Social Security And Other Entitlements

Posts in this series
The Deficit Myth By Stephanie Kelton: Introduction And Index
Debunking The Deficit Myth
MMT On Inflation
Reflections On The Deficit Myth
The National Debt Is Soooooo Big
The Wonkish Myth Of Crowding Out
MMT On International Trade

Chapter 6 of Stephanie Kelton’s The Deficit Myth discusses the perennial conservative effort to cut entitlements. [1] Kelton defines entitlements as statutory determinations that people who meet certain criteria are entitled to certain defined payments. She discusses several of the most widely used entitlements, Social Security, Social Security Disability, Medicare, Medicaid, SNAP and welfare.

Kelton describes the history of these programs, beginning with Franklin Delano Roosevelt. FDR saw Social Security as the first step towards a comprehensive array of programs that would insure that the citizens would be truly free. He specifically chose to fund Social Security with a tax, so that people would feel ownership, making it harder for politicians to vote to take away those benefits. it worked. People are firmly attached to the program. The money is put into a “trust fund”, which holds it in the form of special non-negotiable US Treasury notes.

Politicians, goaded by their rich donors, try to weasel around this powerful attachment. They start with basic debt hysteria: the Trust Funds are Going Bust! [2] They base this on the reports of the Trustees of the trust funds, who are directed to estimate the date on which the Social Security Trust Fund will run out of money. If that happens. under current law, Social Security payments will be cut. They then claim that all they want to do is put Social Security on a firm financial footing. But they have to act now. Now! And somehow the only possible actions are benefit cuts and tax hikes for working people.

This worked the last time the deficit hawks of both parties tried it. Under Ronald Reagan both parties agreed to cut benefits, raise the retirement age, and increase FICA taxes. This increase in tax revenues was then used as cover for tax cuts for the filthy rich. The effort was led by Alan Greenspan, an Ayn Rand devotee, and no friend of working people.

Medicare is also funded with specific taxes which are put into a special Treasury account, and has a board of trustees. But there’s a big difference. Under Medicare statutes, the Treasury is directed to make all payments, regardless of the state of the trusts. So, every report of the Trustees says that Medicare is just fine. We could do the same for Social Security, and all other entitlements. That simple change would solve the problem. That’s what Kelton recommends, and it makes perfect sense under Modern Monetary Theory.

Liberals offer other solutions. We could raise the cap on the wages subject to FICA taxes. We could have a millionaires tax that would fund Social Security and other entitlements. We could impose a tiny tax on securities transactions and direct the funds to the various trust funds. I don’t think Kelton is opposed to funding social programs with dedicated taxes, and I don’t think she would object to any of these ideas or to the idea that paying dedicated taxes adds to a sense of ownership. The issue is that people think it must be this way. It doesn’t. MMT teaches us that we have the money to do what we want to do.

Taking the pressure off of funding sources does two things. It relieves the anxiety of the older people, the group Enzi is trying to frighten. But it also frees us to focus on the actual needs of the future and to plan for them. As people get older, their needs change. They need more medical care, more help at home, more and different kinds of medicine, different furniture, different living arrangements, and so on. Their desires change, too. They want to do more travel, to spend more time with their spread-out families, and to enjoy more varied kinds of entertainment, restaurants, and other kinds of get-togethers.

Kelton, writing before the pandemic hit, calls for the expansion of Social Security. She points out that it was originally intended as one leg of a “three-legged stool” of retirement planning. The other two were personal savings and pensions from employment. The latter two are disappearing.

Before the pandemic, 40% of us didn’t have savings of $400 for emergencies. Once upon a time, employers provided defined-benefit plans, which promised to pay retirees a specific amount based on pay and length of service. [3] Most of those plans are gone. Kelton cites a particularly ugly case where McDonnell-Douglas closed a plant in Tulsa and terminated a defined-benefit plan in part because so many workers were approaching retirement age when they could collect a full pension with terrible results for older workers. [4] Congress established the Pension Benefit Guarantee Corporation to cover a portion of the lost benefits when companies terminate plans. The benefits guaranteed are absurdly low.

