seemed to have their own ideas about how to solve the deficit “problem.”’

    ‘You know what most of them wanted to do? Soak the rich — and cut defense spending. (Are you listening, President Obama?)’

    And I would add that a 90% tax on $1Billion; $900Million is not ‘soaking the rich.’ It would reduce insane wealth concentration with a more balanced civilized less insane $100 Million + a few loopholes, and when the old geezer dies, a 90% estate tax on that would be $90 Million, leaving his heirs with $10 Million plus a few loopholes.

    DEFICITS? No problem.

    So, Lets have a national “America Speaks II” on that.

    1. Skeptical

      Why not a 90% tax on estates over $1 million? $500,000? Why shouldn’t all wealth belong to the state?

        1. Skeptical

          Hugo Chavez couldn’t have said it better ! Or Kim Jong-il. Both are democracies, or so their leaders maintain.

        2. Siggy

          Would you please go and read our contract for government, is specifies a Federal Republic!!!!!!!

          1. LeeAnne

            as long as trillions of dollars are being spent to spread our DEMOCRACY with guns all over the world, DEMOCRACY will do.

            We can have the Republic vs Democracy argument some other time.

            ya know what I mean?

        3. Yves Smith Post author


          In most countries, it’s called a death duty, and the tax rates are much higher than here. And last time I checked, dead people don’t vote. Hence your democracy argument is a tad comical.

          The fact that we have a process for inheritance is because we have courts, laws, police, etc. You seem to forget that the fact that heirs can have some confidence in receiving the assets from the deceased is the result of state action.

          1. Traderjoe

            Yves, so what is the “fair” rate? At what rate do you both encourage investment, ownership, and entrepreneurship and allow individuals the opportunity to “pay back” their society for providing the structure to allow them to accumulate?

            And do you support a flat estate tax, or the loop-hole ridden one that employs armies of insurance brokers, accountants, and estate planners in what otherwise is a relatively ‘unproductive’ endeavor. Sorry, slightly prejorative there.

            And why do we tax income (I’m not talking the vastly dis-proportional incomes of the banksters, CEO’s), investment, and wealth accumulation (all arguably socially beneficial in their ‘theoretical’ form) and not consumption? Sure there are sales taxes, but the Federal taxes mostly focus on income. You get taxed on income, capital gains, and then estates. 3x taxation.

      1. LeeAnne

        And furthermore, those earning or otherwise acquiring in the millions and billions are certainly entitled to the privileged life style they can afford. To suggest that today $500,000 is in that category is disingenuous at best; a lousy argument. It is not in the American character to hate the rich or to be unreasonable about wealth. Generosity and gregariousness is more typically American.

        Americans love innovation, entrepreneurship, productivity, success and the privileges that come with it.

        But the American people better start hating insane aggregations of wealth and do something about it.

        1. Ishmael

          LeeAnne — Read your communist manifesto today! Send all the money to the government and let them distribute for the betterment of the people. That has worked out really well in the past hasn’t it. Already in California between federal, state, sales tax and social secutiry a small business man is paying greater than 65% of his net income to the government for taxes. If this is not enslavement I do not know what is. To the so called progressives you never pay enough in for all the good causes which they want to spend it.

          1. LeeAnne


            Communism has been put to rest – or hadn’t you heard?

            But the ideology of American globalist neocons wedded to maintaining at least a 6% unemployment rate by having the FED private central bank system increase interest rates that suppress workers’ wages and jobs is OK with you.

            And, perish the thought, that the same forces should support social services at least sufficient to sustain those 6% intentionally underpaid and without jobs, now nearing closer to 20% and growing.

            Imprisoning people has its limits for that purpose. A growing number of people even think a 2.3 million prison population is a bit much for a developed country. Yes, Virginia, the two are related: unemployment and jail.

            But, since prisons are a private industry, that should be OK with you.

          2. LeeAnne

            I apologize. I didn’t read your comment carefully. The communist manifesto thing worked too well and distracted me -its so over the top.

            I agree with you that the treatment of private small business is outrageous, at least as bad as the treatment of employees in this country. Its a winner takes all system with no anti-trust to balance things out and preserve competition. Capital has been allowed to concentrate in the hands of the few while Wall Street puppeteers squeeze corporations for deals made during the 35:1 and higher M&A viggerish when all that downsizing was going on that you and I have been paying for. That’s how, for one thing, the American free press has been downsized in quantity and quality.

            But that’s a different argument from the communism vs the proper and beneficial use of social services administered by government in a representative system.

          3. sgt_doom

            Ishmael is blaming regulatory capture (government ownership by the corporate fascist state) for the plight of the small biz people.

            That’s the doing of Corporate America.

            And no, neither the totalitarian state, nor the corporate fascist state should have a monopoly on land, capital and knowledge.

            There is neither one nor the other, but a more equitable third way: economic democracy.

      2. Joe Firestone

        Nobody’s suggesting that all wealth should be paid to to or owned by the State, only that people pay their fair share tax of taxes commensurate with the contributions their fellow citizens have made to their opportunities to accumulate wealth. What some are suggesting here is that since 1981 and the Reagan Tax Cuts people with higher incomes have not been paying their fair share, and also that the near disappearance of the inheritance, the most effective weapon of all in fighting rising inequality is a particularly serious travesty of social justice.

        It’s time to end this neo-liberal stupidity, and create, once again, a more just society.

  11. marketfollower

    This campaign is just another attempt to do what Reagan and then Bush II tried to do–spend the Social Security trust fund and then say the system is broke and the government won’t pay back the trust fund. Remember Bush’s “worthless pieces of paper”?

    Bush was particularly outrageous when he claimed in 2000 that the federal budget surpluses, largely created by the doubling of FICA taxes in the early 1980’s, required cutting taxes on that people who had created those surpluses–the top 1%!?

    Republicans continue to think that the public will stop supporting Social Security if they break the Trust Fund. They are wrong; disastrously wrong.

  12. Tom Hickey

    Jamie Galbraith pretty well summed up the bias of the Peterson Commission here. It’s a sham, and Alan Simpson let the cat out of the bag when he talked of “the lesser people,” inconveniently just after the chairman of BP was speaking of the “the small people.” Do I get a whiff of privilege here?

    The push is now on to replace industrial capitalism and the social gains since the era of Charles Dickens with financial capitalism and control of global money creation by “independent” (unelected and unaccountable) central bankers. The chief objective is to erase the social gains since the time of Dickens so as to enrich rentiers at the expense of productive capital and workers.

    Wake up, world. IThis transition already well underway, as Michael Hudson has been shouting for some time. It is the master plan of the New World Order for globalization, and it’s been in the works for some time. While the New World Order conspiracy theorists were over the top on facts and issues, their basic insight was correct.

    Now, Trichet is already effectively the “emperor” of Europe, deciding which countries are going to live of die monetarily after they gave up monetary sovereignty by entering the EMU. The BIS, IMF, and Word Bank are already in place, and a UN commission is now talking about a world currency based on SDR’s tied to a basket of currencies to replace the dollar as the world’s reserve currency.

    Is this the kind of unelected and unaccountable centralization of financial power that you want? If not, speak up before it is too late, because financial power translates into political power.

    1. LeeAnne

      its called embezzlement -when funds set aside by the people for retirement are diverted for funding illegal wars.

      1. stf

        What does it mean for the issuer of the currency to “set aside” funds? As if that is what did or should have been happening. The “trust funds” are merely legal entitlements for the SS program to spend in the future—there’s no “money” there and there never possibly could be if you understand basic reserve accounting. If you want SS to have more “legal entitlements” to spend in the future, then raise the interest rate the “trust funds” receive.

        1. LeeAnne

          Raising the interest rate is worth considering along with other obvious sources for continuing a popular and successful program.

          Economics JARGON is not required to discuss the issue intelligently, and I for one insist on whatever common language comes to mind and give you permission to do likewise.

          1. Yves Smith Post author


            This isn’t jargon, it’s core to the argument. The idea that deficits need to be “financed” by borrowing is a Gold Standard construct which is irrelevant to SS. This is key reason that the Peterson “burdening future generations” line is utter crap. You do need to read the posts on Modern Monetary Theory here, the are germane to this debate.

          2. LeeAnne


            Its not core to my argument and I must admit that he volume of my comments today come close to spam.

            My argument in favor of continuing Social Security is principles based. I could have as easily written that workers trusted government to pay on promises made and could afford to so, and Peterson propaganda against SS have no basis in truth.

            Social Security is a good idea, it has worked, it could work better. If the people want it, funding can be created if it isn’t sabotaged by the Obama administration as appears to be their intention.

            I’ll concede your ‘jargon’ point. My attempt to trivialize ideology was intentional if lame.

            It isn’t necessary to argue Modern Monetary Theory to point out that Pete Peterson, Alan Simpson et al and George W. Bush in the context of privatizing Social Security are ‘full of crap’ and have the same intentions for retirement funds as the 1980s deregulation enterprise that gutted consumer protection laws and brought the western world’s economies down with it.

      2. W.C. Varones

        Social Security is an unsustainable Ponzi scheme with or without the phony “Trust Fund” accounting. It’s already paying out more than it takes in on a cash basis.

        You’re never going to be able to tax “the rich” enough to make Social Security and Medicare solvent plus cover the 10%+ of GDP annual deficits.

        I love this site for its coverage of the dirty banksters, but some of this leftist faith in benevolent and effective giant government is really silly.

        1. LeeAnne


          “leftist faith in benevolent and effective giant government is really silly.”

          Social Security is paid for by the beneficiaries of the program and has a history of being very efficiently administered by the government.

          Medicare and Medicaid are 2 different programs; neither one is Social Security. Medicare and Medicaid help pay for health care and they are impacted by the same growing cost problems impacting the entire private health care system and aggravated by the rapacious private health insurance business.

          The health care system in America needs reform on every level.

          1. TraderJoe

            “Social Security is paid for by the beneficiaries of the program…”

            That suggests to me (and I am probably wrong on this) that you want Social Security to be self-supporting. Therefore, if life expectancies grow (higher pay-outs) and there are fewer workers supporting each retiree due to the Baby Boomer bulge passing through the system (less revenue per recipient), THEN some solution must be found to either raise contributions and/or lower expenditures. Certainly not your fantasy of “lowering contributions” for your favored class.

            “…and has a history of being very efficiently administered by the government.”

            Early participants of Ponzi schemes love it. They receive unsustainable benefits on the backs of later investors. Sure, when Social Security was created the longevity and demographics were not likely foretold. But the future is very clear. It is not a sustainable program in its current form. There will have to be changes that will effect and disappoint any number of participants. Therefore, I cannot agree that it was “efficiently” administered.

          2. Ishmael

            LeeAnne — Your comment is incorrect. The majority of the people in Social Security receive far more from the system than they ever pay in, even after interest on their funds.

        2. Yves Smith Post author


          You need to bone up on the economics of this issue, the argument about deficits is incorrect. The US and any issuer of a currency does not need to sell bonds to finance deficits. The constraint on a government like the US is inflation, and if you have been reading the press, the US is on the verge of DEFLATION (for one of many links, see Links, today’s link from Ambrose Evans-Pritchard).

