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The catch-22 of tax cuts and how will the government fund social security and $220 trillion in obligations

The catch-22 of tax cuts and how will the government fund social security and $220 trillion in obligations

Ever since the Great Depression, the United States government has been writing checks that future generations would never be able to cash.  And this includes social security and a welfare system where over one-third of the American public already feeds off of.

And while President Donald Trump is correct in realizing that the economy will not grow without a massive program of tax cuts and tax reform, the bottom line is that the government’s balance sheet is too far gone to be willing to trade short and medium term growth for debt obligations that are currently 12 times what the nation’s annual GDP is at today.

Larry Kotlikoff wrote in an article on Forbes that we would need an immediate approximately 50% increase in taxes to fund our future deficits. That’s what we would need to create a true entitlements “lockbox” with the funds actually in it.

But surely everybody knows by now that there is no lockbox with Social Security funds in it. That money was spent on other government programs and debts. And so when the CBO doesn’t count the trust funds as part of the national debt, they are not only being disingenuous, I think they are committing financial fraud.

The money that will actually pay for Social Security and Medicare down the road is going to have to come out of future taxes, just as for any other debt of the US.

So at some point – even though Republicans are jawboning hard about cutting taxes now – we are going to have to raise taxes in order to fund Social Security and Medicare. I personally think it will have to be done with a value-added tax (VAT), because the necessary increase in income taxes would totally destroy the economy and potential growth. – Mauldin Economics

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Just as with banks and corporations, unless there are ironclad laws that criminalize accounting fraud and fiscal irresponsibility within government, then greedy, corrupt, or incompetent men and women will always sacrifice a system over time for their own benefit and rewards.  And this is exactly what has happened with actions such as President Clinton swapping cash from Social Security for debt, and Congress adding the disabled to the list of recipients in the Social Security retirement program.

In our consumer based economy, it is a no-brainer than growing that economy requires individuals to have more money available to be able to purchase more goods and services.  But because we are no longer on a monetary system (gold standard) that acted as a check and balance to government spending and inflationary monetary expansion, what is the right thing to do is no longer the prudent thing to implement since elected officials have already dug a hole over the past seven decades that requires the opposite of tax cuts just to sustain.

Kenneth Schortgen Jr is a writer for The Daily EconomistSecretsofthefed.comRoguemoney.net, and Viral Liberty, and hosts the popular youtube podcast on Mondays, Wednesdays and Fridays. Ken can also be heard Wednesday afternoons giving an weekly economic report on the Angel Clark radio show.


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