Employers now establish defined-contribution plans like 401(k)s. The track record of these plans shows that they are an inadequate substitute for most people. They are expensive, as members pay administration costs as well as management fees to Wall Street. The national average all-in fee is 2.2%. The Center for American Progress estimates that “… the typical American worker who earns a median salary starting at age 25 will pay about $138,336 in 401(k) fees over their lifetime.” Median account sizes vary substantially by age. For those over 50, the median is around $66K. The average is much higher, around 200K, showing that these plans primarily benefit the wealthy.

Taken together, these facts show a critical need for a stronger Social Security system, not the cuts sought by conservatives.

Other entitlement programs are under attack from the deficit hawks. There are constant efforts to make it more difficult to enroll in Medicaid, like work requirements or co-pays. Fifteen states haven’t implemented Medicaid expansion as permitted by Obamacare; Missouri just added a constitutional amendment requiring implementation. SNAP benefits are under constant assault by Republicans in the name of frugality, as if these $68 billion in a 4$ trillion budget was meaningful compared to the needs of the population served.

Kelton’s point is that we have the money. We need the will to establish priorities that match our moral values, and a Congress that will legislate those priorities.

[Graphic via Grand Rapids Community Media Center under Creative Commons license-Attribution, No Derivatives]

[1] It’s one of the more bizarre conservative demands. Social Security is a crucial element of the financial lives of a very large number of older Americans; approximately 40% of retirees would have incomes near or below the poverty line without it. That’s about 21 million voters who are more likely to vote for conservatives. To protect themselves from voter anger, conservatives explicitly call for the “I’ve got mine, screw you Jack” approach: their proposals always exempt today’s older crowd, as if the younger citizens won’t notice that their parents are safe but they aren’t and neither will their parents.

[2] We are currently getting a heavy dose of this from Republicans as they try to avoid passing a pandemic rescue bill that will primarily benefit ordinary Americans. Here’s Senator Mike Enzi, from the metropolis of Wyoming, where he ran a shoe store, insisting that Social Security is the problem. Kelton has a story about Enzi. P. 41 et seq.

[3] The strange locution “defined benefit plan” comes from the Employee Retirement Income Security Act of 1974. Its counterpart is defined contribution plans, which don’t promise any specific payment on retirement. It just requires the employer to pay a specific amount into some kind of plan with whatever vesting rights and investment possibilities the employer chooses.

[4] McDonnell-Douglas eventually merged with Boeing. Here’s a story connecting its executives to the 737 Max disaster.

47 replies
  1. P J Evans says:

    Social Security is my main income; I also have a small pension. I can tell you that both together still leave me below poverty level, and SS has its COLA adjustments set up to stay below the actual increase in the cost of living.
    My opinion is that the fastest way to fix SS and Medicare is to increase the level of the cap – if the GOP is going to assume that middle-class includes people making as much as $400K per year, then people making up to $400K per year should be paying into them. (Congress’s pension/retirement plans should be at the same levels. They’re supposed to be citizen-legislators, not rich guys with a sinecure.)

    • jo6pac says:

      I’m in the same boat and if I didn’t have the greatest landlord I couldn’t afford to live in Calli.

      The cola numbers are just made up so they don’t have to pay out more money.

      Thanks ED

    • elevator says:

      Should the Democrats win all branches of government they can go a long way towards setting this country on the right path. I believe they can increase SS and provide medicare for all with just a few common sense moves. Increase the cap on SS taxes. It is currently unjust and makes no sense. Remove it completely. Then lower the age of retirement five years, at least on a voluntary basis. This would open up more jobs for younger people as folks move up the ladder. Impose a small tax on all stock transactions. Many progressive countries already do with no effect on trading. Increase taxes on the top 20% of wage earners, especially on money earned from stocks ie capitol gains. These adjustments would more than fund the social programs.
      Then implement some kind of national jobs program along the lines of the new deal. Guarantee a jog to every american ( I believe this is more palatable to the average citizen than a guaranteed minimum income) and vastly improve our crumbling infrastructure. I’ve always felt not doing a massive jobs program was Obama’s biggest mistake, along with no public option. Get rid of the filibuster and if needed, increase the number of Supreme Court Justices. We are going to need bold action from our new leaders to overcome the decay of the Trump era and the republican congress over the past decades.