          1. Traderjoe

            @Yves – how do you measure inflation? Is it the CPI – all geometric weightings, housing-equivalent rents, etc. that’s been instituted over time to “dumb down” the inflation indexing SS issues by the politicians, or have you looked at shadowstats alternative using the ‘original’ calculations?

            So, in your MMT (I did a bit of reading on it and read your hyper-inflation link), the government can print money (create the unit of exchange) without selling bonds. What are the limits to printing of money? If the government can spend without restraint, at what point does faith get lost in the value of each individual unit of exchange? What if other countries no longer accept our unit of exchange because they do not believe in the stability of its value?

            The posting on hyperinflation suggested that “where inflating the money supply does not eventually lead to consumer price increases, it does lead to asset price increases which foster a stronger boom-bust tendency.” Why does it not lead to consumer price increases? And if you have asset price increases but not consumer price increases, doesn’t that mean that workers purchasing power declines relative to asset prices, thereby pricing them out of the market for assets (like houses).

            I don’t understand how, in your system, confidence in the fiat currency wouldn’t eventually collapse, since it is backed by nothing and the politicians would have free reign to print as much as possible. I know I’m being histrionic, but wouldn’t that mean we could all make $1,000,000 – but that the million wouldn’t have the same relative purchasing power?

      3. Ishmael

        So LeeAnne, what did you want done with set aside money. You just want it put into cash and some bank vaults? All pension plan funds are invested. People need to realize funds are withdrawn from salaries need to be invested. US treasuries were the safest option in the world. I do not know how long that would be true. What the government does with the money it raises is another issue all together. I never agreed with invading Iraq and Afghanistan.

    2. stf

      SS is only a ponzi scheme to the degree that a society’s worker/non-worker ratio relative to productivity growth can be a ponzi scheme. And if so, no amount of “saving” or “saving SS” will solve that problem. Lose your illusions. You’ve been ECONNED.

    3. Glen

      That’s a good laugh. We’ve just bailed out Wall St with over $8 TRILLION dollars in one year, but Social Security is the Ponzi scheme.

      Or better yet, we spent trillions on two wars that Bush never even PUT on the budget and are spending at an ever increasing rate on the DOD, but that’s not a problem.

      Or health care insurance costs for EVERYBODY (including Medicare) are accelerating out of sight.

      But you want to go after the program that has FULL FUNDING through 2037, and with a couple of tweaks (like soak the rich) through 2100.

      What are you smoking? I want some.

    4. sgt_doom

      You appear to be ignorant of what constitutes a Ponzi or pyramid scheme.

      You might take the time to study up on securitization, credit derivatives, credit default swaps (all five categories), ETFs, ETNs, ownership of global exchanges where the most speculation takes place, and some other subjects before making ludicrously unintelligible comments here.

      1. patterson

        W.C. Cahones is a troll Sarge.

        In his imagination, the money to pay for social security comes from fresh new generations of workers, not from taxes withheld over many years.

        How many of these trust-fund trolls ever earned a paycheck?

  13. lambert strether

    Back in the day, Reagan and O’Neill made a deal.

    The deal was the payroll taxes would be increased so that I paid for my mother and father’s Social Security as well as my own.

    Well, I paid for theirs. And now the elite want to renege on the deal and steal mine. The same elite that can find all the money in the world for endless war, and trillions, also stolen from me, to repay their bad gambling debts in the financial market.

    1. MattJ

      Except that wasn’t the deal at all. The deal was, the left got to protect and expand Social Security benefits, and a lot of additional revenue for the various things they wanted to spend money on; and the right got a much less progressive federal tax system. Everyone at the time new that the next fight would come when the additional SS revenues no longer covered the SS benefits on a cash flow basis. The left gambled that the program would be too popular to cut benefits, forcing the right to accept higher taxes; the right gambled that raising taxes would be too unpopular, forcing the left to accept reduced benefits. We’ll see who was right.

      It is no more a betrayal by the right to demand reduced benefits than it is a betrayal by the left to demand increased taxes; it was known at the time that the fix was temporary, and it has just stopped working.

      1. psychohistorian

        I am going to do this from brain damaged memory hear so may not have all the details correct but SS was also screwed at the time by taking the stash of treasuries that were held (and made money) in the funds name and replaced by current budget IOU’s. This was a Reagan/Greenspan accomplishment to fund more off book imperialism.

        1. Ishmael

          psychohistorian — your comment is totally inaccurate. There was no Reagan/Greenspan grab of US Treasuries out of the social security fund. Social Security funds are invested in a security which is totally comparable to US Treasuries (in everything but name only).

          1. psychohistorian

            Well I guess not quite right but in my defense let me leave you with the last sentence in the Wikipedia section on the 1983 changes:

            “There has been significant disagreement over whether the Social Security Trust Fund has been saved, or has been used to finance other government programs and other tax cuts.”

  14. Ishmael

    WC Varones says — I love this site for its coverage of the dirty banksters, but some of this leftist faith in benevolent and effective giant government is really silly.

    How true you are there. Yves, do you really support this comment or just throwing it out there to get reactions (kind of like when I rub my cats hair backward – boy that makes him mad). Don’t get me wrong, I would make the bankers, elected officials, government workers who participated and lobbyists walk the plank for leading us here, but more government is not the answer.

    Let us look at some of the matters posted here. There is this comment from Suzie Madrak:

    You know what most of them wanted to do? Soak the rich — and cut defense spending. (Are you listening, President Obama?)

    Well of course the majority of Americans want this. We have over 50% of Americans now receiving more from the government than they pay into the system. The majority of Americans believe $250,000 salaries are rich. The majority of Americans want to enslave the medical profession so they will be provided for. The majority of Americans are economically illiterate.

    Then we have this comment from Lambert Strether :

    I pointed to the Government’s option to deficit spend without issuing debt and pointed out that doing this would save nearly $1.4 Trillion in interest costs in 2025, alone, and that, the cumulative effect of a no debt issuance policy would be to eliminate a good part of the deficits projected between now and then.

    Isn’t what this guy calling for is money printing. What kind of economic plan is that and where has it ever worked. Once it starts there is no stopping because every one see it as the ultimate free lunch. Known failures for this thinking include France under John Law, Weimar Republic, Argentina (and most of South America) and Zimbabwe.

    Then there is Tom Crowl’s comment of :

    while people are upset by the issue of undocumented residents… and they have some right to feel that way… they also recognize WHO has benefited from that system… and while most people want secure borders… they ALSO favor a path to citizenship! And they want citizenship to mean something.

    That statement is totally incorrect – 80% of the US Citizen population is against amnesty for (and let’s use the correct term and not the politically correct term that the libertard left is hitting us with) illegal aliens. It is not that they are undocumented, it is because they entered the country ILLEGALLY and did not just forget their documentation. They entered the country ILLEGALLY and have practiced ILLEGAL ACTS continuously since they arrived such as not paying their taxes, driving cars without insurance and driver’s licenses, smuggling drugs, stealing, and murder. Let us not forget the 1,000,000 illegal alien gang members in Southern California and that one quarter of California’s prison population consists of people who are here illegally. Plus who cares what the WHO thinks! Of course the WHO is happy for me to pay for their health care – one of the main reasons that health care in the United States is shooting up like a rocket. In addition, Amnesty has already been tried once when Reagan legalized 2.5 million illegals and the only way Americans went along with it was because they were told it would never happen again. Now the libertards want to legalize 20 to 30 million more.

    And finally we have the Communist thinking of LeeAnne. I see quite plainly that this country is going to swirl down the toilet of National Socialism and Communism as people in this country continuously want more than they have earned. As this progresses, you will soon see major capital flight out of this country. I am already seeing some of this. Hopefully I will exit this place prior to the real SHTF moment.

    1. ummm...

      > The majority of Americans believe $250,000 salaries are rich.

      Please describe your personal experience with this household income.

    2. Yves Smith Post author


      With all due respect, you have not been reading this site closely, or to the extent you have, you have ideological blinders. Modern Monetary Theory, contrary to your assertions, isn’t left wing, it’s based on accounting identities. You reject it because YOU don’t like the ideological implications. That’s your bias, not mine.

      And you make your other bias VERY clear. $250,000 is the top 1.5% of household income. For a single person, in salary alone, it’s clearly somewhere in the top 1%. Sorry, statistically that qualifies as rich, even if you deem the lifestyle that goes with it to be inadequate.

      You further ignore that we’ve had over 30 years of stagnant real average worker wages, in an era of increasing productivity. The gains of progress have not been shared as they were in the past, but have been extracted solely to the benefit of investors and top managers. There’s a very good reason people want more progressive taxes back. The folks at the top of the food chain have abused their privileges.

      The US had much higher growth rates when taxes were more progressive, another point you ignore. I paid much higher taxes when I was young (end of Carter era, and as a newly minted MBA who had gone straight to Goldman, and in high tax NYC, I was in a very high tax bracket) and I didn’t bitch about my taxes, and more important, I have no recollection of people either at Goldman or Salomon (where I had also worked), or for that matter, at Harvard Business School bitching about taxes. And most of the top people at both firms gave heavily to the Democrats, so voting patterns also did not indicate much discontent with what would now be seen as high taxes.

      The rich are much richer now, in relative income terms and on an after tax basis, yet they want even more. Peculiar, that.

    3. Yves Smith Post author

      Your remarks reveal ignorance, bias, or both. One bit: your comparison to Weimar, Zimbabwe, etc. Hyperinflation requires extremely specific conditions to occur, it’s been debunked here, long form, by Ed Harrison:

      Money quote:

      Clearly, the hyperinflation talk is a gimmick with which to discourage deficit spending. You should see this debate as about a specific policy prescription driven by ideology.

      Read the post, maybe then we can have an intelligent conversation.

      1. dave

        Yves, I didn’t read the OP you are responding too, so I don’t claim to defend whatever they are stating.

        The US is unlikely to go into hyperinflation in the short run, nor even slight inflation. The fact that we are financing with debt makes it especially likely we will not experience inflation in the short run. When the government issues debt it reduces private consumption (turns it into savings) so that it can increase government spending. If that spending is of a productive nature that the government can service the debt it issue without resorting to inflation or higher taxes in the future. However, if it is of a consumptive nature (which transfer payments are) then it will have to service that debt with inflation or tax increases in the future. What we are doing today will have to be paid for in the future via taxation, inflation, additional don issuance (which can only occur without the above if we are in a low growth stagnation that makes government debt attractive, like Japan for the last two decades).

        1. Yves Smith Post author


          Your assumptions about how government funds operations are incorrect. States (anyone who does not issue currency) do need to issue debt if they run a fiscal deficit, a currency issuer does not. So your argument about consumption and debt service is off base. We’d had a lot of posts on this topic, I suggest you familiarize yourself with government monetary operations.

    4. purple

      There are many ways to raise revenue so that the beleaguered 250,000 to 1,000,000 bracket would feel no pain.

      Unfortunately, when people like Scott Brown block new taxes on the financial sector, which would not be felt by any individual in any significant way, it makes any reasonable discussion impossible.

      Those who make the reasonable impossible, push a lot of non-political types towards more radical ideas – to paraphrase Kennedy.

