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Now if we can only get states (like California) to stop giving out stimulus payments (they literally calling it inflation stimulus; learn economics 101) and dro

Now if we can only get states (like California) to stop giving out stimulus payments (they literally calling it inflation stimulus; learn economics 101) and drop student debt forgiveness nonsense. The fed is trying to curb inflation, while politicians are trying to get re-elected at any cost, fighting the fed.

lampshades 4y ago
California doesn’t have a central bank, so it’s not like it can print money out of thin air like the Federal Reserve. If they’re giving out stimulus, they must be getting it from tax payers, right?
- kube-system 4y ago
  Technically speaking, not all state government revenue is tax revenue; states can issue bonds or other debt
  - count 4y ago
    Which is repaid via?
    - kube-system 4y ago
      Issuing more debt? :)
  - lampshades 4y ago
    But someone has to buy the bonds if they want to give out the stimulus as dollars. What are they doing in California? I haven’t been paying attention.
    - milkshakes 4y ago
      they have a budget surplus
      - dragonwriter 4y ago
        Not just a budget surplus (revenue above planned spending), but revenue that exceeds a State Constitutional cap on what the State government is allowed to spend (unless it is directed to very specific spending categories which are unlimited), and thus has triggered an obligation to return funds via some rebate mechanism.
- NineStarPoint 4y ago
  California state debt actually went down from 2019->2021, so yeah must be from taxes.
- jollyllama 4y ago
  If there's an institution willing to give them a loan, then the money can be created ex nihilo, just like a person takes out a mortage on a home.
- dragonwriter 4y ago
  > California doesn’t have a central bank, so it’s not like it can print money out of thin air like the Federal Reserve. The whole point of an independent central bank is that the fiscal authority (Congress) cannot print money out of thin air to monetize spending, either; monetary policy is based on macroeconomic conditions, not fiscal demands. OTOH, the federal government inherently has a much lower cost of borrowing than the states, and California, like many (almost all, I think, though the details vary) has a State Constitutional requirement for a balanced operating budget and effectively relies on federal deficit spending for countercyclical spending. > If they’re giving out stimulus, they must be getting it from tax payers, right? Yes, the inflation relief tax rebate is paid out of current tax revenue (in fact, it is a plan to fulfill a constitutional mandate to return surplus tax revenue beyond a certain spending limit if not spent on education and infrastructure) and is not characterized as “stimulus”, contrary to the upthread misrepresentation. It's redistribution which probably has a very slight stimulative (and thus inflationary) effect because it goes to people with a higher propensity to spend in the domestic economy, per marginal dollar, than those it comes from, in order to relieve more of the impacts of inflation at the lower end of the income distribution.
UncleOxidant 4y ago
> Now if we can only get states (like California) to stop giving out stimulus payments (they literally calling it inflation stimulus; I agree with you on this. They're ostensibly to help people afford to buy more gasoline. We should let the high gas prices change behavior instead. > drop student debt forgiveness nonsense. Not sure I agree with you on this. While I don't think it would be a great idea to forgive all student debt, I think a targeted forgiveness (under certain income/net worth threshold) of some student debt makes sense.
- unethical_ban 4y ago
  >We should let the high gas prices change behavior instead. Yeah, quit their jobs to save money on the commute.
- notch656a 4y ago
  Student loan forgiveness is a regressive tax.
  - UncleOxidant 4y ago
    Which is why I'm saying it should be means tested.
- dhritzkiv 4y ago
  Why means test for student loan forgiveness? It adds complexity/loopholes to be more trouble than it's worth, and it's likely not necessary: wealthy families don't need student loans, so those with a large familial net worth with student loans should be a rounding error. In addition, those from wealthy families are more likely to take unpaid internships, thereby qualifying for 'low income' in that way.
unethical_ban 4y ago
The student debt issue is a complicated one that we shouldn't want to recreate, but I don't see how debt forgiveness on education is nonsense.
- boppo1 4y ago
  The crisis is in part because of high uni prices. Giving everyone federally guaranteed loans killed price discovery for higher education. Forgive the loans without adding the possibility of bankruptcy to future loans (and forcing unis to cosign a significant fraction) and you'll just see prices skyrocket further.
standardUser 4y ago
Raising taxes on the wealthy could offset any changes to the money supply caused by a slightly more generous welfare state. An obvious solution.
- 8note 4y ago
  That's unlikely to reduce demand though. If the inflation is trigger by a lack of supply for things poor people want, taxing the rich won't change anything
  - standardUser 4y ago
    I agree, but most people like to pretend inflation is only caused by increases to the money supply.
- al_mandi 4y ago
  Who are the wealthy in your view? Anyone making more than N amount? Or worth more than M amount? And what's that amount?
  - standardUser 4y ago
    Only three leading questions? Go on, ask a few more. Or feel free to make a point.
    - al_mandi 4y ago
      The point is that the model itself is broken and unfair. I'd recommend looking into Islam's Zakat system for something that works.
chickenpotpie 4y ago
This is not economics 101 and it's more nuanced than that. Stimulus checks can make inflation go up, but they can also do nothing. And it's important what type of inflation it causes, because California is only giving it to lower income citizens. If you quadruple the price of sports cars by giving every low income person a check, you still helped out the most vulnerable people.
- 01100011 4y ago
  > California is only giving it to lower income citizens. Not last time I checked. I work at a FANG and am definitely not low income yet my wife and I will be getting a few hundred.
  - nodesocket 4y ago
    Thanks for dispelling all these myths, the California inflation checks are indeed going out to single and married people with very high annual income. If you don’t think this is to help keep politician’s in office (Gavin) you aren’t paying attention and being naive.
    - pkaye 4y ago
      Quite a few states are doing this btw. https://www.cnet.com/personal-finance/taxes/state-stimulus-checks-2022-who-is-getting-a-payment/ https://www.cnet.com/personal-finance/taxes/state-stimulus-c...
zeroonetwothree 4y ago
CA isn’t printing money. If they don’t use it for this it will be used for something else. Now perhaps specifically this use of money is especially bad but it’s not obvious that’s the case.
- notch656a 4y ago
  In effect they are. When you gain the stimulus money from progressive taxes but return the money in a relatively flat (less progressive) way (like $X dollars for everyone meeting a fairly common threshold) then the velocity of the money changes. When goods/service/estate remains equal, change in velocity and change in money printed both have the inflationary/deflationary response.
AlexandrB 4y ago
This happens in reverse during recessions too, where governments will cut spending and do "austerity" when stimulation is what's called for. That's why the Fed is nominally independent - so it can implement unpopular policies.
dragonwriter 4y ago
> Now if we can only get states (like California) to stop giving out stimulus payments (they literally calling it inflation stimulus; learn economics 101 California is not giving out anything called stimulus payments. You seem to be referring to the inflation relief tax rebate which is the system that has been adopted to return tax revenue that exceeds the Constitutional cap on state spending (FY 1978-1979 spending adjusted for population and inflation), because of the enormous revenue windfall the state has received in the post-COVID boom (and that cap takes into account inflation, so this is even with the high inflation.)
- nodesocket 4y ago
  You realize the reason California in particular has a budget surplus is because of federal stimulus in addition to their outrageously high tax policies. That aside, why give money straight into people's pocket who will go out and spend it (foolishly) and thus increase inflation? How about, invest in the states infrastructure, address homelessness, work on crime, invest in education, work on wildfires. If after all that, there is still a surplus, give it back in the form of tax cuts. Don't just give everybody free money, most of those people pay little to no tax at all. If you don't pay taxes (or pay very little), you shouldn't get tax surplus money back.
  - dragonwriter 4y ago
    > You realize the reason California in particular has a budget surplus is because of federal stimulus in addition to their outrageously high tax policies. California neither increased taxes nor got favoritism in federal stimulus, so that's not why it is doing outstandingly well in fiscal terms. It just manages it's economy better and so has GDP growth that consistently outstrips the national average (usually, it also gets hit harder in the brief GDP drops, but that wasn't the case with COVID—perhaps because California’s GDP is more reliant on remote-compatible work.) See, e.g. https://united-states.reaproject.org/analysis/comparative-trends-analysis/gross_domestic_product/tools/0/60000/ https://united-states.reaproject.org/analysis/comparative-tr... It did cut spending during the COVID downturn, which might have affected surplus numbers, but wouldn't have any impact on revenue overshooting the Gann Limit. > That aside, why give money straight into people's pocket who will go out and spend it (foolishly) and thus increase inflation? Because the very slight effect of the redistribution on expected overall inflation is much less than the expected effect it has in mitigating the impact of inflation on lower-to-high-middle income earners, especially lower income.

