Nick Gillespie Should Be For It Too

Nick Gillespie posts a sharp rejoinder to the latest Jonathan Chait attack on him here.

(Of course, Chait, in the attack article, shows his ignorance of macroeconomics and modern monetary theory after ridiculing those who don’t understand economics. But I’ll just mention that in passing here.)

In the comments section, someone named Don said:

Also, totally dishonest to characterize Gillespie as an apologist for “deficit financed” tax cuts. I don’t think Gillespie’s proposal for “financing” tax cuts is by increasing the deficit? Did anybody read it that way? This guy is a total crank.

I will restate my reply to Don here:

I’m an apologist for deficit financed tax cuts to boost aggregate demand during a recession even if Nick is not. And I believe that if Nick were fully informed and thinking clearly about it, he would be too.

One reason I post here ( is to get more libertarians to see the light on this issue.

When 10% of people are unemployed, it means the country isn’t producing all it could. That is a disaster that holds back standard of living increases and compounds forever in the future (anti-compounds, if you will). And thanks to the fiat money system, it’s easy to get people to be more productive in a recession and boost aggregate demand. And the best way to do that is to deficit spend by taking less money in taxes until the economy no longer has excess capacity.

I’ll be attacked (as always) for stating this truth, but I figure it’s worth it if just a few intelligent people check it out or think it through on their own.

Social Security is not a Ponzi Scheme

I hang out quite a bit on the Hit & Run blog. Recently, in the comments on a post about the controversy created by Alan Simpson’s comparing Social Security to a “milk cow with 310 million tits” I posted a very brief explanation of Social Security. This was in response to those who thought it was either a Ponzi scheme or just a really bad “investment” because it had a lousy “rate of return.” I thought I’d spruce it up just a little bit and repost the explanation here.

Social Security is neither a Ponzi scheme (strictly) nor a retirement program on which a “rate of return” can be calculated.

Social Security is an inter-generational financial asset transfer program. (I’m being a bit pedantic – an intergenerational wealth transfer program would more succinct but not quite as accurate).

The program arose in deception, and is mainly propagated in deception, that deception being that you are “paying in” so that some day you can “get your share.” Nothing of the kind is happening here.

What’s happening is that money is being transferred from young wage earners to older people. If the program functions as intended this will allow those older people to claim an increased share of the real goods and services being produced in the economy.

Congress sets both the level of payments to the older people, and the level of taxation associated with the program (notice I didn’t say ‘funds the program.’) Either of these can be changed at any time, and they bear no necessary connection to each other.

What’s really happening is that the govt is creating money (it prints paper checks or makes electronic credits in the recipient’s bank account) and doling it out. This is legal tender, so merchants have to honor it. In order to prevent the massive inflation that would otherwise occur, the government also takes in (or more accurately destroys) money in the form of FICA taxes on wages (along with many other taxes, the selling of Treasury securities, etc.), thus removing it from the private sector. The net effect amounts to a transfer of financial assets from one segment of the population to another.

The only real problems with the system are 1) ensuring that enough excess real goods and services are created by the relatively young “producers” to be consumed by the older people and 2) the morality of involuntarily transferring wealth from one person or group to another. I am very interested in problem (2) and intend to explore it in this blog at a later date.

Comparing the system to an individual retirement plan is fundamentally mistaken. It makes no sense at all to calculate a rate of return on your lifetime of “investment” since the money you “pay into the system” over your lifetime of work bears no relation to the payouts you may or may not receive. There is no “lock box” with your name on it containing your money and the interest you’ve earned over the years! By trusting to the Congress to set the payments and other terms (such as the age at which benefits begin) Americans are simply hoping that our elected representatives will come up with a benefit level that neither beggars older people nor sends the nation into an inflationary spiral (people usually say “bankrupting the nation” which is not strictly possible and is therefore incorrect). I leave it up to you to decide whether this is a sane way to solve the problem of providing retirement income.

If these ideas interest you, I’d recommend going to Warren Mosler’s blog at and checking out the Mandatory Readings section there.

Draco’s Rule for Burning Religious Texts

I’d like to propose the following rule:

The only time it is appropriate to burn a religious text is as a ritual of personal liberation from that religion.

This implies that you once practiced the religion, and that for whatever reason you no longer do. It also implies that you now view the dictates of that religion as tyrannical, wrong-headed, or evil, thus justifying the strong symbolism of the burning ritual. Note that this would exclude burning the holy books of others with whom you are currently having a spat.

Glenn Beck shares his perspective here.

I found Wretchard’s post on the Pastor Jones controversy thought provoking.

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