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Actually, the Treasury funds itself by issuing bonds to the dealer banks or the Fed, where its account is then credited. Taxes are used as inflation control or

by HiLo 11y ago

Actually, the Treasury funds itself by issuing bonds to the dealer banks or the Fed, where its account is then credited. Taxes are used as inflation control or to incentivize certain activities. What you're suggesting is that Treasury would have a cash flow problem if people payed less taxes, which isn't the case. Although you could start to see an inflation problem.

dragonwriter 11y ago
> Actually, the Treasury funds itself by issuing bonds to the dealer banks or the Fed, where its account is then credited Its ability to sell bonds is controlled by the markets perception of its ability to pay those bonds, which is tied to a number of factors including, inter alia, its perceived ability, willingness, and track record of revenue sources with which to pay them. People paying less taxes directly effects that.
- HiLo 11y ago
  Again, not true. The Federal Reserve can step in and buy bonds at any point, giving Treasury the ability to pay. >revenue sources with which to pay them Can you show me where Treasury says fiscal outlays are funded by tax receipts, or solely through payments from primary dealers? The government doesn't work like a business in this case.
  - dragonwriter 11y ago
    > The Federal Reserve can step in and buy bonds at any point It may be the case that it theoretically is authorized to do so (though it does not in practice), but if so it would do so in support of the goals its employment/inflation related goals, not to finance the debt. In fact, the whole reason for having an independent (of the entities setting and executing fiscal policy) central bank is to reassure users of currency and investors in government debt that fiscal concerns will not drive monetary policy. > Can you show me where Treasury says fiscal outlays are funded by tax receipts, or solely through payments from primary dealers? I can show you where the Fed says that they don't purchase directly from the Treasury, and that their purchases are tied directly to their mandates regarding employment and inflation targets, not supporting Treasury's fiscal needs. [0] > The government doesn't work like a business in this case. The government may seem not to work like most businesses because its debt is perceived as risk-free, which gives it seemingly limitless ability to borrow money at extremely low rates, which makes it possible to make spending decisions with little short-term regard for balance with revenues; but the perception of lack of risk in government debt is driven by the underlying perception that the government has, and is willing to use to the extent necessary, the power to tax assets and income subject to the jurisdiction of the United States, and the perception of the size of those current assets and expected income. [0] http://www.federalreserve.gov/faqs/how-does-the-federal-reserve-buying-and-selling-of-securities-relate-to-the-borrowing-decisions-of-the-federal-government.htm http://www.federalreserve.gov/faqs/how-does-the-federal-rese...

by HiLo 11y ago

dragonwriter 11y ago

> Actually, the Treasury funds itself by issuing bonds to the dealer banks or the Fed, where its account is then credited Its ability to sell bonds is controlled by the markets perception of its ability to pay those bonds, which is tied to a number of factors including, inter alia, its perceived ability, willingness, and track record of revenue sources with which to pay them. People paying less taxes directly effects that.

HiLo 11y ago
Again, not true. The Federal Reserve can step in and buy bonds at any point, giving Treasury the ability to pay. >revenue sources with which to pay them Can you show me where Treasury says fiscal outlays are funded by tax receipts, or solely through payments from primary dealers? The government doesn't work like a business in this case.
- dragonwriter 11y ago
  > The Federal Reserve can step in and buy bonds at any point It may be the case that it theoretically is authorized to do so (though it does not in practice), but if so it would do so in support of the goals its employment/inflation related goals, not to finance the debt. In fact, the whole reason for having an independent (of the entities setting and executing fiscal policy) central bank is to reassure users of currency and investors in government debt that fiscal concerns will not drive monetary policy. > Can you show me where Treasury says fiscal outlays are funded by tax receipts, or solely through payments from primary dealers? I can show you where the Fed says that they don't purchase directly from the Treasury, and that their purchases are tied directly to their mandates regarding employment and inflation targets, not supporting Treasury's fiscal needs. [0] > The government doesn't work like a business in this case. The government may seem not to work like most businesses because its debt is perceived as risk-free, which gives it seemingly limitless ability to borrow money at extremely low rates, which makes it possible to make spending decisions with little short-term regard for balance with revenues; but the perception of lack of risk in government debt is driven by the underlying perception that the government has, and is willing to use to the extent necessary, the power to tax assets and income subject to the jurisdiction of the United States, and the perception of the size of those current assets and expected income. [0] http://www.federalreserve.gov/faqs/how-does-the-federal-reserve-buying-and-selling-of-securities-relate-to-the-borrowing-decisions-of-the-federal-government.htm http://www.federalreserve.gov/faqs/how-does-the-federal-rese...