Paying Social Security Benefits Under Rise Up
There is great confusion and massive misunderstanding in America about where the government gets the money to pay its bills as compared to where it gets the money to offer 1% interest rates to banks so they can lend it out as low-cost mortgages. The former comes from taxing the people - $2.8 trillion this year. The latter comes from printing money (expanding the monetary base) to pay the bills – probably at an effective $100 trillion cost in the last three years.
We all feel the pain of taxation – it is confiscated right out of our paycheck. Expanding the monetary base is more subtle and unlikely to catch our eye. For example if all the assets of America were worth $400 and represented by 400 units of currency; and the government decided to “print” 150 additional units then it would take 550 units to buy the $400 in assets. We know that condition as the “falling value of the dollar”, inflation, devaluation and some other words not fit to print.
This “printing” money technique has been used by governments for eons to pay off the liabilities it incurs with cheaper dollars. As it is such a staple of economic life, the wealthy feed voraciously on the rise in values in real estate and stock to create wealth. The poor and middle-class with so few assets only benefit slightly – the motivating rationale behind Rise Up to get them a pool of capital so they can participate in the economy.
The United States used this printing technique to solve the Savings and Loan crisis in the early 90’s and again recently to avoid a deep recession by lowering interest rates. We at the Ownership Society Institute believe that this technique should be used to transition to personal accounts from the present Social Security and Medicare plans. Instead of costing $100 trillion it should pay for itself or at a minimum cost $6 trillion – a small price to pay to accumulate the hundreds of trillions in wealth personal accounts will generate over the years.
Presently the government takes in $1.3 trillion in payroll taxes and immediately pays out $1.1 in old-age benefits. By adopting Rise Up and personal accounts, the $1.3 would be put into personal accounts leaving the government to finance the $1.1 trillion in benefits from another source.
We recommend they expand the monetary base. Therefore when they print $1.1 trillion to pay the benefits to recipients they have $1.3 trillion in new assets on the American balance sheet to offset any fall in the nation’s net worth or value of its currency.
In fact it is our belief that the US dollar will rise in value when the financial community sees the trillions personal accounts will generate. Financial speculators who determine the value of currencies world wide will no doubt immediately respond favorably to a nation that abandons consumption-type funding of entitlements and adopts investment-type funding.
No matter what the costs of transition are they pale in comparison to the benefits personal accounts will deliver. Those of you who are unfamiliar with Rise Up can get caught up at www.riseupamerica.us.