      • jo6pac says:

        Please stop all the wars and close bases all over the world. Then make corp. Amerika pay taxes along with 1%.

      • Bruce Olsen says:

        The thing is, our tax dollars fund nothing. Stop thinking that they do.

        Our constraint is doing too much too quickly, which will outrun the economy’s ability to produce real resources, thereby causing inflation

        That’s what MMT reveals.

        Taxes do have value, but they do not pay for FG spending.

  2. earlofhuntingdon says:

    Neoliberals don’t believe in public taxation. They believe their tax proceeds should be spent entirely on them. No one else deserves it. It is entirely selfish and anti-government in a way common to Robber Baron Social Darwinists, whom wags say were neither social or Darwinian. They’re right.

    Neoliberals argue that we don’t have the money as a way to prevent government from spending it on their competitors – everyone else in society. It’s an application of the Powell Letter argument. That reveals the two things elites fear, besides a decline in asset values. Sharpened pitchforks and the large crowds wielding them, pressed against their garden gate; and government, collective action.

    Government is the only institution large and powerful enough to compete with them. It’s also the institution that sets the rules by which elites amass their fortunes and keep their garden gates closed. They can’t have it pursuing anyone’s ends but theirs. That’s going to play out loudly in the background, as Biden attempts to maneuver between the Scylla of public demands for relief from pandemic, and economic exploitation and depression; and the Charybdis of the Chuck Schumer wing of his party, adamant that only its priorities be recognized and acted upon. (Personally, I can’t wait for Ocasio-Cortez to primary the guy.)

    • joel fisher says:

      When Whatshername is appointed to the cabinet, AOC can take her place in the Senate. I kind of like Shumer; he’s kind of a lefty Luca Brasi.

      • Timmer says:

        I have not been impressed by Sen Schumer (alone) as a leader. When he teams up with Leader Pelosi, he sounds stronger. The aged (my age) Dem Senators aren’t much better than the “very concerned” Sen Collins. Senator Blumenthal is especially filled with concerned and chilling quotes, but nothing to offer.

  3. Moonzoo. says:

    Best to absorb what is actually happening.

    The Republican party opposes Trump. Paul Ryan assiduously stymied Trump because Ryan hated Trump, among other motivations.

    The Republican opposition to Trump has been more indirect than the other vociferous opposition to Trump, but it has been no less ardent.

    Hatred of Trump is a bipartisan emotion. Even GOP Trump ostensible supporters just go through the obviously empty words.

    Whatever else anyone wants to say in hatred/opposition of Trump, there is close to zero evidence that Trump is not a man alone. He is all by himself.

    Objective reality is hard when one is not so inclined.

    But objective reality is that Trump is alone other than his supporters.

    • Rayne says:

      I would buy that argument if it wasn’t for the fact only one Republican senator voted to convict Trump on one of two articles of impeachment.

      Every vote not to convict was support for Trump. They all support him.

      The only member of Congress who didn’t support him quit the Republican Party.

      • P J Evans says:

        The lurkers oppose him in e-mails. (Anonymously, of course.) But they obediently vote for whatever he wants – or what Mitch tells them he wants, anyway.

    • MB says:

      What about Sen. Ron Johnson of Wisconsin who is actively working to provide the Trump campaign with the dirt on Biden that Pres. Zelinsky of Ukraine never did?

      What about Lindsay Graham and all the GOP’ers on the Senate Intelligence committee who are doing their own investigation into the origins of the Russia investigation because they didn’t like Horowitz’ findings in the IG report?

      I would say these dudes are all active supporters of Trump. Those who mutter disdainfully behind his back and grumble in private are in the minority, I would bet.