    5. Joe Firestone

      Ish, You say:

      “Then we have this comment from Lambert Strether :

      “I pointed to the Government’s option to deficit spend without issuing debt and pointed out that doing this would save nearly $1.4 Trillion in interest costs in 2025, alone, and that, the cumulative effect of a no debt issuance policy would be to eliminate a good part of the deficits projected between now and then.”

      “Isn’t what this guy calling for is money printing. What kind of economic plan is that and where has it ever worked. Once it starts there is no stopping because every one see it as the ultimate free lunch. Known failures for this thinking include France under John Law, Weimar Republic, Argentina (and most of South America) and Zimbabwe.”

      First, lamberstrether didn’t make that statement, I letsgetitdone, did, as you would know if you had actually linked through my post and read it.

      Second, the notion of “printing money,” is a hangover from gold standard days when it meant that Government was issuing paper currency that wasn’t backed by gold and convertible to it on demand. Since the 1970s, the US has had only fiat money. So, we have the following situation now.

      All US Dollars are fiat dollars. New fiat dollars are the same as old fiat dollars, because they are all fiat dollars created by the Government at one or another. In fact there is no US currency that wasn’t created by the Federal Government, because only it has the constitutional authority to issue currency.

      When the Government spends money it creates fiat dollars. These are mostly not printed, they have the form of markups to the bank accounts of private sector accounts. They are just electronic numbers in those accounts, bits of information. They are not printed dollars.

      Third,in my post, I proposed that the Federal Government stop issuing debt instruments when it spends money. It has a perfect right to do that under the constitution. You say this is “printing money,” but I’ve just shown above that it’s not printing money. You also said that “printing Money” has never worked. And you give the examples of “France under John Law, Weimar Republic, Argentina (and most of South America) and Zimbabwe.”

      However, the United States is like none of those cases. Weimar Germany owed a huge amount in foreign currencies resulting from settlements imposed on Germany after WWI. It also had Labor Unions capable of forcing wage increases in response to inflation. It was also on the gold standard. Weimar tried to print its way out of its problems by trading its own increasing plentiful currency for the foreign currency it needed to pay its debts. Of course, this didn’t work because international markets just de-valued its currency as fast as it could print it, so that it couldn’t get the foreign currency it needed. It also couldn’t default on its debts because part of Germany was still occupied.

      Zimbabwe is different from the United States because it owed international debts to the IMF in USD rather than its currency, and also it had trashed its productive capacity, so when it created too much money it could neither pay off the debts denominated in USD, nor avoid created demand in its own country which outstripped its capacity to produce goods domestically. In short, the classic too much money chasing too few goods led to hyper-inflation.

      In Argentina, there was again a situation where external debts were owed to the IMF, which imposed an austerity program on Argentina. That program caused unrest in the country, which led to a default on its debts, At that point Argentina reclaimed control of its own currency, and began to use Government spending to create employment and enable economic growth. Since then (2002) Argentina has been something of an economic success story and not a basket case at all. But its history supports MMT-based economics and doesn’t at all suggest that Government spending necessarily leads to inflation.

      Fourth, in any case, my proposal had nothing to do with inflation, which is an entirely separate issue. All it has to do with is Government doing its spending without issuing debt, and relieving itself of responsibility to pay interest. Why this should in itself be inflationary must be shown by some economic argument or other. Vague references to supposedly relevant cases that are very unlike our own won’t cut it, and certainly don’t constitute empirical proof.

    6. Fick dich weg

      “The majority of Americans believe $250,000 salaries are rich.”

      And in the next sentence you again imply the topmost 1% of income earners are on the verge of enslavement, ostensibly by that degenerate bottom 50%. You should be ashamed.

    7. Tom Crowl

      It certainly is a difficult issue. But as a person who believes the role of ‘citizen’ is a crucial one… I find the idea of having a nation divided between ‘legals’ and ‘illegals’ very troubling.

      As for the statistics…

      From a CBS/New York Times Survey as reported in The Hill

      “A plurality of Americans favor a path to citizenship for immigrants in the U.S. illegally, a new poll found Tuesday.”

      “43 percent of respondents to a CBS/New York Times survey said they most favored allowing illegal immigrants to stay in their jobs and eventually apply for U.S. citizenship, compared to 32 percent who said illegal immigrants should require to leave their jobs, as well as the United States.”

      As Ms. Smith has often pointed out… polls can be troublesome and it could be the same in this case.

      But since I truly think deportation would be a disastrous idea and impossible to implement…

      And I also think secure borders and workplace verification are essential…

      It seems the outlines of the ultimate solution are clear.

      So I too am upset. I wish the situation had never arisen like this.

      Perhaps if we’d had a rational national debate decades ago we wouldn’t be here.

      But I feel its time to be a grownup. A tantrum about how it
      should’ve been done won’t fix things.

      P.S. Since we’re trading ‘stats’ could you let me know where you got that one about a million illegal alien gang members in L.A.?

      And, of course, how the status quo helps that to the extent the statistic is true. (I’m all for getting rid of those who are criminally inclined. And yeah, I know they committed a crime coming here. But the oligarchy on both sides of the border has sent very, very mixed messages to the Mexican population.

      P.S. I’d say I’m a Progressive. Not a Liberal. I don’t have much faith in mega-government.

      Thanks for listening.

  15. OnTheNextPlaneOuttaCali

    I’m surprised none of the Social Democrats in these posts have mentioned the Federal VAT and Cap-And-Tax which are coming soon to a gas station/electric utility/ Wal*Mart/Target/Best Buy near you. In two fell swoops your Comrades in D.C. shall plug the budget gap AND eliminate America’s trade deficit from imports of consumer goods and foreign petroleum products.

    Of course they’ll lock-in a permanent 16.5% extended unemployment rate, but it’s okay cuz people will still get their gub’mint checks and health benefits.

    The beauty of the VAT is they can raise it whenever their health care “reform” (which will lower the cost of health care by giving out more free and subsidized health care – wait, what??) fails to reduce government health care costs! I believe the UK has gone to a 20% VAT rate and counting? Why stop there!!

    1. sgt_doom

      This is such a clownish remark, importuning the cap-and-trade as anything other than what it is: the next Wall Street pyramid-Tontine scheme.

      So Richard Sandor, who was in the bunch who gave us the “junk bonds” is a director over at Climate Exchange, PLC, the holding company of all the global climate (and several insurance) exchanges.

      And Blythe Masters, who gave us the “credit default swap” and variations of CDOs, has been diligently at work on the next generation: carbon derivatives, and you somehow believe this is anything other than Wall Street lobbyists promoting the next sham?

      Un-frigging-believable some of the nitwit posts financially supported by the Financial Services Roundtable and the Peterson Institute at this web site.

    2. patterson

      I assume that’s the next plane out of Cali, Columbia, since you make absolutely no sense.

  16. Traderjoe

    I’ve been coming to Naked Capitalism for a couple of months now to get a variety of news and perspectives. Typically enjoy it. This article, and some of the comments make me vastly less hopeful that we will come to a solution to our long-term issues and problems. First, I used to run a business that employed 8 people. I closed it when the taxes and regulation made it so that I made less than my employees (and working 2x the hours). I agree that Big Business has captured the regulators (Regulatory Capture). There’s really not much difference between Democrats and Republicans – the whole system ensures short-term thinking around the election and news cycles and is played for personal gain. Let me take a couple of pot shots…

    First, debt IMHO is the ultimate servitude created by the banksters to skim money off the top. Yet, many of the so-called liberals here seem to be advocating more spending. More largess. The comment in the article “that deficits lead to accumulating debts that our children and grandchildren will have to pay off. This proposition is a myth” is sheer lunacy. How is not creating a massive level of debt a burden on our children?? Of course, it seems the author suggests we can simply print money without debt. But, inflation and hyperinflation hit the poor extremely hard, as gas and food prices outstrip wage gains. And that’s not much of an economic policy.

    We have spent and bought on an unsustainable level. Illinois spends 100% more than it earns in tax revenue. It would have to cut its budget by 50% to balance it. It borrows to make its pension contributions. How is that sustainable?

    All we have done is made a lifestyle that is unsustainable, but somehow expected by the people. It is therefore now their right to get XYZ from the government, because some politician promised it to them, or someone else gets theirs too. What about personal responsibility? What about saving 10-20% of your income for a rainy day and your own retirement? There is nothing more powerful than being self-reliant.

    The system is so broken in so many ways (health care, education, government, Big Business) that throwing more money at government will not solve the issues. If you tax something, you get less of it. The “rich” will just leave or close their businesses. Companies will move off-shore. If you subsidize something, you get more of it. The marginal tax-rate of a family on Section-8 and EITC provides NO incentive to ever leave the systems. They are acting rationally economically by not leaving the system. The irony is that these are “progressive” programs – hardly hoping for them to advance themselves.

    I fear that it will be a dark economic time for quite some time…

    1. Ishmael

      Traderjoe — I agree with every thing you said. We have tossed aside everything we learned in this country for 200 years and implemented a form of socialism that is growing into authoritarianism in this country. Anyone who does not believe that when the government gives you something it also puts controls on it is fooling themselves.

    2. LeeAnne

      TraderJoe “It is not a sustainable program in its current form. There will have to be changes that will effect and disappoint any number of participants. Therefore, I cannot agree that it was “efficiently” administered.”

      It is very “efficiently administered” which is only one factor in its favor as a government function opposed to privatizing where Wall Street can get its hands on it. Its a RETIREMENT program intended for SECURITY. Nothing is secure or guaranteed in Wall Street but the fees, the rapaciousness, the hustle, the secrecy and the shenanigans. It wasn’t a joke to watch Bush the idiot campaigning for putting Social Security in the stock market? Pete Peterson’s campaign is no different.

      There isn’t a lot of disagreement about Social Security’s ‘sustainability in its current form.’ It needs adjustment consistent with fairness and worthy of the greatest country and wealthiest on earth.

      1. Ishmael

        There isn’t a lot of disagreement about Social Security’s ’sustainability in its current form.’ It needs adjustment consistent with fairness and worthy of the greatest country and wealthiest on earth.
        This comment goes right along with patriotism and religion and all hyperbole. The first thing this country needs is to become realistic about where it now is. This country per capita is the most indebted country in the world. In addition, the natural resource ability of this country is severly depleted. Manufacturing industry is in disrepair.

        Let us get real. This country is far fromt the wealthiest on earth.

        1. LeeAnne

          now you’re waking up. next you’ll be saying it isn’t the greatest country in the world.

      2. Traderjoe

        If you are defining efficiency as low management fees, than sure. But I would counter with: (1) making promises that were unrealistic and unsustainable; (2) lowering the personal incentive to save for retirement; (3) allowing politicians to raid the SS “trust fund” to spend on those foreign wars you discussed; etc.

        Yes, the concept of SS is a good one. But I don’t believe it was meant to be a retirement fund for vast swaths of the public – and thereby discourage personal savings. I’m being a bit dramatic here, but maybe the SS system is merely a part of the bankster/political/big business oligarchy which intended people to consume, consume, consume, and then become guaranteed votes at the end of their life? Like Ishmael alludes to, we have allowed ourselves to be blinded by complacency at our own success as a nation, and have convinced ourselves that we “deserve it”. And like GM and Chrysler, our “legacy costs” (retirement, health) have now made us uncompetitive in the global marketplace.

