What Social Security/Medicare Solvency Problem?

What Social Security/Medicare Solvency Problem? | New Economic Perspectives

Progressives and Centrists like CAP still don’t understand that austerity is destroying private sector net financial assets by cutting government spending and/or raising taxes in such a way that Government additions of net financial assets to the non-government portions of the economy (government deficits) fall to a level low enough that they are less than the size of the trade balance, whether in deficit or in surplus. Right now the trade deficit is 3.5% of GDP. That means Government deficits must be at least 3.5% of GDP to prevent contraction in net private sector financial assets. That’s a roughly a $560 B deficit in 2013, just to remain in place. CBO’s latest projections are for a deficit of $642 Billion this year, a bit higher than break even; but not by very much. The deficit could well be smaller than that, however, since it’s dropping fast.
If the economy recovers further, it’s likely that the trade deficit will grow larger as a proportion of GDP. If the Government deficit isn’t allowed to grow, then the result will mean declining net financial assets and greater inequality since the scramble for declining net financial assets will favor the economically well-positioned over most of the rest of us.
The austerians want to solve this political problem by cutting back on entitlement benefits. “Progressives” want to solve it by eliminating the income cap on FICA taxation. The advantages and disadvantages of both solutions are very well-known so I won’t repeat them, but will just point out that both will subtract net financial assets from the economy, and offer a third solution that doesn’t have that problem.
That solution is for the Executive Branch to use its Platinum Coin Seigniorage (PCS) authority under 31 USC 5112(k) and 31 USC 5136 to mint a single proof platinum coin each year to cover any shortfall between FICA revenues and spending on Social Security and Medicare. If that were done annually in advance, based on projections, then there would be no further depletion of the “trust fund” credits, and no further political issue of Social Security and Medicare insolvency.