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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.
by 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 agoa) 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 agoYour 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.