4 ms·

We should recall that not only did the US cut rates and spend a lot of money through the covid recession, when things were bad, it ignored that first bit of adv

We should recall that not only did the US cut rates and spend a lot of money through the covid recession, when things were bad, it ignored that first bit of advice before Covid when things were good (it's hard to remember now how hot the economy was in 2016-2019, but it was really hot), by cutting taxes and continuing to print money and keep the rates low to cover it. As the tax cut detractors correctly predicted, those tax cuts (and the growth that didn't happen enough to cover them) reduced the US's leverage to respond when an actual crisis came up.

throwaway0a5e 5y ago
I don't see how tax policy matters in this case. That money still sloshes around. The only difference is who's nominally in control of it.
- InitialLastName 5y ago
  a) higher taxes enable the government to apply deflationary pressure on the economy (by removing currency from circulation) b) Reducing taxes without cutting spending (because it will "pay for itself in growth") leads to a larger deficit, which requires increased debt to cover, which triggers the money-printers.
  - MisterMower 5y ago
    Your first point is only valid if the government doesn’t spend that money or uses it to pay down debt, a dubious assumption with the US federal government. Your second point is wrong: you can continue to run deficits without printing money. You just have to find lenders in the marketplace willing to buy your bonds. Yes, the Federal Reserve is buying vast quantities of US treasuries right now, effectively monetizing the debt, but the sequence of events you describe isn’t typically how things work.
landemva 5y ago
The Fed raised interest rates into Trump's first two years in office.
- alphabettsy 5y ago
  Wasn’t that during Yellen’s term who was replaced by Powell in 2018? The same year the tax cuts went into effect. The following year the rate cuts started and then Covid hit.

throwaway0a5e 5y ago

I don't see how tax policy matters in this case. That money still sloshes around. The only difference is who's nominally in control of it.

InitialLastName 5y ago
a) higher taxes enable the government to apply deflationary pressure on the economy (by removing currency from circulation) b) Reducing taxes without cutting spending (because it will "pay for itself in growth") leads to a larger deficit, which requires increased debt to cover, which triggers the money-printers.
- MisterMower 5y ago
  Your first point is only valid if the government doesn’t spend that money or uses it to pay down debt, a dubious assumption with the US federal government. Your second point is wrong: you can continue to run deficits without printing money. You just have to find lenders in the marketplace willing to buy your bonds. Yes, the Federal Reserve is buying vast quantities of US treasuries right now, effectively monetizing the debt, but the sequence of events you describe isn’t typically how things work.

landemva 5y ago

The Fed raised interest rates into Trump's first two years in office.

alphabettsy 5y ago
Wasn’t that during Yellen’s term who was replaced by Powell in 2018? The same year the tax cuts went into effect. The following year the rate cuts started and then Covid hit.