Economics As a Mystery Religion

I've felt as if I were drowning in irrationality all day. I've been trying to conduct an online discussion with a bunch of people who believe that Social Security -- indeed, the entire welfare state and debt structure of the United States -- is hunky-dorey. To begin with, I found it virtually impossible to get across the idea that, although this may seem a very, very wrong, unpleasant, and inconvenient result -- Social Security will inevitably be degraded and then dismantled. The first 20 times I tried to say so, I got back the furious reaction that these benefits are a debt, a honorably incurred debt, and it would be wrong if the people expecting their benefits did not receive them.

I don't disagree, of course, but I don't see how that changes the odds that it's going to happen. "But we really are going to need that money," they'd say. Yes, I'd agree, it's going to be bad. And it doesn't change the odds that it's going to happen. "But it wouldn't be fair to expect us to do without them." No progress.

I did, at length, come to a point where we could define the difference between me and them as the belief, or doubt, that Social Security, Medicare, Medicaid, and unfunded federal, state, and local pension obligations, which together amount to over $500,000 per American household, can all be absorbed without the U.S. defaulting on a single one of these obligations even in part. I myself doubt whether it can be done, no matter how hard we tighten the screws on the rich people, unless we recklessly risk the health of the economy and the currency and court a fate like that of Greece. They, in turn, believe this is no problem at all, and only a mean person would say it is.

Here's the part I need help with. One commenter had this explanation for why it was all going to be possible, even without raising tax rates. The problem is, I literally cannot understand a word of the following. I'm hoping someone here can help:

I don’t think they have to turn the screws on the rich a little harder. I think they can just mark up the account balances to match the needs, and I don’t even think that, I know that. It’s a factual statement. I don’t even think the government needs to tax at all, except for to manipulate the money supply to soak up excess liquidity that might be in the market. In fact, I know that as well. It’s not a guess, it’s the way it is. We don’t operate our policies around those foundational realities, but it doesn’t make them any less real. . . . Debt and deficits just don’t mean what you think they do in a modern-money world, and they’re not indicators of the things you think they are.

I'm certainly no economist. Is this pure nonsense, or something like a respectable branch of the science?

No comments: