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The phony “trust fund” controversy

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Here is what the “trust fund” scare-mongers like the Committee for a Responsible Federal Budget (CRFB) is telling you: “Major Trust Funds Are In Trouble”:

The common interpretation of Shakespeare’s, “A rose by any other name would smell as sweet” is wrong. Words count. That is why products are given “fresh,” “sweet,” or otherwise positive names.

  • You never will see a toothpaste or a perfume named, “deadly stinkwort.”
  • When you misname something you create a false impression of what the thing really is.
  • Sadly, many things in economics are misnamed. The federal “debt” is not a real debt. It is the total of deposits into Treasury Security (T-bill, T-note, T-bond) accounts.
  • The federal “deficit” more accurately should be termed the “economic surplus,” because the private sector is enriched.
  • The “trade deficit” is a “trade surplus,” because the economy receives net goods and services.
  • And federal “trust funds” are nothing at all like real trust funds. Instead, they merely are bookkeeping balances.

To quote from the Peter G. Peterson Foundation web site:

A federal trust fund is an accounting mechanism used by the federal government to track earmarked receipts (money designated for a specific purpose or program) and corresponding expenditures.

The largest and best-known trust funds finance Social Security, portions of Medicarehighways and mass transit, and pensions for government employees.

Federal trust funds bear little resemblance to their private-sector counterparts, and therefore the name can be misleading.

A “trust fund” implies a secure source of funding. However, a federal trust fund is simply an accounting mechanism used to track inflows and outflows for specific programs.

In private-sector trust funds, receipts are deposited and assets are held and invested by trustees on behalf of the stated beneficiaries.

In federal trust funds, the federal government does not set aside the receipts or invest them in private assets.

Rather, the receipts are recorded as accounting credits in the trust funds, and then combined with other receipts that the Treasury collects and spends.

Further, the federal government owns the accounts and can, by changing the law, unilaterally alter the purposes of the accounts and raise or lower collections and expenditures.

Thus, the federal government can do whatever it wishes with the “trust funds.” It can add to them, subtract from them, or change them from the wrongly presumed mission of supporting federal expenditures.

At the click of a computer key or the passage of a law, the balance in the federal “trust funds” could be changed to $100 trillion or $0, and neither would affect taxpayers.

Thus, the notion that any federal “trust funds” are, as the CRFB claims, “in trouble,” is a lie, unless “trouble” comes from those who don’t wish you to understand the differences between the private sector’s real trust funds vs. the federal government’s phony “trust funds.”

(The scare-mongers always “forget” to tell you that Social Security Part B, doesn’t even pretend to be funded via a troubled trust fund. The federal government simply pays for it.)

The CRFB is led by this distinguished group of economists, business leaders, and educators. Is it even possible that these smart, well-informed people don’t understand the differences between a private-sector trust fund and a federal trust fund?

I think not. I think they very much understand.

So why do they broadcast the Big Lie, that federal taxes fund federal spending, and trust funds are going broke, when in fact, federal taxes fund nothing, and the trust funds have whatever Congress and the President want them to have?

They do it because of Gap Psychology, the desire to distance oneself from those below on any social scale.

In some cases, these distinguished people do it because they are paid by the rich. In other cases, they do it because they are rich.

They wish to grow richer by keeping the middle- and lower-income/wealth/power people down. And this is how they want to do it, as the CRFB summarizes:

Policymakers must turn their attention to long-term debt and deficit reduction to get the country on solid fiscal ground.

This includes action to secure Social Security and other trust funds headed toward insolvency, limit the growth of health care and other costs, and raise additional tax revenue.

Here is what those terms mean:

  1. “Debt and deficit reduction” means cut spending and increase taxes
  2. “Secure Social Security” means cut benefits by raising the minimum age (as we have been doing), and with an adverse formula for inflation (as has been attempted)
  3. “Limit the growth of health care” means larger deductibles, fewer procedures covered, and fewer people covered or eliminating a program altogether (i.e. Obamacare).
  4. “Raise additional tax revenue” by increasing the FICA percentage and by raising the maximum salary collection level (but not to the level where it would impact the rich).

In short, the debt scare-mongers want to take dollars from the lower- and middle-income groups and give the dollars to a federal government that has an infinite supply of them.

They want to starve the economy and impoverish the lower- and middle-income groups, thus making the rich richer by comparison. During the resultant recessions and depressions, the rich grow richer by gobbling up assets, while cutting payrolls.

And they want you to agree to do it.

Rodger Malcolm Mitchell

Monetary Sovereignty Twitter: @rodgermitchell Search #monetarysovereignty Facebook: Rodger Malcolm Mitchell …………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………..


The most important problems in economics involve:

  1. Monetary Sovereignty describes money creation and destruction.
  2. Gap Psychology describes the common desire to distance oneself from those “below” in any socio-economic ranking, and to come nearer those “above.” The socio-economic distance is referred to as “The Gap.”

Wide Gaps negatively affect poverty, health and longevity, education, housing, law and crime, war, leadership, ownership, bigotry, supply and demand, taxation, GDP, international relations, scientific advancement, the environment, human motivation and well-being, and virtually every other issue in economics. Implementation of Monetary Sovereignty and The Ten Steps To Prosperity can grow the economy and narrow the Gaps:

Ten Steps To Prosperity:

  1. Eliminate FICA
  2. Federally funded Medicare — parts A, B & D, plus long-term care — for everyone
  3. Social Security for all or a reverse income tax
  4. Free education (including post-grad) for everyone
  5. Salary for attending school
  6. Eliminate federal taxes on business
  7. Increase the standard income tax deduction, annually. 
  8. Tax the very rich (the “.1%”) more, with higher progressive tax rates on all forms of income.
  9. Federal ownership of all banks
  10. Increase federal spending on the myriad initiatives that benefit America’s 99.9% 

The Ten Steps will grow the economy and narrow the income/wealth/power Gap between the rich and the rest.



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