      He is not a “man alone”, not yet…

    • earlofhuntingdon says:

      Alone, except for 40% of American voters. Except for the GOP establishment and its members, which he owns lock, stock, and barrel. Except for the FedSoc and the rest of the wingnut establishment. Except for Bill Barr and every government official like him. Our ideas of evidence and aloneness are not the same.

    • Zirc says:

      Some GOP cowards may privately despise Trump, but there are a lot of true believers out there and many have been elected.


    • Bruce Olsen says:

      Is bmaz on vacation?

      The idea that any national GOP pol opposes Trump is laughable. What they do behind doors is completely irrelevant.

      The GOP is engaging in appeasement far beyond Chamberlain’s. The PM merely gave away other people’s countries: the GOP is giving away its own.

      But I do appreciate your sense of humor; leading with “Best to absorb what is actually happening” is a hoot.

  4. Godfree Roberts says:

    This is why China–where personal saving is an obsession–imposes a benefits pension burden of 40% of wages.

    And why two thirds of Chinese today say they’re not worried about having enough money to retire on.

    We’ve got to bite the bullet.

    • readerOfTeaLeaves says:

      1. The Chinese don’t traditionally have a stock market that was regulated, as the US capital markets were, for decades. I’m told by immigrants from China, Hong Kong, Taiwan that traditionally money went to purchase REAL estate, gold, and anything else that got your grandparents to safety when war broke out. Recall that those parts of the world have had upheaval for about 150 years now, and that has affected their spending and savings habits — or at least the habits of some immigrants to US and Canada.

      2. The Chinese aren’t robbed blind by private health insurance, as far as I’m aware. If I didn’t have to pay a small fortune for health care costs, I could sock away quite a bit more. Saving doesn’t necessarily make the Chinese more virtuous than Americans; they live in a system with a health care system that apparently does not rob them blind.

      3. I have read in several places that the (mainland) Chinese government has embraced a variant of MMT, although I don’t have specifics.

      4. From what I can tell, you are offering an apples to oranges comparison. While I find the Chinese savings rate laudatory, your implication that all Americans are lax or spendthrift seems quite a stretch.

      5. The point that Kelton raises beautifully is whether America will get its act together and invest in a more prosperous future. As COVID continues to harrow out small businesses, and children are underfoot at home, IMVHO there will be a whole new impetus to invest in public goods – starting with public health and medical research. That’s the ‘half full’ promise of the current moment.

    • P J Evans says:

      I put 10% of mine into my 401(k), in addition to the withholding for SS and Medicare. I got paid enough that I could afford to do it and usually not run out of money – but many many people can’t do that.
      It still isn’t enough to live on, even after doing it for decades.

      • Bruce Olsen says:

        In addition to decoupling health insurance from work, we need to decouple pensions from the stock market. Besides the kind of outcomes we both (and many others) have endured having to gamble with your retirement money, it would diminish the size and power of the financial sector, which does very little to grow the real economy.

    • Bruce Olsen says:

      If that’s their tax bite, it sounds like it’s an anti-inflationary tactic (which is one of the valid reasons for taxation in MMT). The speculation on housing units in still-vacant cities caused global pressure on drywall and cement prices, and is a bubble waiting to burst. China doesn’t want any more of that going on.

  5. jaango says:

    Ed Walker,

    Keep up to hard work to distinguish the “academics” from the Propaganda Purveyors.

    Of course, I much prefer addressing that “strategy and tactics” of the Purveyors.. Take, for example, the “progressive” view as currently being touted by Chicanos and Native Americans, demonstrates that in the early 1950’s there was only one Chicano-oriented Elected Official, and today, there are over 8,000 Elected and Appointed Officials currently underscoring the ‘substance’ of today’s perception of a “failed democracy” being espoused on the political Right.

    In short, the “progressive” view of today, and where 600,000 ‘youthful” Chicanos are registering to vote and will be voting on annual basis for the next 20 years adds to the luster that is the new:\\
    demographics and when taken in the appropriate context and content, poses an overwhelming dilemma for today’s ‘academics.”

    Thus, the lack of vigor among the ‘academics’ for interviewing these 8,000 Elected Officials, effectively demonstrates that today’s academics cannot or will not risk any “tenure” thoughts that challenge their academic’s futures. And as such, academic tenacity, remains still borne.

    And this Age of Disinformation and Disparagement remains front and center since the Republican Party in the Senate chamber refused to discard Trump, once and for all time.

    In closing, today’ s “academics’ refuse to bring forth their exhaustive level of knowledge to the trials and tribulations facing the rampant support for advancing our misperception, and yet, continuing the challenge that Anglos, writ large, have been attempting to advance the idea of a “failed democracy.” And David Brooks latest effort is another disaster for the misguided view for perpetuation of Propaganda and distinctive Disinformation.

    • Ed Walker says:

      I agree that we need to pay more attention to Hispanic voices. Lately I’ve watched a bit of MSNBC and CNN, for the first time ever. I am pleased to see more Black people and on MSNBC there is an effort to add Hispanic voices, especially from mayors and doctors and other local officials from Texas and California. I hope that trend increases. These practical voices are the mainstay of a functioning state.

  6. Willis Warren says:

    A key part of the “look, we’re extending benefits” while defunding social programs is getting the billionaires back on board with the trump campaign. Everything Trump’s doing right now is about his reelection, and this move has ulterior motives beyond killing SS and Medicare

  7. Zirc says:

    “Under Ronald Reagan both parties agreed to cut benefits, raise the retirement age, and increase FICA taxes.” In 1983, they also started taxing a portion of social security benefits–not a great argument for bipartisanship.

    Now, Trump is saying he wants to cut social security withdrawals. Such a move may help my monthly bottom line, but it seems idiotic to me. However, if I read your point about the way Medicare is paid and reported on correctly, the argument could be made that such a cut wouldn’t matter, at least not in terms of payments to beneficiaries. We’d just keep making the payments.


    • earlofhuntingdon says:

      The MMT argument is that payroll benefits taxes are not necessary for a currency-issuing government to make the corresponding benefits payments. Economically, the feds could make Social Security and Medicare/Medicaid payments without charging taxes for them. The statutory arrangement could be adjusted to reflect that reality.

      One of the important things MMT does is to lay bare neoliberals’ arguments about why they don’t want government to do certain things, such as insist on clean air, fair employment rules and safe workplaces, and a necessary minimum income in retirement. Neoliberals argue government cannot afford those things. In reality, neoliberals do not want those things because they reduce elite social and political power.

      When government participates in the economy – an economy it creates and whose rules it enforces – it does not harm some mythic natural order. The harm done is to elite power. Higher progressive taxes on the rich are not, for example, necessary to fund government. They are necessary to reduce the power of a few, to keep them from being more powerful than their government, and to keep them from actively harming their fellow citizens.

      • Ed Walker says:

        To add to this insight, note that neoliberals favor privatization, as in Charter Schools and Private Prisons, and use government to fill those schools so they can insert themselves into a cash flow stream and suck up more public money.

        The neoliberal fall back position is public-private partnerships, where government puts up lots of the money and takes the risk, while the private sector sucks out money and uses its control to jack up profits. As an example, neither party has been willing to fix the horror show in Flint, or the lead problems in other towns and cities. It’s just a matter of putting up the money and putting the local government in charge of repairs. Instead, Tammy Duckworth and other neoliberals propose a public/private partnership. Making water subject to capitalist profits is a wet dream for rich people.

        • earlofhuntingdon says:

          The wag was correct: the public takes the risk, the privateers take the profits. Rather like the drugs industry’s vaccine model.

          Relatedly, my bete noire is when mega-companies like Nestle buy up public water supplies for a song, pour it into bottles, and charge a premium price for it. No risk profit. What’s not to like, except for the public water systems, which remain stuck in their 19th century coal and lead pipe phase.

