IEA: Current Policy Issues (documents)

Current Policy Issues
Annotated List of Documents

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Current Policy Issues
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Most of these articles were written to clarify some of the key policy issues being debated in the 2004 election campaign, and some aspects may require minor adaptations appropriate to the current situation.

Contents

General
Social Security
Monetary Policy
Macroeconomic Management

General
1. Protecting Social Security and Maintaining Fiscal Responsibility in Time of Crisis -- a New Approach
  Proposes 4 basic changes:
  1. Take SS completely "off budget" -- end the "unified" budget.
  2. Separate the budget effects of tax & spending decisions from the "automatic stabilizer effect of recessions.
  3. Insulate SS Baby-Boom reserves from both recessions and diversion to other purposes.
  4. Take the interest cost of SS Baby Boom reserves out of the budget by allowing the SS Trust Fund to buy private mortgages & bonds (not stock)
2. Thoughts on "The Next Progressive Agenda:" Federal Budget & Social Security Reform
  8 pages. Key Points:
  1. FEDERAL BUDGET
    1. End "unified" budget: remove Social Security -- and the other retirement funds, which account for most of the near-term non-SS surplus.
    2. "Standardize" the Congress-controlled Policy Budget projections at 4% unemployment.
    3. Balance the non-SS Policy Budget annually -- with a fixed 2%-of-the-budget allowance for gradual NATIONAL debt reduction (to gradually reduce the huge interest cost).
    4. Use the (normally) economy-controlled Stabilization Account for pro-active anti-recession policy by an "off-budget" formula adjustment of withholding taxes to coordinate with monetary policy & to stabilize and reduce interest rates.
    5. Why the supposed conflict between debt reduction and increased social investment spending is a false myth based on misunderstanding of budget relationships.
    6. Oppose any reduction of income tax rates unless part of a "package deal" with conservation-inducing VAT on fossil fuels, steeply progressive VAT on luxury purchases, and an undistributed profit tax.
  2. SOCIAL SECURITY
    1. Key fact: There is no SS "crisis" if the Baby Boom Trust Fund reserves are protected from misappropriation and recession-induced reductions.
    2. "Standardize" SS financial projections at 4% unemployment (like Policy Budget).
    3. Any economy-caused shortfall is reflected only in main-budget Stabilization Account, not current surpluses and reserve fund.
    4. Invest Baby Boom reserves in private bonds & mortgages to:
      - Protect them from potential tax-cut deficits.
      - Save interest cost in the Policy Budget (thus increasing its surplus).
      - Make it unnecessary to disrupt of financial markets by complete pay off the PUBLIC portion of the NATIONAL debt.
      - Avoid temporary increase in SS component of the NATIONAL debt due to buildup and liquidation of Baby Boom reserves.
Social Security
1. A Social Security Strategy to Preemptively Counter Bush's Attack
  Executive Summary
  Full version (coming)
2. Four Keys to REAL Social Security Reform
3. The Most-Needed Social Security and Budget Reforms:
  A Challenge to Congress, the President and Political Candidates (6/27/00 Op-Ed)
  1. BASIC PRINCIPLE: The financial security of SS must not be hostage to unreliable and ever-changing economic forecasts, or recession-caused surplus reductions, or diversion of its Baby-Boom surpluses to other purposes.
  2. End the deceptive "unified" budget -- remove SS & the other retirement funds.
  3. Base SS and budget projections on "standardized" 4% unemployment conditions.
  4. Separate the standardized (Congress-controlled) POLICY BUDGET from the economy-controlled STABILIZATION ACCOUNT.
  5. Transfer to the Stabilization Account any recession-caused shortfall of the SS surplus from its 4% unemployment projection.
4. Social Security, the Federal Budget & Their Relationship to the Economy:
  How to Resolve Confusions and Refocus Policy" (4/00 -- 30 pages, with charts.)
  1. The 1996 SS "crisis" was caused by the SS Trustees' 6% unemployment assumption -- their 5% projection had no financial problems for the whole 75 years.
  2. End the "unified budget" monstrosity -- take SS and the other retirement-related trust funds completely out of the main federal budget -- as required of business firms.
  3. Insulate the SS Trust Fund from economic fluctuations and government economic mismanagement by basing SS projections on a "standaradized" Humphrey/Hawkins 4% unemployment" rate, with deviations of the Trust Fund surplus from these values transferred to the main budget's Stabilization Account.
5. The Phony Social Security "Crisis" (11/96)
  The much-heralded 2029 (or 2032) "bankruptcy" is caused mainly by the SS Commission's own inappropriate economic assumptions; their 5% unemployment projections have no financial problems for the forseeable future, and there is no need for the government to permit unemployment to go above that again if it adopts responsible economic policies.