        1. JTFaraday

          And here I thought our legacy costs are 20th c global policeman and 20th c finance, the zombie remnant of the US industrial-technical powerhouse.

          From over here in the 21st c, that’s certainly the way it looks to me.

          You two, Traderjoe and CallMeIshmael, on the other hand, keep on comandeering the domestic catfood commission from the viewpoint of about 1980.

    3. greg b


      I dont disagree with much of the sentiment of your post but I want a little clarification on this;

      ” First, I used to run a business that employed 8 people. I closed it when the taxes and regulation made it so that I made less than my employees (and working 2x the hours).”

      I want to know 1) What business were you in 2) What specific taxes and regulations put you in this bind you describe 3) Are any other businesses doing what you did and why are THEY still in operation

      My sense, when I hear many people rant against business taxes and regulations, is that there is a tendency to overblow the evil “taxes” and “regulations” and ignore other business realities that were either poorly understood or ignored. Taxes are on all businesses so they affect all the same (within a sector) and regulations are also USUALLY applied/enforced equally. Those things should not have put you out of business on their own.

      1. patterson

        “. Taxes are on all businesses so they affect all the same (within a sector) and regulations are also USUALLY applied/enforced equally. ”

        Some are more equal than others greg b. Hate to burst your naive bubble there.

    4. sgt_doom

      “First, debt IMHO is the ultimate servitude created by the banksters to skim money off the top.”

      Negative, economically-ignorant and financially-ignorant one.

      Debt peddled as an asset, then peddled numerous times on underlying debts as further assets, aren’t to be desired, as they have robbed the populace, destroyed the economy and created an unsustainable criminal class of debt-financed billionaires.

      And economy based on nothing but debt, as Peterson, the other PE types, and the banksters of JPMorgan Chase, Goldman Sachs, Morgan Stanley, Citi and BofA, would have, is definitely the problem.

      The solution: an economy of the people, by the people and for the people.

      Too American for your tastes, I strongly suspect…..

      1. patterson

        The problem was not debt per se, it was that these guys weren’t doing their jobs. They were entrusted with making loans that could ultimately be repaid and would be helpful for the community. Instead they found a way to make more money harming the community with loans that they knew couldn’t be repaid after repealing laws that prevented them from doing this, preventing new laws against their harmful conduct, and bribing politicians to cover their losses from public taxation.

  17. R Jensen

    Social security is unconstitutional. It is also insolvent, and it is nothing more than a Ponzi scheme. Actually, it is more than a Ponzi scheme, as you are forced to participate in it. It should be scrapped.

    We are headed for an economic meltdown, if spending by the government is not put under control. It’s already happened to Greece, but they were bailed out by your insolvent US government, among others. But who’s going to bail the US out when that time comes?

    I don’t know why we need a tax-exempt foundation to drill these facts into people’s skulls.

    1. JTFaraday

      “But who’s going to bail the US out when that time comes?”

      General Petraeus. He’s going to pack up camp and come home.

  18. Matt T

    This blog is really veering into left field. Over the past couple of years I considered it an even-handed source for economics and finance news, but more and more we’re seeing an politicized leftist, Keynesian, soak-the-rich and spread-the-wealth agenda.

    It it seriously Yves’ contention that the U.S. government as a whole, and SS/Medicare in particular, do NOT face a fiscal crisis? The Left has found it increasingly necessary to take exactly this fantasyland position, in order to counter rising calls for austerity. Hopefully sensible people can see the problems for what they are – and also that “government spending to increase aggregate demand” is not at all the way forward.

    1. LeeAnne

      Matt T,

      The last 30 years has been back 100 years to when the banksters were in charge and brought down the world economy in the 1930s.

      Its now time to end US Drug Prohibition, the for profit program for gangstas before we move into bringing our jobs and production back home, doing some Finance and FIRE downsizing to about 7% of the economy and getting them off welfare. Then we can move forward.

    2. LeeAnne

      Social Security and Medicare are two (2) different programs that serve the same constituency: the elderly.

      Social Security provides retirement income and is a worker with employer contribution financed program that could fall short, but right now is solvent. Medicare, on the other hand, a separate program, is insurance for health care. It is right wing talking points to conflate the 2, confuse discussion as if they were the same and to claim they are both socialist and in trouble.

      The health care insurance, Medicare, is a big problem because of big growing costs and inefficiencies; the same health care system as the private health care system. US health care needs reforming. Private health insurance industry aggravates the problem. It is the same high cost, increasing cost health system we all use, whether privately insured, corporately insured or self-insured.

      Social Security is funded by workers in advance of their or the previous generation’s retirement (have it your way), was never intended to be entirely self-funding, was projected to require some help from the General Fund; but never projected to be transferred to the shadow banking system or

    3. Yves Smith Post author

      In all honesty, your comment reveals some combination of 1. You have not done your homework on Social Security (hint: Peterson and his followers have done a masterful job of distorting the data); 2. You have not come to grips with Modern Monetary Theory (which is based on accounting identities, not theory) and 3. You have an ideological bias.

      I suspect 1. in your case, the out-to-get SS crowd has done a good job of dominating the debate. Short response: the problems are greatly exaggerated and some actually pretty minor fixes would bring the projected deficits into balance. But Peterson et al want to gut it.

      1. dave


        Your MMT reading is causing you to go off your rocker. Issuing unlimited claims against future consumption is not some kind of get rich quick scheme. You really ought to go over to interfluidity and read his last two posts and comments, he deals with this issue a lot better then any of the crank authors you’ve been posting on this site.

        As for SS/Medicare all you’ve really proven is that people support increases in programs they will benefit from as long as someone else pays for it. You can’t separate who pays and who benefits and expect meaningful responses. I support lower military spending and a reworked tax code, but if those aren’t enough to do the job then I think SS/Medicare need a look. You can talk all you want about health price increases being the problem with Medicare, but as long as the system goes unreformed we will be forced to make tough choices, not just bury our heads in the sand and wish for better circumstances.

        1. Yves Smith Post author


          With all due respect, you are now engaging in blatant distortions.

          Waldman has ONE post on MMT, and he is very positive about it. ” Agree or disagree, the “MMTers” are among the most interesting and provocative thinkers in the economics blogosphere…..I agree with much but not all of what the MMTers have to say.” And he has some misunderstandings of it, some of the people who write here were going to e-mail him about it to discuss, I ‘m not sure what came of that.

          It’s cheap and easy to dismiss an analytical framework when you haven’t bothered to understand it. And since MMT is based on accounting identities, it is AWFULLY HARD to reject it were you to take the effort to learn about it. You simply don’t like the ideological implications. You are engaging in a classic “the earth is flat” response.

          1. dave


            Austerity is stupid, stimulus is dangerous, lying is optimal, economic choices are not scalar


            Rob Parenteau gets sectoral balances right

            Seem related to the subject to me, but whatever.

            Steve clearly disagrees that with the MMT approach that all spending is free when you have an output gap and we don’t have to worry about government debt at all (the debt thing may make more sense if you go way back to some posts awhile ago). If that is a mischaracterization of your position then please correct it, because that’s all I’m hearing every time you link in New Deal 2.0 or Krugman pieces.

            I think you, and the less dogmatic MMTers, agree that excessive government spending can lead to inflation. Inflation is a social cost, agree? Assuming you accept that here are the arguments as to why nobody should worry about inflation.

            1) We don’t currently see inflation in the CPI.
            2) Market prices for treasury debt don’t indicate inflation in the future.
            3) There is currently an output gap.

            1) What we currently see in the CPI doesn’t means it won’t be higher in 10-20 years when the baby boomers retire. Its like saying that inflation in 1955 was an indication of what conditions would be like in 1975. I would except your argument if we were talking about the short term, but we aren’t. We are talking about the long term effects of issuing debt. If the treasury was printing money and not issuing debt the current CPI would be relevant. The issuance of treasury debt as opposed to direct printing obscures the inflationary consequences of current government spending by spreading inflation out over time rather then putting it all in the current period.

            Keynes understood this, which is why he acknowledged that different kinds of government spending played different roles. There was spending of a consumption nature and spending of a investment nature. Investment based government expenditures, like building a road people will actually use, pay for themselves in increased productivity over time and thus not need be inflationary. However, consumptive government expenditures won’t increase productivity and will be inflationary over time. The issuing of bonds merely spread that inflationary pressure out over time rather then putting it all up front.

            All the MMT garbage I’ve seen getting spit out on this site doesn’t acknowledge this. It sees no difference between different kinds of spending. It simply says they and all free and all good and we are going to print and debt issue our way to prosperity without any care as to how we are using scarce resources in any time but the present.

            2) Pretty much the same as above. Market prices are an important data point for decision making. But not the final one. If they were then anyone who was saying housing was a bubble in 2005 would be considered a fool. Market prices are transitory, and our current casino system makes them increasingly unreliable. I don’t know what is a fair price for real estate, treasury bonds, etc. Using either $150 or $30 oil within the last two years to make sweeping energy policy would have been foolish, just as using current treasury bond rates might be foolish. 10 year buyers today could end up looking like 10 year buyers in 1970, for all we know. This environment is hard enough to invest in, let along make gran policy declarations based on.

            3) I’ve always had a problem with the output gap. At the end of the day its theoretical and involves a lot of assumptions. If I could crudely summarize the output gap assumes that we should be able to achieve GDP at the beginning of the recession. Alternatively it assumes we should have employment around where it was at the beginning of the recession. Why? Surely, some peoples jobs have been proven to be malinvestments, why would we want them back. And they don’t have the skills to randomly assume a new job at the same level of productivity. So why shouldn’t GDP decline now that a lot of the growth 2002-2007 has been proven to be a fraud. And how can we expect it to grow if all our policies are geared around trying to go back to 2007 rather then reallocate human and physical capital along more sustainable growth paths.

            I’m sorry the output gap infuriates me. Its like people just pull numbers out of their ass and pretend there is a reason other then making a massive assumption. Why is full employment in the US 5.5% but in Japan that’s a massive output gap? Why is current US unemployment a huge output gap but in Germany would be considered full employment? Its all so arbitrary. And to use the historical data you have to prove it is relevant going forward. Just because unemployment in the US was 5.X% 1980-2007 doesn’t make it relevant going forward if that entire period was market by a massive credit expansion that brought demand forward and artificially juiced employment.

            Anyway, I think I have gotten a bit off track. I suppose to some up:

            1) How the government spends its money matters, whether it spends it wisely or poorly will determine whether it is good or not. Obviously when prices are cheaper (in a downturn) it makes it easier for government spending to justify itself, but it is not costless.
            2) Government debt issuance is not “free”. It creates a political liability and people expect to be paid back in dollars that haven’t been eroded by inflation.
            3) Issuing debt obscures the true inflationary cost of political spending to the public. It is easy to see inflation in the short run if the government prints and spends. It is more difficult to understand the effects of inflation over a multi decade period when the government issues bonds.
            4) Current CPI and treasury prices are not sufficient to justify large government debt issuance if the purpose of the debt issuance is questionable (the money is to be spent poorly).

