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The Revolving Door Project, a Prospect partner, scrutinizes the executive branch and presidential power. Follow them at therevolvingdoorproject.org.
Terrible news! We have more money!
Late last month, the Medicare and Social Security trustees released their annual report on the accounting of the nation’s two pillar social safety net programs. According to the trustees, things are looking better than expected: Social Security is projected to spend down its savings in 2035, and Medicare in 2036, instead of 2034 and 2031, respectively, as previously projected. The reason for these longer timelines is straightforward: These programs are funded through payroll taxes, and a lot of people are employed right now, so more funding than expected is flowing in. A rare glimmer of positivity in the news cycle, right?
Of course not. “Social Security and Medicare Finances Look Grim as Overall Debt Piles Up,” read The Washington Post’s headline to a story whose actual news event is that the finances look better than expected. “Eleven years. That’s all that’s left,” gasped Peter Coy of The New York Times. For context, 11 years ago Healthcare.gov was a buggy mess, Glenn Greenwald had just published the Snowden leaks, and government shutdowns were a new and scary norm in American politics. Hell, 11 years ago is when I graduated high school.
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But the more things change, the more they stay the same at the nation’s most prestigious media outlets. If the Fourth Estate is puzzled why almost no Americans can correctly answer 101-level questions about our economic institutions, it might be because the Fourth Estate itself spews nonstop false tropes and misunderstandings about these topics, as they have for decades.
As the Post noted, we’re going to have some big fiscal fights next year as the Trump tax cuts expire, which will put all of this back in the center ring of American politics. Our journalists need to be better than this by then. So allow me to inform the people who inform the people how money works. If you’re an econ reporter, please print this out and pin it to your cubicle.
Just because a number is big does not mean that number is important.
The total public federal debt is currently $28 trillion, which the Post described as “the nation’s already enormous burden.” Close your eyes and think: When was the last time you personally felt the burden of the national debt? Never? Correct!
The absolute value of the debt is a completely pointless trivia tidbit. The federal government prints the currency it borrows in, meaning it can always inflate the currency to pay back the absolute value of what it owes. Doing so would have serious trade-offs, but would not be worse than an apocalyptic “fiscal crisis,” whatever that actually is.
I understand that it is scary that you cannot imagine what $28 trillion looks like. It is scary to imagine if you yourself, personally, were $28 trillion in debt. But these feelings do not mean that $28 trillion in federal debt is meaningful, because you and I are not like the federal government. Life is scary and you are small. Get over it.
Social Security cannot “run out of money.”
If Congress does nothing in the mere, uh, 4,000 days it has left to avert calamity, Social Security checks will still go out to beneficiaries nationwide. They’ll just be for less money—specifically, everyone will receive only about 83 percent of their current monthly benefits.
That would be a terrible outcome that Congress absolutely can and should avoid. But it is still a better outcome than Social Security disappearing altogether, which is what half of millennials think is going to happen. If the Social Security trust fund depletes in 11 years, that just means that it will have depleted a nest egg it built up a few decades ago. In that event, Social Security will just pay out every cent that it takes in. Our checks will be for less, but we will still get checks.
My fellow millennials’ misconceptions make sense, however: Our whole lives, we’ve been subjected to Pete Peterson propaganda that depicts our parents as stealing our earnings to fund programs we’ll never enjoy. Journalism’s job is to cut through that noise, not exacerbate it.
The only reason why Medicare and Social Security funding are “issues” in the first place is an accounting fiction from the 1930s.
FDR rightly thought that laissez-faire conservatives would try to destroy Social Security, so he came up with One Weird Trick to get population-wide buy-in. He sprinkled some pixie dust and made up a new, special category of revenue called federal payroll taxes, and said they have to go into his new, special pot of money called the Social Security fund. Every worker pays into this pot during their career; then when they retire, they get out of Social Security an amount roughly equivalent to what they paid in.
Since everyone pays in during their careers, no one wants Social Security to get cut before they reach retirement—we all want to get out what we paid in. LBJ saw how well this worked and adapted it for Medicare. Today, the two most popular programs in the American welfare state are also the two most universal.
