"To add songs and playlists to your Library, you must use Cloud Music Library"

When adding songs to a playlist I get this message pop up and it asks if i want to "Merge Library". Nothing happens when I click Merge Library, the song does not get added into my playlist. Sync Library is on. I've tried quitting as well as restarting my computer. I see this issue has been brought up before but the responses have been less than helpful. I am able to to add songs to playlists on my iPhone, just not my Mac.