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if the government expend money in the economy beyond real available capacity (all else unchanged) we will see inflation. If the government increase taxes in th

if the government expend money in the economy beyond real available capacity (all else unchanged) we will see inflation. If the government increase taxes in the economy in absence of inflation (all else unchanged), there is going to be a deflationary trend. All the point of the argument is that if we have real available capacity in the economy you can spend, 600$ or whatever have been promised, and, if we don't have real resources available, we can't spend anything, never mind what have been promised. It have nothing to do with how much money we have saved or how big is the deficit, but with the real resources available at the moment of paying.

SilasX 9y ago
>It have nothing to do with how much money we have saved or how big is the deficit, but with the real resources available at the moment of paying. My point is that the obligation is phrased as "$600 + inflation index", not "the amount of utility you could have got for $600 at the time we made the promise". Improved productivity can help you meet the latter, not the former. The latter is a more reasonable promise, but the former is what was actually promised. >All the point of the argument is that if we have real available capacity in the economy you can spend, 600$ or whatever have been promised, It's not true that "if the real productive capacity is there, then taxing out the money for the pensions is no problem". The evasion behavior is non-linear and there's a cap to how much you can collect with taxes before e.g. pushing economic activity underground and into other countries. (Hence the Laffer curve point.)