But this setup is ultimately an accounting fiction for political, not economic or legal, purposes. There’s no metaphysical reason to treat payroll tax revenue differently from the rest of federal tax revenue, and thus, no reason why a shortfall in payroll tax revenue has to be cataclysmic. If it wanted to, Congress could amend the Social Security and Medicare statutes at any time to have the programs draw from the general revenue fund. Then we could just put payroll tax revenues into that fund and get rid of this accounting fiction altogether. While they’re at it, Congress could mandate a certain minimum distribution for every beneficiary, paid via deficit spending if needed. Then we’d never have to talk about this ever again. Indeed, the only part of Medicare in perfect fiscal health (the Supplemental Medical Insurance Trust Fund) is the part that’s already paid out of general revenue.
This is why some economists say there are actually three issues with the entitlement programs—the financial authority to pay, the legal authority to pay, and the real available resources (the national supply of doctors, food, housing, etc.)—and the first two are completely fictional.
This leads us nicely into …
Money is made up. Health care and poverty are not.
The core insight of Modern Monetary Theory is just asking a very empirical question—“Where does money come from?”—finding the answer, and then thinking through the implications of that. Even if one is not persuaded by MMT, good old Keynesian economics (and common sense) shows that the federal government creates and legitimates the currency. Ergo, if the only thing holding the federal government back is that it doesn’t have enough of the special pieces of cotton which it fabricates for itself out of thin air and calls “money” … well, that seems like a solvable problem, no?
That’s not to say that the solution to everything is “just print more money.” MMT itself is very clear that the limiting factor is real resources: If there’s too much cash circulating, and not enough stuff to buy with it, prices rise. But this points to what journalists should be asking if they consider themselves to be economic empiricists, unbridled by political dogmas, and they are actually concerned about the country’s ability to provide health care and a high standard of living to every American: Do we have enough doctors? Enough medicines and medical devices? What about enough housing, food, transportation, public spaces? The national government can find or create the money, but it can’t create real resources by signing a bill.
The ruling class hates the welfare state. They are going to lie to you about it constantly.
Peter Coy’s brilliant plan to save Social Security is to destroy the thing everyone likes about it: universality. What makes him think this won’t trigger a backlash? “Means-tested programs, including Medicaid, college aid and nutrition assistance, have grown rapidly over the past half century and for the most part aren’t perceived as unjustified giveaways,” Coy declares, and then just moves on.
Ah yes, the famously nonpolitical issues of Medicaid, college aid, and nutrition assistance! He should read his own damn paper’s coverage of 20 million people losing Medicaid, the student debt forgiveness wars, and nonstop efforts to obliterate SNAP. Even feeding hungry children is controversial!
Coy’s ignorance about the politics of welfare is startling, but he certainly didn’t come up with the idea of means-testing Social Security: Plutocrat Pete Peterson, to whom we owe practically all of the media’s interest and framing on this issue, was calling for an “affluence test” on the whole social state all the way back in the ’90s. Better minds than mine have made the affirmative case against means testing time and time again, but seemingly nothing can shake the policy’s “inherently reasonable” frame to people who have never been left waiting on a bureaucratic approval process to find out if they can stay in their home.
This gets to the heart of the matter: Whether and how we should change or abolish Medicare and Social Security is almost exclusively discussed in think tanks, boardrooms, federal commissions, and glitzy panels—and almost exclusively by people who probably aren’t dependent on these programs for their own survival. The welfare state is framed as something that elites do to the public out of magnanimity, but also something that elites can certainly withdraw or restructure whenever they choose, even if doing so is a bit awkward. It’s conceived like a yearly donation to the local soup kitchen, not a basic obligation of a functioning state.
Covering social spending accurately means getting outside of the Beltway and Davos circuits, and that doesn’t mean poverty porn; it means actually taking the time to learn the ins and outs of the programs one is covering, and being ready and willing to call out someone who is lying, distorting, or telling a half-truth. It means actually understanding the data someone shoves in your face, both qualitatively and quantitatively. It means seeing “the budget” as a set of institutions that literally make or take real people’s lives, not just numbers in a spreadsheet.
It means doing real reporting.
