The Ridiculous Retirement Crisis

Re the 9/11/24 Sacramento Bee Op Ed title: Why aren't we talking about America's retirement crisis*
© Mark Dempsey

What’s the retirement crisis? Why we’re running out of money! And everyone knows dollars grow on billionaires. That’s why a country that makes its own currency must borrow from its population! Don’t you know this? Okay, sarcasm doesn’t become me, but you get the point. All of the hand wringing about Social Security running out of money is baloney…heck, it’s baloney squared.

We don’t even print most dollars any more–they exist as electronic entries in the Federal Reserve’s computers. The Fed (for short) is the US central bank, and to make a dollar, a technician sits at a special computer terminal and types a “one.” He’s just made a dollar. Add three zeros, and he’s made a thousand, three more zeros and he’s made a million… et cetera. We’ll run out of dollars when the Bureau of Weights and Measures runs out of inches. Never. I’m not saying we need to make infinite dollars, but worrying about running out is ridiculous.

The worry that Social Security taxes (FICA) won’t keep up with the demand for Social Security payouts is equally baloney. The government is the only fiscally unconstrained player in the economy. It would be like a household, if households made dollars….but they don’t. Taxes create the demand for dollars, they do not supply the creator of dollars with dollars it needs. (See former Fed governor Beardsley Ruml’s paper “Taxes for Revenue are Obsolete” … from 1945)

The Bee's editorial talks as though national “debt” is a problem we have to solve by cutting those programs–a talking point that originates with a fundamental misunderstanding of double-entry bookkeeping. Your mortgage may be your liability, but to the people collecting the payments, it’s an asset. Your bank account is your asset, but the bank’s liability. You could march down to the bank and demand it reduce its debt, but all they would do is reduce the size of your account. Not very sensible.

National “debt” includes the dollars in your wallet. They are “Federal Reserve Notes” (“note” is legalese for an IOU). Andrew Jackson’s administration eliminated national debt entirely in 1835. That meant there was no public currency. People did their business with specie (monetized gold) and over 7,000 varieties of private bank notes, of varying reliability. It was a nightmare. After people’s savings got sucked out of the economy, there was a massive wave of asset forfeitures and foreclosures called the Panic of 1837. In fact, whenever there’s been a significant reduction of national debt the economy tanks…100% of the time following such fits of “fiscal responsibility™.”

Why aren’t we talking about America’s retirement crisis? Because it’s as real as the monster under the bed…useful to scare the children, but certainly not real.

*(authors: Christopher D. Cook is a senior writer at the New School for Social Research. Teresa Ghilarducci is professor of economics and director of the Schwartz Center for Economic Policy Analysis at the New School, and author of "Work, Retire, Repeat.")


Update: The British debunk of the same American false anxiety: