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Why Social Security can’t go “broke”

In: The Elgar Companion to Modern Money Theory

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  • Kerry Pechter

Abstract

The sustainability of Social Security has long been a topic of fierce debate. Doubts about the ability of the US to finance Social Security appear to be based on two assumptions: that the US government faces the same financial constraints as households and businesses, and that the federal and private sectors compete in a zero-sum rivalry for a finite amount of money. This chapter explains the Modern Monetary Theory position on Social Security. The US Treasury, the Federal Reserve and the banking sector continuously—if indirectly—cooperate to meet the nation’s financial needs. Thus, the federal government can continue to finance its social insurance program, even if tax “revenues” fall short. Instead, the sustainability of Social Security needs to be evaluated in terms of the availability of real resources. While the aging US population will create challenges for the economy, to address those we need to focus on material resources, not finance.

Suggested Citation

  • Kerry Pechter, 2024. "Why Social Security can’t go “broke”," Chapters, in: Yeva Nersisyan & L. R. Wray (ed.), The Elgar Companion to Modern Money Theory, chapter 19, pages 251-263, Edward Elgar Publishing.
  • Handle: RePEc:elg:eechap:18498_19
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    File URL: https://www.elgaronline.com/doi/10.4337/9781788972246.00027
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