> “The problem is that 30 years from now there will be a lot more retired people and proportionately fewer workers (that part’s right), and the Social Security trust fund will run out of money (as if number in a trust fund is an actual constraint on govt’s ability to spend ...silly, but they believe it), so to solve the problem we need to figure out a way to be able to provide seniors with enough money to pay for the goods and services they will need.”

> With that last statement it all goes bad. They assume that the real problem of fewer workers and more retirees, which is also known as the dependency ratio, can be ‘solved’ by making sure the retirees have sufficient funds to buy what they need. Let’s look at it this way. 50 years from now when there is one person left working and 300 million retired people (I exaggerate to make the point), that guy is going to pretty busy since he’ll have to grow all the food, build and maintain all the buildings, do the laundry, take care of all medical needs, produce the TV shows, etc. etc . etc. So what we need to do is make sure those 300 million retired people have the funds to pay him??? I don’t think so! This problem obviously isn’t about money. What we need to do is make sure that one guy working is smart enough and productive enough and has enough capital goods and software to be able to get all that done, or those retirees are in serious trouble , no matter how much money they might have.

> So the real problem is, if the remaining workers aren’t sufficiently productive there will be a general shortage of goods and services and more ‘money to spend’ will only drive up prices, and not somehow create more goods and services. The mainstream story deteriorates further as it continues: “Therefore, government needs to cut spending or increase taxes today, to accumulate the funds for tomorrow’s expenditures.” By now I trust you know this is ridiculous, and evidence of the deadly innocent frauds hard at work to undermine our well being and the next generation’s standard of living as well. Our government neither has or doesn’t have dollars. It spends by changing numbers up in our bank accounts, and taxes by changing numbers down in our bank accounts. And raising taxes serves to lower our spending power. That’s ok if spending is too high causing the economy to ‘overheat’ as we have too much spending power for what’s for sale in that big department store called the economy. But if that’s not the case, and, in fact, spending is falling far short of what’s needed to buy what’s offered for sale at full employment levels of output, raising taxes and taking away our spending power only makes things that much worse.

> And the story gets even worse. Any mainstream economist will agree that there pretty much isn’t anything in the way of real goods we can produce today that will be useful 50 years from now. They go on to say that the only thing we can do for our descendents that far into the future is to do our best to make sure that they have the knowledge and technology to help them meet their future demands.

> So the final irony is that in order to somehow ‘save’ public funds for the future, what we do is cut back on expenditures today, which does nothing but set our economy back and cause the growth of output and employment to decline. And, for the final ‘worse yet,’ the great irony is that the first thing they cut back on is education - the one thing the mainstream agrees should be done that actually helps our children 50 years down the road.

Warren Mosler, Seven Deadly Frauds of Economic Policy

http://www.heterodoxnews.com/htnf/htn93/Seven_Deadly_Rev12_D...