6. The Phony Social Security Crisis and the Privatization Scam (9/96)
  The basic falsehood in the arguments for privatization of Social Security -- they fail to take into account (or deliberately ignore) the inappropriate economic assumptions which project SS "bankruptcy." A 4% unemployment projection (as mandated legally by the Humphrey/Hawkins "Full Employment and Balanced Growth Act of 1978") could probably even safely permit a FICA tax reduction!
7. Links to other good Social-Security related sites
Monetary Policy
1. A Challenge For Bernanke (2/06)
  This prescient article was written at the time now-Fed Chairman Ben Bernanke was being considered for his post. Based on the shorter earlier article, "Flying Blind" (below), it lays out the analytical and policy factors that IEA believes to be important in bringing the economy to its full-employment potential and keeping it there.
2. "Flying Blind" -- How the Fed Lost Control, and How to Regain it (4/01)
  Greenspan admits his money management is based on personal judgment, not a clear analytical/conceptual framework. His problem has 3 main aspects -- a failure to distinguish clearly between money and credit, a failure to recognize the real "transmission mechanism" between money growth and economic growth, and a required reserve ratio now so low that the needed direct control of money growth is impossible. This article gives a precise conceptual and empirical definition of money, explains how money growth finances economic growth, explains the need for a 100% reserve system (and how to get there), and the need for systematic coordination of monetary and fiscal policy.
Macroeconomic Management
Application of the Integrating Dynamic Money-Flow (IDMF) Analysis and Policies
1. A Social Security Strategy to Preemptively Counter Bush's Attack
  The best Social Security defense strategy is to "re-frame" the Social Security debate, launching a powerful preemptive counter offensive based on two real reforms -- protecting Social Security from economic mismanagement, and improving federal budget transparency. 2/1/05
2. The Three Essential Keys to an Effective Recovery Policy
  A checklist for evaluating the credibility of any purported "stimulus" policy. 6/1/03
3. The Recovery Bonus Plan for Fast Recovery and Monetary Management Reform
  Summary of the Macro Policy Tool Kit and the Recovery Bonus tool, with explanation of how the special Recovery Bonus Bonds can be used to increase monetary reserve ratios. Revised 5/16/03 (10 pages)
4. A Policy Tool Kit to Stop Irresponsible Tax Cuts And Achieve Fast Recovery
  An annotated list, with underlying basic principles. 4/30/03
5. Economic Agenda for Recovery Now
  A functionally coordinated "tool kit" of federal budget and macroeconomic management reforms to end the present analytical and policy disarray. 12/22/02
6. Reconciling Fiscal and Economic Responsibility in Time of Crisis -- a New Approach
  Proposed basic policy changes:
  1. Take SS completely "off budget" -- end the confusing and irresponsible "unified" budget.
  2. Separate the budget effects of congressional tax & spending decisions -- the Policy Budget -- from the "automatic stabilizer" effect of recessions -- the Stabilization Account.
  3. "Standardize" the Policy Budget -- and Social Security Projections -- on the 4% unemployment basis mandated by the Humphrey-Hawkins "Full Employment and Balanced Growth Act of 1978."
  4. Use the Policy Budget to maintain a fiscally responsible "balanced budget."
  5. Systematically coordinate monetary and fiscal policy.
  6. Insulate SS Baby-Boom reserves from both recessions and diversion to other purposes.
  7. Take the interest cost of SS Baby Boom reserves out of the budget by allowing the SS Trust Fund to buy private mortgages & bonds (not stock)
7. Monetary and Fiscal Policy Sunshine Act. (1/00, 5 pages)
  These integrated policy tools are crucial preparation for preventing the widely-expected "post-bubble" recession.
  Fed is required to publish recommendations for a specific real GDP "soft landing" approach to full employment, and explain how it is trying to achieve this. Congress and the President are required to prepare a "standardized employment" (4% unemployment) Policy Budget as the main basis for budget discussion and legislation. Combined with FASTA credit stabilization policy, this provides for more systematic coordination of monetary and fiscal policy.
8. Full-Employment Anti-Inflation Tools (1998)
  Written to accompany the Monetary and Fiscal Policy Sunshine Act.
9. Rx for the Japanese (and World) Economy (7/98, revised 4/99)
  Explains how the IDMF conceptual framework can assist understanding of the Japanese and other economic crises, how their recovery can best be promoted, and how the IMF can best avoid the kind of errors it has so often made in the past.

Revised: January 1, 2010

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