        • P J Evans says:

          Public-private is what they did with Amtrak and the USPS. And then Congress fails to follow through on the public side.

    • Ed Walker says:

      Let’s be careful. Medicare benefits won’t be cut. Social Security Benefits will be cut when the money in the trust funds runs out.

      • Bruce Olsen says:

        Most readers here probably aren’t aware that FICA taxes (if not paid to current pensioners) are currently used to buy special Treasury securities that can be sold only to SSA; the dollars the Treasury receives from the sale of these special securities is added to the US general fund. These special treasuries pay roughly 2.7% interest to SSA, making the annual interest payments around $80 billion. This interest is considered part of the national debt, which is used to frighten voters whenever convenient, but of course it’s money the FG owes to itself. If we simply gave up the sleight-of-hand of the special treasuries, that part of the debt would vanish. The GOP will argue that the SSA would (by current law) have 2.7% less money available to pay out to old folks like P J Evans (and me) but this is nonsense.

        One argument heard against paying SS benefits without taxation is that it would encourage inflation, but it’s more likely that keeping those dollars in the economy now would grow the economy more over your working career than sequestering it in a non-existent “lock box” for the same time would, making it more likely that by the time you retire, the real resources you wanted to buy would be available.

        Finally, one of the little-discussed advantages of the Job Guarantee is that everyone capable would be working, and thus eligible for SS or a more equitable replacement.

  8. joel fisher says:

    I am often in error, so don’t be shy about correcting me (I’m looking at you, bmaz), but don’t I recall that old liberal dogma was to differentiate between welfare programs on the one hand and Social Security on the other. People paid into Social Security and felt, ironically enough, “entitled” to recover some (or all or more) of their money back. In no way am I criticizing the social welfare programs that provide food, shelter, and other essentials that people, a huge portion of whom, are children. need to survive. Rather than falling back into the Reaganesque BS of “Welfare Queens, we should be doing more in every area: nutrition, housing, day care…you name it, we are not doing enough. But tolerance of lumping Social Security in with other federal programs, it seems to me, furthers the 83 year effort of the GOP to cut/end Social Security. “We’ve got to get these entitlements under control” sells better to the Trump moron base than, “Let’s cut Social Security”. I’d like to think it didn’t make any difference, but then I remember one day we had an “inheritance tax” and nobody seemed to mind, and the next day it was “death tax” and poor dumb pre-Trumpers (They’ve always been there, just waiting for him.) began to howl like their daddy was going to have to sell God’s little acre to pay the tax from the hereafter. So I guess I’m in the liberal, but no-lumping camp.

    • P J Evans says:

      People forget that SS and Medicare are *insurance* programs – SS is a nationwide annuity program, intended to keep older people from experiencing dire poverty. So you pay premiums in order to benefit later.

      • earlofhuntingdon says:

        Framing then as insurance programs was a tool of political persuasion. It was also a defensive framework, intended to make it harder to undo them via normal budgetary maneuvers. But MMT’s argument is that the insurance scheme is not required to fund the program.

        • P J Evans says:

          It’s that they shouldn’t be framed as “entitlements”, because people contribute to them, and in the case of Medicare, even after retiring.

          • Bruce Olsen says:

            Well, I happen to think my efforts (and yours) contributed to the general welfare, and we’re both entitled to a slice of that.

            We should stop viewing “entitlements” as a dirty word.

  9. Literay says:

    This is post No.2. I have lurked for some time but have been hesitant to post because of a recurring nightmare. The anxiety driven dream consists of me dodging saguaro in the Sonoran Desert while being hounded by an annoyed BMAZ. So far I have just barely made it to relative security over the mountains into the Chihuahuan Desert and Peyote catus. Tempting the fates, I share some thoughts.

    A few simple ideas that could make enormous differences. Details being the devil’s work of course. I believe these things must be done in concert as they are unlikely to stand alone.