          2. stf

            Yes, SRW’s just the latest to make the “MMT’ers don’t care about what type of spending, as long as there’s spending” mistake. Given how intelligent and also how influential he is, it was very disappointing to see him make such an egregious error.

            Basically, the problem is that there is about 20 years of MMT research, and about 1 year of MMT blogging. The 1 year of blogging has been based primarily on getting across the idea that sovereign govt’s are not revenue constrained and that the “cost” of too large deficits is inflation, not insolvency. Most don’t understand this, so that’s been the focus. If you do, then good for you. We don’t have to convince you, then.

            But it is a BIG mistake to infer from the large number of blogposts making that point that there is no concern over what type of spending or deficits are incurred. Again, there’s about 20 years of literature on this, and if people would read some of that, it would be obvious.

            And frankly, it should be obvious from the blogs, too. We’ve been very strongly against all the bailouts; we claimed that Obama’s stimulus package was poorly targeted over a year ago; we have been strongly in favor of direct job creation; we have been in favor of block grants to states on a per capita basis; we have been for a payroll tax holiday.

            All of these positions we have been repeating, probably dozens of times in the blogosphere, and if you haven’t seen them, then like SRW you just haven’t looked very hard. Disagree with the positions if you like, but don’t spew this garbage that we haven’t been specific about which sorts of spending or deficits we prefer.

          3. Yves Smith Post author


            I link to quite a few things, many of which I deem interesting or provocative but do not necessarily agree with. So you are more than a bit off base in saying link = agreement.

            Krugman is NOT arguing from an MMT perspective. Krugman comes to similar policy conclusions from a completely different line of argument.

            The reason is if you deleverage the private sector and don’t have a lotta exports, you have to run a public sector deficit OR ELSE you get big time price and wage adjustment downward. With a large debt overhang, that means a deflationary spiral. Hello, 1932.

            You keep talking about increasing debt. Again if you had bothered understanding MMT (the monetary operations part) you would know that debt issuance is NOT NECESSARY to fund a fiscal deficit for a government that issues its own currency. All this talk of debt burden generating inflation in 20 years is simply wrongheaded.

            The reason the slack in the economy discussion) has come up here because the constraint on government deficits is inflation. We have so much slack in the economy that we are at the risk of deflation. The idea that the government is constrained in any meaningful way now by inflation in its ability to deficit spend is a canard. And deficit spending does not create a future burden. You keep throwing debt issuance in, it’s a spurious argument.

            Please also see stf, Scott Fullwiler, on this thread, he discusses how Waldman misrepresented nearly 20 years of writing on MMT.

          4. Ishmael

            Yves — You keep flashing this “accounting identity” issue like we are suppose to kneel and pray to it. Having worked as a CPA for 30 years (on four continents including Argentina in the mid to late 70’s) I say so what.

            Sure on a macro level you say the government can print all the money they want without inflation because deflation will offset it and that is the only thing you prove with your accounting identity argument. The problem with the accounting identity, is it does not apply to the micro level. For 30 years, inflation in much of the developed world has been focused in assets — real estate, stocks, commodities and precious metals. We are now experiencing deflation in those areas. MMT does not ensure that deflation in these area will be offset and more likely would set off inflation in other areas such as consumer products. Then we would have the worse of both worlds, deflation in assets while having inflation in consumer products.

            As mentioned by another reader, you are also expecting the government to distribute the funds in a nonpolitical, fair and logical manner. This is just the opposite manner of how government works.

            Finally, how do you set any limit to MMT. Is there some divine calculation to stop. One thing history clealy shows us is that if a little of something works well then government will then puts the pedal to the metal and we find out the cure is worse than the disease.

          5. Yves Smith Post author


            It is trying to talk to someone who appears unwilling to come to grips with the basics, and I mean basics, of a line of analysis. You’ve already reached your conclusion in the absence of understanding. I doubt anything I say can penetrate your prejudice and willful ignorance on this topic.

            Your argument re asset inflation is quite a stretch. The rise in commodities prices have FAR FAR more do with global population growth and rising living standards in emerging economies than monetary policies (in fact, they are likely entirely explained by them). And while Greenspan’s overly lax monetary policies played a role in the global credit crisis, far bigger culprits were increasing leverage across the global financial system, in particular, the creation of a roughly $8 trillion shadow banking system with pretty much no equity behind it, plus the Greenspan put. Why not engage in highly leveraged asset speculation if the Fed will ride in to the rescue? It’s a one way bet.

          6. stf


            Why don’t you go to an MMT blog and ask these questions if you really want to know the answers? Your questions demonstrate that you really have no idea what MMT is about in the first place. Perhaps you’d like to learn? If not, keep asking these extraordinarily off target questions on a non-MMT blog, as I doubt those who really know the answers will bother.

            Also, as a CPA, you should know that accounting identities are equally valid at the micro and macro levels. You are referring to something entirely different when you speak of asset inflation and so forth.

          7. dave


            Yes, a currency issuer is no contained in the sense that they can print to pay their bills. However, that printing creates inflation. Do you not agree inflation is a social cost? Do you not agree inflation is just another way of saying default?

            Issuing a bond or levying a tax are both ways to decrease current private sector demand in order to allow for the government to increase current spending without increasing inflation because current period aggregate demand remains the same. However, issuing a bond unlike levying a tax creates a payment stream that goes on into the future. People expect you to make good on that promise in dollars that don’t get inflated away in value. So when you issued the bond if you didn’t spend the money building productive capital for the nation you’re either going to have to tax demand away from another citizen or default via inflation. Yes, you could issue more bonds, but then you are just digging yourself a bigger hole.

            SRW did a good write up explaining this, but it was a digression within another topic and I can’t find it now.

            As for whether I’m mis-characterizing MMTers I can only say this is what I’ve read on the net. I’ve probably seen half a dozen MMT sites and read dozens of MMT essays. If I had to boil down the entire philosophy it would sound something like this:

            1) Sovereigns can issue all the debt they want without consequence. If anything it must issue more debt all the time. Sovereign debt does not affect future economic circumstances.
            2) The quality of government spending is irrelevant and will always positive as long as there is an output gap.
            3) While inflation is a possible result of too much spending, inflation is low now so we can issue all the debt we want and spend it on anything without consequence.

            Yes, it seems irresponsible and childish. If its inaccurate, then MMT bloggers are doing a shitty job of explaining their position because this is all I’ve gotten out of it. And the idea of Washington armed with such ideas scares this shit out of me. You can complain all you want about Washington and talk about better ways to stimulate, but in the real world you’re stuck with what we’ve got, and all they here from your MMT arguments are “we can do whatever we want.” If you don’t like that then stop writing stories about how burying bottles full of money and digging them up again it going to bring us prosperity.

          8. Yves Smith Post author


            Not only do you still evidence a lack of understanding of the most basic elements of MMT, you seem unable to grasp what Scott said in this very thread. In all seriousness, your comments bear all the hallmarks of someone who either has reading SERIOUS comprehension issues or is so wedded to a point of view that he filters new information and ideas through his prejudices. All you are doing is confirming what I wrote earlier about your posture.

            Your responses, even to material in THIS VERY THREAD, are distortions of the remarks made to you. And Scott said that Waldman misrepresented MMT, yet you invoke him! Hello! I really like Waldman, he is a nice guy, but he has made some big errors (his analysis of the Abacus CDO was stunningly wrong too). We tell you he is off base here, and you cite him again? Don’t you listen?

            You may have LOOKED AT some blogs on MMT, you most certainly have NOT thought about or grasped its most basic points (and as Scott has indicated above, which you ALSO ignored, the blogosphere discussion, even on MMT blogs, merely hits some very basic points of 20 years of research and writing). I can skim a physics text, that doesn’t mean I am about to go off half cocked and think I understand it well enough to discuss it with someone who does. Or if I did think I had gleaned something, but someone who was expert told me I still didn’t get basic stuff, I’d go back to the text rather than keep carrying on about something I didn’t understand adequately.

            But you keep asserting comprehension, and worse, are unwilling to go back and do your homework when we keep telling you you do NOT understand. Even now, you keep talking about “issuing debt” and “output gap”. That ALONE says you don’t have the FOGGIEST understanding of MMT. I told you that earlier and you ignored what I said, And you seem to think Krugman is MMT when he is not. You appear to have no idea of what is MMT vs. Keynesianism vs. post-Keynesianism.

            I’m not answering any more comments on this with you, your are making completely erroneous remarks and persist in your ignorance.

          9. dave


            I guess I can’t help you. Whenever anyone challenges you on something your reply is always that they are ignorant or don’t understand. You never seem to respond challenges to theories or assumptions, you just repeat the same theories and assumptions like they are the ten commandments. If you can’t provide justification for your beliefs, then I don’t see what value your providing.

            Its amazing that you take such a tact within this post. You basically are doing exactly what the Peterson Foundation is doing. The Peterson foundation has made some assumptions in taking their position. People challenged those assumptions. They basically ignored those challenges and said their detractors were simply ignorant, selfish, etc and went on with their business.

            I offered you that I might be mistaken about MMT beliefs, and told you what I feel your position is based on what you’re presenting. If those positions are wrong then correct them, and provide reasoning for their correction. Anytime anyone challenges what seems like the “free lunch” characteristics of MMT all I seem to get in reply is the equivalent of, “no, you’re stupid,” from schoolyard playground.

            I like reading economics blogs, especially if I have downtime at work or having trouble sleeping. I’ve found parts of MMT very education(the logic and insight into monetary theory and banking, not the goofy policy prescriptions). I’ve easily spent 100+ hours reading essays, opinions, comments, and blogs from an MMT perspective and way more on economics, finance, and investing generally. I also used to work in IB for a major wall street bank, have a background in insurance, and a lot of education in political economy and history. If the purpose of economics blogs is to educate laymen in economic matters so they can be good citizens, and someone with my background can’t get what your saying, then either your theory is bunk or your completely failing at your intended purpose.

          10. Yves Smith Post author


            You keep presenting argument that are NOT MMT to MMT. I can only conclude you are either straw manning or just don’t understand. When I tell you that what you are arguing is NOT part of MMT, and an expert on MMT chimes in and agrees, where am I supposed to go with this?

            You are basically taking a “When did you stop beating your wife?” position. I tell you MMT has nothing to do with wife beating, or in this case, unconstrained deficit spending, or issuance of government debt, and you keep insisting it does. People who have been writing about MMT for decades tell you are misconstruing MMT, and you ignore them and keep up with a line of argument that is not part of MMT. You keep saying MMT is something that is most assuredly is not, I keep telling you it isn’t, and you get mad at me.

            The reason I have been forced to describe your position, accurately, as willful ignorance, is that I have REPEATEDLY pointed out how the arguments you ascribe to MMT are NOT MMT. You come back and IGNORE what I have said, and continue to repeat your misconstruction of MMT. You do not even take in the comments I make in this thread.

            MMT does NOT prescribe unlimited deficit spending, as you incorrectly posit it does MMT is merely about monetary operations. It’s like engineering. You can’t build a bridge without engineering (well you can try, it might work, but it is kinda random). MMT does NOT tell you what kind of bridges (policies) to build, merely the constraints on policy making. You and others ascribe to MMT all sorts of things that are just not in MMT.

