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NATIONAL
JOBS FOR ALL COALITION
UNCOMMON
SENSE 29 October 2014
What Really Supports the Elderly?
Hint: It's Not the Trust Fund
By June Zaccone,
Economics (Emerita), Hofstra University, and
Executive Committee, National Jobs for All Coalition
Many discussions of Social Security support the fallacy that
money is what sustains us and provides our standard of living.
Both Republican and Democratic plans for "saving" Social
Security depend on acceptance of this fallacy--that all we need
to do is to provide funding. If this were the answer, then the
government has the power to create money, and thus eliminate the
assumed problem. Of course this is not true, and put in this way,
no one would recommend it.
But what exactly is the problem with it?
Suppose you were stranded on a desert island with $1 million
in cash, but no food, clothing, shelter or tools. Wouldn't it
be obvious that until a ship comes by or you get back to an area
where you can buy something or make something or grow something,
the million dollars will be useless? That what you need is goods
and services, and cash is only a way of financing,
not of providing them. And that you
might be willing to exchange all your cash for bread and water?
What Determines Our Standard of Living?
What keeps us alive and gives us the consumer goods and services
we
need or want is what we produce and what nature provides us. Our
standard of living depends largely on our capacity to produce
goods and services and to make use of the bounty of nature. How
much our standard of living increases depends on how much we have
invested in people and factories and machines, and how well we
have protected our soil, water and other resources.
We Can't Save Social Security by Buying Stock
Those who talk about "saving" Social Security by using
its funds to buy
stocks to get its higher returns forget this simple truth. Many
stock owners, brokers and investment houses believe that they
are the source of productive wealth. They can't believe that the
values they trade in depend on marketing ability, animal spirits,
and money available for speculation, and are only loosely related
to the real world of production, skills, and investment which
really provide our wealth. However important for startups, the
stock market is nearly irrelevant to established businesses, which
either use retained earnings or borrow to finance their investment.
In fact, since the mid-1990's, stock buy-backs by non-financial
corporations have exceeded new stock issues. [See Note. Buybacks
help to keep up a company's stock prices.]
What Needs to Be Done
This truth is that we depend on our output of goods and services,
not money, to get what we need to survive. And our failure to
protect and enhance our ability to produce in the future imperils
Social Security and much besides.
Note: US
Flow of Funds: Equities , Figure 9, p.6, Yardeni Research
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Editors: Helen Lachs Ginsburg, Economics (Emer.),
Brooklyn College, CUNY
and June Zaccone, Economics (Emer.), Hofstra University
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