    First corporations. I disagree that the purpose of corporations is to raise funds to promote growth and innovations. Non-withstanding any original concepts, the purpose is to avoid responsibility. Investors have zero responsibility for corporate actions, and managers, directors and executives have effectively little to no responsibility for the actions of the legal person. Investors and decision makers for the legal person must be held responsible for its actions. 1st Amendment rights, or any other rights that should belong to sentient homo sapiens, is ludicrous for these legal persons. Laws create these entities; laws can change or eliminate them. Expansion and innovation can be financed in other ways – see following.

    Elections. Make democracy real. Elections should be eliminated and replaced by random selection. Much like jury duty, the duty to serve if selected must be unavoidable except for rare circumstances adjudicated by disinterested arms length randomly selected individuals.

    Capitalism. Make the economy function more closely aligned with Adam Smith’s philosophy. Eliminate all taxes except one. That one must be 100% and inescapable. I call it the death tax. Every person may accumulate as much wealth as they can without regard to taxes. They just cannot pass it on. Children get the benefits of DNA; nothing else. All education systems will be public. Everything returns to the society that produced it. A functioning democratic society would distribute the proceeds as it sees fit. I foresee equal income and services for all starting at birth; limits to be placed on the value an individual can purchase from an estate – corporate type entities need not apply; and merit based non-economic competitions for control of divided assets of an estate. A major problem will be the prevention of bureaucracy from determining winners and losers. And as technology evolves, preventing artificial intelligence from taking over the bureaucracy. Auctions on the courthouse steps could be for everyone to participate.

    I have thought about these concepts for some time and fully realize the torturous and unlikely path to fruition. Nibbling at the edges of human constructs inevitably leads to frustration of ideals. Let us go big. We invented money, now let us use it for all of us. In my very limited understanding of Ms Kelton’s work (my local library does not have it yet), I believe MMT fits nicely with the above.

    I would be honored should any of the august moderators and/or commenters give these ideas a modicum of consideration.

    • P J Evans says:

      I would say, on corporations, that the majority shareholders should be held responsible. If you’re not in that group, or you’re not on the board of directors or in the top levels of management, you have no say over decisions. (Some companies have even passed rules that say that shareholder-initiated motions, even when winning in voting, are only advisory, thus making minority shareholders voiceless.)

      • Ed Walker says:

        Very few public corporations have a majority shareholder. The largest shareholders of many large companies are mutual funds. I’d guess you would want personal liability for officers and directore, and any entity that can vote some percentage of the stock, low enough to encourage mutual funds to act responsibly.

        • Rayne says:

          Most publicly-held corporations buy Directors and Officers (D&O) liability insurance; smart directors and officers certainly wouldn’t accept their appointment without such protection.

        • Geoguy says:

          Thanks for posting this series. Some public corporations might not have a single majority shareholder but they have a group of shareholders who control the company. Walmart is a classic example. This from Investopedia, Top Walmart Shareholders: Top 3 Institutional Shareholders
          Institutional investors hold about 30% of Walmart’s total shares outstanding, which is a relatively small share compared to institutional holdings of other large cap stocks. This relatively small share, however, can be explained by the fact that the Walton family, in some way or another, holds the majority of the company’s total shares outstanding, at about 50.1%.

    • Bruce Olsen says:

      There are legitimate arguments for eliminating corporate income taxes, and instead taxing income as it’s taken out of the company and passed to individuals.

      This doesn’t mean corporations wouldn’t be subject to taxation for other reasons, most likely to discourage monopolistic or other societally-undesirable behavior (like building up enormous cash piles). And states/localities need to be paid for services rendered to corporations, like the courts, roads, education for workers.

      But taxes pay for nothing at the Federal level.

    • Bruce Olsen says:

      Cheney may have meant deficits don’t impose a political cost (in particular that it didn’t impact Reagan politically).

      MMT had been in existence around a decade when he made the comment to Paul Simon, so he could have been aware of it (though it doesn’t seem likely to me).

      The various components that comprise MMT have existed for a century or so, and he could well have understood that spending doesn’t depend on tax revenues.

Comments are closed.