            And you keep talking about governments racking up debt with MMT. I keep telling you that that exhibits a lack of understanding of MMT. Sovereign currency issuers do not need to issue debt to fund fiscal deficits. If you had said this once, I could see it as a drafting error, or a genuine misunderstanding, but then you’d go off and read more about it. But after pointing out this error, you come back to the debt issue, and it looks like you really don’t want to understand. You haver your OWN personal idea of what MMT is, and you appear unwilling to drop it.

            You are really unwilling to see your failures in understanding here. You keep attributing flat world (as in other schools of economics) arguments to MMT. We told you your points 1, 2, and 3 above were NOT part of MMT. So why are you still taking about free lunches?

          11. dave

            I understand that sovereign currency issuers don’t NEED to issue debt in order to spend. However, in the modern world they do. There are reasons (political) that they do. Sometimes those political reasons are good, sometimes they are bad. I actually think issuing sovereign debt can be good in certain circumstances, even if it isn’t necessary. Though I would definitely make many changes to how its issued and who benefits from it. There are also bad reasons that a sovereign issues debt, including to obscure the effects of economic policy.
            “MMT does NOT tell you what kind of bridges (policies) to build, merely the constraints on policy making. You and others ascribe to MMT all sorts of things that are just not in MMT.”

            I’ve found absolutely no shortage of policy advice from people who use MMT to justify their policy advocacy. How many calls for increased stimulus do we get every day, and the standard line from MMTers is that MMT shows that there is no cost to the stimulus and you’d be an idiot not to support it. MMTers argue there is no constraint on stimulus or debt issuance, or that it is irrelevant.

            I don’t buy that. I don’t think its costless, and I do think debt issuance creates an implied future transfer from one class of citizenry to another that we might not consider just, and that if we ever plan on getting out of deflation the presence of increased debt obligations can lead to increased inflation at that time if we choose to make those transfers with new money.

            While I agree that debt deflation is horrible and can lead to a lot of unnecessary hardship, sometimes its the only way to purge bad debts. If maintaining aggregate demand means pouring new money into a failed economic model just to keep it on life support, draining the capital of the nation so it can never grow and transform, then I’ll take my lumps. I wish we had a political system capable of maintaining aggregate demand by making responsible spending decisions, but we don’t. We have what you see. And I don’t think digging ditches (which I here is a great policy solution from MMTers all the time) and filling them back up is a responsible way to maintain aggregate demand and grow the economy.

            In other words, I can agree with you that the government has to increase the deficit to maintain aggregate demand, agree that can be a good thing in many ways, and still think that on the whole liquidation and debt restructuring would be preferable policy that would bring about the most long term good.

            Actually a more open minded MMTer characterized the trade offs pretty well. He maintained a position while acknowledging trade offs, rather then declaring his position correct.

            The Case for Austerity

            I support larger stimulus and greater deficits. This is because the private sector is still overleveraged, and wants to increase its net financial assets. The deleveraging process is reducing aggregate demand, and getting to a debt level that the sector can service out of income via default will bring with it massively higher unemployment, and thus real output losses. Our current 10% unemployment rate is already too high, and the real output losses acute. So, let’s stimulate through higher deficits.

            Let me now try to make a case for Austerity.

            The credit crises exposed distribution that seems unfair to the electorate. Or at least grossly inefficient. For example, the financial sector is remunerated multiple times above the non-financial private sector, and yet, once you factor in the cost of bailouts, seems to net destroy wealth. This seems unfair, or at least, grossly inefficient. Much of the Obama administration’s stimulus has benefited the financial sector directly, supporting and extending this practise.

            Public sector unions such as the SEIU and the teachers union, especially in California, have lavish benefits and retirement packages that they can juke to increase to obscene levels. At the same time, they enjoy extreme job security in a system that does not seem to reward competence or productivity. In California, young promising teachers are fired while teachers on probation (and therefore, not teaching) get paid full salaries for years. Again, this seems unjust, or at least, grossly inefficient.

            And Greece has a large public sector, which draws the best and the brightest for its generous compensation and job security, while the Germans work hard, save, and export all the fruits of their labor so they can save some more. The Germans tighten their belts, while the Greeks strike so they can keep retiring at 60. This may seem unjust, or at least grossly inefficient, to the Germans.

            And, at ground zero, irresponsible homeowners took on massive loans they could not afford, which inflated the price of housing leaving the prudent “priced out forever”. An ocean of tax breaks, bailouts, hand outs, ZIRP, etc. have all focused on helping the irresponsible homeowner, keeping house prices high, and the prudent stuck on the sidelines.

            All of these situations are political, and as Rahm noted, you need a great crises to tackle them. So far, stimulus has taken the form of extending and further entrenching the inefficiency and malinvestment. All of this has real cost, in badly allocated resources, lost opportunity, and a further corrosion of the polity (such as it is). If this be “stimulus”, the Austerians might say, then maybe it is time to “purge the rot from the system”.

            If stimulus took the form of flat rate, per capita transfers, then we could purge the rot while protecting employment. But unfortunately, academic macroeconomics does not understand that Government deficits fund net private savings, and so it managed aggregate demand for savings through unemployment and not through appropriate fiscal policy.

            Am I characterizing? The above is actually pretty balanced, but most of the stuff I see on your blog and others is of a very different tact. What I posted is what I see your site and in your comments. I’ve heard the ditch digging example (or digging up the money bottles) a hundred times, pretty much every damn day over at Krugman’s blog (yeah, Keynesian, but advocating the same policy for basically the same, i think flawed, reasons). Anyone who disagrees with you is a “terrorist” (it was lame when Bush called everyone a terrorist but now its cool apparently).

            Anyway, I think that’s all I got in me tonight, its rather late.

          12. selise

            stf @ 9:02 pm,

            But it is a BIG mistake to infer from the large number of blogposts making that point that there is no concern over what type of spending or deficits are incurred. Again, there’s about 20 years of literature on this, and if people would read some of that, it would be obvious.

            And frankly, it should be obvious from the blogs, too.

            just from personal experience, as a non-economist / non-financial type, i can attest that it is obvious from the blogs too. one has gotta read the blogs, etc. though. it’s been amazing to me that readers of a blog (!) don’t want to do that before engaging in making false statements and/or mischaracterizations.

          13. anon


            Off topic, but referenced above: can you clarify where you end up with Steve Waldman on the Abacus analysis?

            My understanding was that SW thought the structure was unconventional, even for a synthetic CDO – due to “missing pieces” in the actual liability structure that was issued. He referred to it as a “synthetic synthetic”. I think your position was that structure was not irrregular for a synthetic CDO?

        2. stf


          I’m with Yves. Your points 1, 2, and 3 are all wrong regarding your interpretation of MMT.

          As I said to Ishmael, if you want to discuss this and actually get at the answers regarding what MMT is actually saying ask the questions on an MMT blog (it appears you know how to find them). Otherwise, it’s not worth discussing further.

          1. Traderjoe

            @Yves, concerning your response to Ishmael above:
            “It is trying to talk to someone who appears unwilling to come to grips with the basics, and I mean basics, of a line of analysis. You’ve already reached your conclusion in the absence of understanding. I doubt anything I say can penetrate your prejudice and willful ignorance on this topic.”

            I’ve never head much success starting a comment by saying the other person is ‘thick-headed’ and essentially suggest they are ignorant and prejudiced to their own opinion. As an aside, I believe that these sorts of macroeconomic questions are theories (hence, the MMTheory part), and therefore hard to prove without a doubt one side or another. I liked your site until I learned that you will conclude (or start) arguments with essentially a bully-like statement. I still think a central question a few of us non-believers are asking is “what will the limit to MMT money creation be?”. If the process is controlled by the politicians, will there ever be a limit? Yes, solvency is no longer a question, but inflation can also be created by a loss of confidence in the paper money. That loss of confidence can happen quickly. Perhaps that is too much of a monetarist theory for you.

            A bit OT, but I don’t buy the output gap/low CPI/no inflation argument. Those are in the AGGREGATE, and the CPI is a political construct. The local University has raised tuition by 14% annually, TWO years in a row. No inflation? And I believe a large contributor to this inflation is the government guarantee of student loans, which has allowed colleges to bloat their overhead (because prices were in effect subsidized) but has also left wide swaths of students in debt and in servitude to the system and the banksters. I believe prices for tuition would be lower in a market without subsidization.

            Finally, you discussed the Greenspan put. Wouldn’t you have the MMT put in your argument since governments would never bear to have a recession (too politically painful)?

          2. Yves Smith Post author


            I suggest you re-read the thread, and in particular, my comment of 2:09 AM.

            The reason I am getting frustrated and sharp with dave is simple: I early on pointed out specific ways in which he was misrepresenting MMT. So I was trying to correct/educate him.

            Then the conversation devolves. Dave says, “MMT says A, I think A is bad”. I say, “MMT does not say A, it say aa!” Dave comes back and says. “You didn’t address my issue with A”. I say AGAIN, “I told you MMT isn’t about A, its aa!.” And someone who is one of the leading writers on MMT chimes in and says, “Yes, it is aa!, not A”.

            Dave comes back and writes a LONG compliant, again talking about A and issues that result from A. I tell him he is NOT listening, not digesting the comments given to him earlier in the thread, and appears not to be willing to do his homework. Dave comes back and complains more, but is still harping on A.

            Can you see why I am getting annoyed?

            This technique (and dave is not conscious he is doing it) is a classic negotiating technique called broken record. The Japanese are masters at it. And it usually DOES make the person on the other side look like a bully, when in fact the person doing the broken record treatment is being obstinate. It’s very passive aggressive.

            Go back, you will see I start trying to tell dave he has got some stuff wrong, and he keeps repeating. I was trying to be polite (and explaining it long form would take a lot of space, if dave is familiar with MMT blogs as he claims he is, I gave him PLENTY of clues for him to check on his own as to whether I was mis-stating or exaggerating).

            And if you read my comments in general, I get snarky normally only in response to snary comments or when someone browbeats an issue (some dogmatic conservatives also like to do broken record, and I foolishly get sucked into their game). And MMT makes very few prescriptions, which is counter to what you and dave claim about it. That’s what is so frustrating. It’s as if I show up wearing a white shirt and black pants and you were complaining that I need to stop wearing stripes. What you are attributing to MMT is not MMT, I don’t know how to disabuse you of the ideas you have picked up on this front.

          3. dave


            I sound like a broken record its because I don’t feel like your going into a discussion of what you think about points A, B, and C and why you think that. You’re just kind of saying that A, B, and C are wrong, without explaining why.

            I agree the conclusions of A, B, and C are wrong, but as best I can tell that is the MMT position. I base that on what I see on this site and what you say in the comments. Now, you did say one thing that is correct. That you link pieces you don’t necessarily agree with. So perhaps I have ascribed positions to you that you don’t have. However, you never really delve into this in comments, mainly you just call people stupid, to be honest.

          4. stf

            Joe and Dave,

            If you want to discuss MMT at the level of question you are asking here, go to an MMT blog. You are all assuming A, B, and C are what MMT says. They are not what MMT says. I don’t know how many times we can say that and still have people come back and say “but you didn’t address why A, B, and C aren’t true.” We didn’t say “A, B, and C aren’t true.” We said that A, B, and C are not what MMT says. If you want to know why, go to an MMT blog and there will be many there who will engage you. It’s not happening here.

          5. stf

            Also, Dave . . .

            First, MMT’ers would generally agree with at least most of what Winterspeak says in the post you quoted. That you don’t know this shows you haven’t read much MMT. Where do you think Winterspeak learned his MMT from?

            Second, since you keep wanting a response on your three points, here goes:

            “1) Sovereigns can issue all the debt they want without consequence. If anything it must issue more debt all the time. Sovereign debt does not affect future economic circumstances.”

            No. MMT’ers do not argue this at all.

            “2) The quality of government spending is irrelevant and will always positive as long as there is an output gap.”

            No. MMT’ers do not argue this at all. As Warren Mosler says all the time, government spending to build the Panama Canal raises national productivity, and government spending to blow up the Panama Canal reduces national productivity.

            “3) While inflation is a possible result of too much spending, inflation is low now so we can issue all the debt we want and spend it on anything without consequence.”

            No. MMT’ers do not argue this at all.

            You are so far off it’s pointless to try and completely explain here. Go to an MMT blog if you really want to understand. It doesn’t appear that you do want to understand, though; it seems you’d rather mis-characterize.

        3. Yves Smith Post author


          You persist in distoriting what Scott and I say.

          I did not ever say you were stupid. I have never called a reader stupid. I said you were “willfully ignorant”. That has nothing to do with intelligence, it has to do with your persisting when you have gaps in your knowledge. There is a difference between intelligence and knowledge. I gave you pointers and you keep coming back to me. This blog is NOT school, I have 40,000 readers a day and cannot spend time educating a single person in comments, particularly when there are entire books and blogs on MMT.

          This illustrates the sort of misconstructions your are making. I say one thing and you seem to hear something different.

          I told you I am not going to engage substantively further. Scott and I both told you your points 1, 2, and 3 are not MMT. You keep insisting you think they are.

          This is as if I wear a white shirt, black pants, and you say you hate the fact that I am wearing stripes.

          The burden is on YOU to show that this blog has posts from MMT experts who have advocated 1, 2, and 3 (and Marshall Auerback does not count, he argues from a Keynesian as well an MMT perspective)

          1. dave

            Aubrak was the very first person I was going to bring up. I’m glad to see you don’t agree with everything you link from him.

            I have gotten the impression from your comments that I felt were defending Aubrak or similar posters that you agreed with the same principles. Perhaps this is an error.

            I am glad that you don’t believe in some of the principles that I mentioned, it certainly means your sane and we have a lot we agree on. What puzzles me is it at least seems like you fall back on those principles when defending policy choices you’ve made, to portray them as having no downside. Once again, it is possible I’m mis-reading you and simply attributing others ideas to yourself as you feature them on your site in a complementary light.

            I will try to find examples of posts or comments of yours where I got this impression when I have a bit more time.

        4. Yves Smith Post author


          Thanks for your query. I spoke to people who worked on CDO (as in put them together) and they said there was nothing unusual about the Abacus deal that is the subject of SEC litigation.

    4. greg b

      “It it seriously Yves’ contention that the U.S. government as a whole, and SS/Medicare in particular, do NOT face a fiscal crisis? The Left has found it increasingly necessary to take exactly this fantasyland position, in order to counter rising calls for austerity. Hopefully sensible people can see the problems for what they are – and also that “government spending to increase aggregate demand” is not at all the way forward.”

      Is it your contention that the US can run out of money?? Is it possible that one day we’ll have to say “Sorry we CANT pay that anymore”?

      Think really, really, really hard about that.

      I’ll give you a hint. We cant run out of money. Knowing this where do we go?
      We can run out of titanium to make total knees, we can run out of oil to make plastics. The issues in SS and medicare are distributional not monetary. Always have been. There is no fiscal crisis in SS medicare there’s a political crisis.

    5. sgt_doom

      What point about SS don’t you comprehend?

      That it’s a pay-ahead tax?
      That it’s solvent until at least 2037, and should an economy ever be actually designed for use, perhaps 2044?

      Or that it has NOTHING to do with deficit spending?

      What part is too difficult for you, dood?

  19. MattJ

    Shockingly, when given a choice, the majority votes for getting more in benefits than they pay in taxes, covering the difference by taking it from a minority of the population and printing money.

    The wisdom of the founders restricting the vote to property owners has never been more obvious.

  20. ginnienyc

    I have been reading NC for about 2 years now without posting, but I feel compelled to respond to some of traderjoe’s remarks. “What about saving 10-20% of your income for a rainy day and your own retirement?” Well, sir, I did just that very thing for 23 years — but then his banker became seriously ill, and all those savings went pfft! in 16 months. Thus, I would be living in a ditch (if I were still among the living) WITHOUT Social Security (and Medicare).

    You know, “personal responsibility” posters, sometimes **** happens, and well-laid plans go awry. As I paid into the system, I, like everyone else who has, am entitled to draw upon it.

    1. Traderjoe

      @Ginni – I totally agree with the need for and the attractiveness of reasonable social safety nets. My trouble is that governments and politicians consistently make promises to current voters in order to get elected that are not sustainable long-term. And that voters respond favorably to this pandering without questioning the promises and long-term impacts. The very best example of this is the local government pension train-wreck that is coming.

      And I also agree with LeeAnn that our [useless] foreign wars and defense spending are a large part of our fiscal issues.

      In a perfect, utopian world, we as a society could come to agreement as to what a reasonable safety net is, how to pay for it, and how to make changes over time as the circumstances change (longer lives, fewer workers per retiree, etc.). Instead, we get glib comments on cable news channels aimed at the 24-hours news cycle and the very next election. I don’t think any government program that clearly needs fixing should be the “third rail of politics” and simply so untouchable that we will barrel full-speed to its ultimate demise because we can’t address the realities as they change.

      Ultimately, I think our inability to make small adjustments when they are needed (as opposed to large changes when they are forced upon us), will sow the ultimate seeds of our demise.

      1. JTFaraday

        “My trouble is that governments and politicians consistently make promises to current voters in order to get elected that are not sustainable long-term.”

        Like what? The last “promise” that was made was “healthcare reform,” which transmogrified into a mandate to purchase private health insurance in an unreformed insurance and healthcare market.

        But YOU’RE not attacking the politicians for pulling a fast one with social security as they clearly did with “healthcare reform” (and consequently Medicare), you’re attacking the public for having the AUDACITY to order its own government’s spending priorities.

        As demonstrated by the the fact that you crawled out from under your rock–and you specifically ANNOUNCED IT, no less– in order to commandeer the catfood commission along with CallMeIshmael, the “management consultant” layoff and business austerity entrepreneur.

        1. Traderjoe

          @JTF – Huh? I’m really not sure of what to make your attack. First, I thought this was a relatively polite debate. Second, I’m not sure what the cat food commission is.

          Most importantly, I’m not sure you actually read anything I’ve said, nor understand the limitations of brief responses in a blog atmosphere. We were talking about SS and not healthcare. But since you brought it up, I totally agree that healthcare reform was a joke. It represented a grand compromise of sorts in order to get passage and score political points for that mere fact. A 2000+ page bill that will merely entrench the regulatory capture of big business and insurance companies. But that also will vastly increase our debts and unfunded liabilities, where the bill was twisted over and over in order to get a CBO score that showed it “saved” money over a certain irrelevant time period. Future be damned.

          And I am most certainly attacking the politicians for pulling a fast one. And the people for listening and believing. I wish the public would have GREATER audacity in ordering their government’s spending, BUT ALSO understood that restraint, self-reliance, community, skepticism, and long-term thinking need to be a part of equation. That we need to prioritize and make choices.

    2. sgt_doom

      Please, Ginnie, don’t take TraderJoe seriously, she/he/it is nothing more than a paid-for-shill from one of the call centers funded by the Financial Services Roundtable, the National Assoc. of Manufacturers or the Peterson Foundation.

      He attacks the politicians, as if those 40,000 (was 35,000 – but the pharma industry increased it recently) lobbyists have nothing to do with it, nor does Corporate America buy up politicians at the drop of a hat.

      It’s always those poor, unfornate billionaires at the mercy of nasty pols.

  21. Joe Firestone

    Hi Yves, the posts you cited above under Lambertstrether were actually written by me, Joseph M. Firestone, Ph.D. otherwise known as letsgetitdone at and FDL. My blog at Corrente is here: and at FDL:

    Part Five of the series has now appeared> An dyou can link to it from either of these pages. Parts six and probably seven are coming soon, probably in the next couple of days..

  22. LindaSutton

    I went to the Los Angeles meeting and a VERY HIGH percentage said to CUT military spending. The majority did NOT want the cuts to Medicare or Social Security and went for the TAX the RICH (like Peterson)options that were presented. Another issue that came up (and was CHEERED) was that we need to take the for-profit insurance companies OUT of the health business and have SINGLE PAYER like ALL of the other developed countries in the world.

    BAD SIGN: I was just called a few nights ago and asked if I had attended. Guy on phone said if I HADN’T, he would give me the survey OVER THE PHONE and take down my ANSWERS. So, these guys are STILL trying to SPIN the results, and if they mix into the final tally a lot of responses from their carefully selected phone lists, the results WILL NOT reflect what was said in the TOWN HALL meetings where people sat around tables and actually discusses the issues.

    1. sgt_doom

      And the sad fact is that with trillions of stolen funds at their disposal, these debt-financed billionaires can keep at it and at it and at it indefinitely…..

  23. sgi

    It’s pretty clear that the left have a big problem with Pete Peterson and his foundation. But they shouldn’t need reminding that the left have more than their fair share of foundations that fund many left-wing causes and projects.

    It didn’t take long to find a report by AmericaSpeaks that among a lot of other things, reveals a liberal bias in the participants. 44% of the participants tended to view themselves as either liberal or somewhat liberal in economic or fiscal policies as compared to only 33% who tended to view themselves as conservative or somewhat conservative in the same. 23% were moderates.

    Also, AmericaSpeaks organized these meetings and research on behalf of not only the Pete Peterson foundation but also by the Kellog foundation and the MacArthur foundation.

    All of this begs the question: who got their money’s worth?

    1. Yves Smith Post author


      First, as pointed out vis extensive extracts from its website earlier in the thread, AmericaSpeaks presented itself as neutral when it is anything but. They aggressively tried to shape opinion and were planning to present the findings from a distorted process as a reflection of public opinion.

      This isn’t about right/left, as much as you want it to be about that. It’s about propaganda and dishonesty. This blog has pointed out PLENTY of propaganda by Team Obama, you can hardly imply we have a left-leaning bias on this beat.

      Second, you have no benchmark for your charge of “bias” which you mean lack of representativeness, among participants. I’d have to look at the was the question was put (it might not have been stated neutrally, note the comment on “in economic and budgetary matters” will skew responses from other assessments of liberal/conservative orientation. The account at Corrente suggests AmericaSpeaks may have sought more educated respondents. The cities chosen for the meetings would ALSO have affected the sample.

      Awfully quick to charge bias on thin to non-existent grounds, aren’t we?

    2. sgt_doom

      Woweee, the Macarthur Foundation, founded by one John D. Macarthur, old General Dougie MacArthur’s cousin who made his fortune by selling phony insurance policies to poor and almost-poor working people during the Great Depression, but never fulfilled his legal obligation by making good on those insurance policies.

      And his counsin General MacArthur who, when warned of the oncoming Japanese military at the onset of WWII in the Philippines, ignored his men and screwed his men by doing so.

      And, when Gen. MacArthur was warned of the Red Chinese Army who was massed on the Yalu River, ready to cross and engage his army, once again chose to ignore that information and again screwed his men.

      The very first time MacArthur, that bloody scum (speaking as a combat vet, myself), screwed military men was when he, together with Patton and Eisenhower, attacked the bonus marchers and an-honest-to-God general, Gen. Smedley Butler.

      As for Peterson and his ilk, no, sane and rational people tend to despise crooks and vile sorts who peddle their tripe from the Peterson Institute, the Peterson Foundation, AmericaSpeaks, the Concord Coalition, and every other propaganda-spewing money-grubbin gang he’s financed.

    3. Joe Firestone

      sgi, Which “Liberal” foundations did you have in mind? From where I sit most of them have turned elitist or deficit hawk. Perhaps the Open Society Foundation is still liberal and some others that George Soros funds But right off the top of my head, I can’t think of many others. Nor can I think of many liberal publications outside of the blogosphere. The NYT isn’t very liberal anymore, and don’t even mention WaPo. They’ve been bought off by Peterson. So, if you’ve got a list of “liberal foundations” that haven’t been bought off by the corporations I’d like to see it.

      That aside, I think that Yves is right. This is about truth in labeling. The AmericaSpeaks event wasn’t neutral, biased, open, and full of integrity. It was, as I’ve said in my series “procrustean democracy” — a process that was systematically biased to create results favorable to the deficit hawks. The fact that it did not produce a clear outcome in this respect is only due to the ability of many of the participants to see the frames of the process-makers and to introduce their own perspectives into the process, despite all the difficulties placed in their way by the organizers.

  24. YankeeFrankee

    Commenters like Greg B, Matt T, Eric Anderson and TraderJoe put forth notions like “favored class” as if there is no moral dimension to this country’s crisis — as if we’re all just talking about who gets more of a pile of jelly beans — as if in the end we all get to have decent and safe shelter, food and medical care, and we’re just fighting over who gets the extra gravy on their potatoes and who doesn’t. The idea that as citizens of the wealthiest country in the world we have the right to those things seems abhorrent to them. Well, I say that is a severe moral failing; and our country is falling apart due to this preference for technocratic ideological mumbo jumbo over common sense and morality. The rich have gained an even more inordinate share of the pie over the past 30 years such that we now have an elite that is unaccountable to the law and the rest of us are falling off a cliff. Its time for some redistribution of wealth in the other direction for a change. Morality demands it, despite the pooh-poohing of a corrupted intelligentsia and those who repeat its dead ideological evil.

    1. Traderjoe

      @Yankee – my last post on this particular topic and I do hope Yves answers my questions about MMT because I am curious to hear the logic about why a fiat currency created out of thin air wouldn’t at some point be so politically manipulated that it would cease to be considered a sound store of value.

      My “favored class” concept applies to ALL classes favored by the government – banksters, CEO’s, etc. When the government takes money from one group to give it to another it is creating a favored class. Recently, the best favored class to be is the banksters.

      People seem to want to devolve arguments down to Republican and Democrat concepts. Under what circumstances do we as citizens have RIGHTS to resources? [Or by the way is it the right to life, liberty, and the pursuit of happiness?] As a social safety net for honest hard-working folk for hard times, or simply for being born? As the latter, taken to the extreme, everyone could simply live off the government because it was their right.

      You’ve missed the essence of several of my posts. It’s all about creating the right incentives – which is word the liberals seem to ignore.

      In one post, I suggested that certain programs like the EITC and Section 8 vouchers created a dis-incentive to leaving the programs (in effect creating a large marginal tax rate for work). So, I do believe in housing and assistance to the poor? You bet. But not at the cost of actually creating a disincentive for work and being productive.

      And I totally agree that a large redistribution of wealth needs to occur, but who does this? Who is the arbiter of who wins and who loses? The government? Ahh, but haven’t they been complicit in all of this, this whole time? The corporations and the government are in charge, can you really trust them to redistribute wealth in an efficient and effective manner? 2000 page bills that don’t accomplish anything but further engrain the special interests (FinReg, healthcare).

      The system is too bloated and self-reverent to be trusted. Do I believe in equality of opportunity and a flatter income/wealth structure – you bet. I just don’t believe it can be accomplished WITHIN the current political structures – as that is almost counter-intuitive.

      And I believe “community” is a much better determiner of “morality” than government. And that churches, non-profits, etc. provide a more compassionate and effective social safety net than the government does.

      1. globewalker

        The wording of your question says you don’t really want answers, you have already made up your mind. If a trial lawyer stated a question like that, the odds are high that opposing counsel would object and have his objection sustained.

        If you are sincere about answers, as opposed to merely trying to engage in one upsmanship, go to one solely or mainly about MMT, like Bill Mitchell’s blog.

      2. sgt_doom

        I so do love the way these cowards, who get their blood money from those organizations who have shipped the jobs and technology offshore, then claim that there’s some type of disincentives to work.

        After they’ve removed all work…..

        Then they always fall back on attacking the tax structure; you know, the one they themselves put in place for their very own profit.

  25. Costard

    How fascinating some of these comments are. I propose a rule: those who live by poll numbers should die by them. If it is fair and democratic that a majority of people wish to “soak the rich”, then it must also be fair and democratic when popular opinion supports an aggressive war. Or segregation. Or internment camps. Or pogroms. If a policy is right because it has majority support, then all policies with a plurality MUST be right.

    Even better when the discussion turns to principles, like vaunted fairness. Taxes should be made more progressive, because that would be fair. We should have a flat tax, because that would be fair. It is fair to reward the hardworking and ambitious, and it is fair to raid the wealthy. It is fair to support the poor baker, and it is fair for the starving to steal their bread. With such principles and a few thugs, one might accomplish anything! And of course, history agrees.

    It goes without saying that the alternative – a society in which no favors are given, no thuggery is permitted, men keep their wallets and their lives, and fairness is left to the only entity who might possibly understand what it means – in short the kind of society that was envisioned and poorly put to paper by a cabal of advantaged white men on an occasion that we commemorate once a year, well, twice if you count that day in September – it goes without saying that such an alternative is laughably naive. Principled, democratic humanity would never accept such a pay cut.

    I’m making fun. Sorry. It’s late. I see this “reasoned” debate about who shall eat who, and I can’t stop myself.

    But, I’m not at all sorry for ignoring the incredibly uninteresting topic of this thread. Though the irony does appeal to me, that Yves’ commentary and the discussion on this website is every bit as paradigmatic as America Speaks’ agitprop. In a way, this kind of internecine warfare is encouraging. It puts the world in balance. A genuinely reasonable person could tip the scale, if one could be found.

    1. JJ

      Good comment Costard, generally speaking. It is interesting to see EVERYBODY dividing up the spoils based on their version of how the fair world should be. I have my own ideas as well. Everyone, as every five year-old kid knows, has an agenda.

      By the way, I always wondered why we have to be so politically stilted/silo’d in our outlooks. It is possible to think most benefit gov’t programs are generally structured as intergenerational-shifting ponzi schemes AS well despising the bankster bailouts, thinking the wars are insane and the DOD needs to be cut back significantly.

      1. globewalker

        You did say “generally speaking” but you are falling for a trap Costard is setting quite adeptly: that anyone who advocates a policy, particularly income redistribution, must do so out of economic self interest. It’s a lowest common denominator view of human behavior.

        Sorry, I personally know a lot of exceptions. I’m in a very high tax bracket, yet favor more in taxes because I think the breaks to the rich are ridiculous (and not, I’m not in a position to rearrange my affairs to escape). I know heavyweights in private equity who say they are beneficiaries of the current system and think it stinks, and are giving major political donations to people who are promoting progressive policies, including raising taxes.

        There are some in the wealthy who haven’t forgotten noblesse oblige. Most are self made, and mostly older too.

    2. YankeeFrankee

      its not who should eat who, its whether some get to eat at all while others gorge, or all get to eat while some gorge. the facile lies and sophistries that masquerade as thought and principle in this era are bringing us to our knees. words are flung like cluster bombs — inaccurate and full of the casual violence of decadence.

  26. MainChance

    Costard, I’ve seen you on this board before. Your cheap shot at Yves is no surprise. Let’s’ see, Peterson puts a billion dollars behind a campaign to orchestrate meetings around the US with the aim of producing “opinion” that is aligned with his agenda. Peterson operatives control the meetings very tightly and silence opposition, albeit with professional cool.

    Yves has an open thread, and sometimes argues with people, some of whom are insistent morons. Her mistake is she tries to teach pigs to fly, and they get predictably annoyed with her and she gets annoyed back.

    And you compare this to Peterson agitprop? You who come here and regularly dispense right wing blather? Only someone like you could try to make the case the two have anything to do with each other.

  27. Joe Firestone

    A number of comments above have claimed that MMT is about Government spending without regard for inflation. Yves and Scott Fullwiler have tried to persuade people that this is not the case and have urged people to read MMT blogs to find out what the truth is. As it happens, one of the current three leading MMT economists, Professor Bill Mitchell of the University of Newcastle has just started a series on MMT and inflation: here:

    Here’s a quote from the opening:

    “It regularly comes up in the comments section that Modern Monetary Theory (MMT) lacks a concern for inflation. That somehow we ignore the inflation risk. One of the surprising aspects of the public debate as the current economic crisis unfolded was the repetitive concern that people had about inflation. There concerns echoed at the same time as the real economy in almost every nation collapsed, capacity utilisation rates were going down below 70 per cent and more in most nations and unemployment was sky-rocketing. But still the inflation anxiety was regularly being voiced. These commentators could not believe that rising budget deficits or a significant build-up of bank reserves do not inevitably cause inflation. The fact is that in voicing those concerns just tells me they never really understand how the monetary system operates. Further in suggesting the MMT lacks a concern for inflation those making these statements belie their own lack of research. Full employment and price stability is at the heart of MMT. The body of theory and policy applications that stem from that theory integrate the notion of a nominal anchor as a core element. That is what this blog is about.”

    Those who really want to learn about MMT and inflation can start with this one and follow the links to other billyblogs. In addition, this piece by Paul Davidson at Warren Mosler’s site will be helpful.

    And on hyper-inflation:

    Also, Randy Wray’s book: Understanding Modern Money: Full Employment and Price Stability is here:

    and also you’ll find Bill Mitchell’s and Joan Muyksen’s book Full Employment abandoned at Bill’s site when you go there.

  28. Ed Simple

    Rather than an income tax, what about two things:
    1) a wealth tax, say everything over $100 M (starters)
    2) eliminate the entire tax exempt sector (i.e. make them tax payers) except for religious institutions – that way you’d broaden the base by including endowments etc which are never taxed and you would force education institutions to focus on education rather than becoming land barons and hedge funds with schools on the side.

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