lampshades 4y ago

California doesn’t have a central bank, so it’s not like it can print money out of thin air like the Federal Reserve. If they’re giving out stimulus, they must be getting it from tax payers, right?

kube-system 4y ago
Technically speaking, not all state government revenue is tax revenue; states can issue bonds or other debt
- count 4y ago
  Which is repaid via?
  - kube-system 4y ago
    Issuing more debt? :)
- lampshades 4y ago
  But someone has to buy the bonds if they want to give out the stimulus as dollars. What are they doing in California? I haven’t been paying attention.
  - milkshakes 4y ago
    they have a budget surplus
    - dragonwriter 4y ago
      Not just a budget surplus (revenue above planned spending), but revenue that exceeds a State Constitutional cap on what the State government is allowed to spend (unless it is directed to very specific spending categories which are unlimited), and thus has triggered an obligation to return funds via some rebate mechanism.
NineStarPoint 4y ago
California state debt actually went down from 2019->2021, so yeah must be from taxes.
jollyllama 4y ago
If there's an institution willing to give them a loan, then the money can be created ex nihilo, just like a person takes out a mortage on a home.
dragonwriter 4y ago
> California doesn’t have a central bank, so it’s not like it can print money out of thin air like the Federal Reserve. The whole point of an independent central bank is that the fiscal authority (Congress) cannot print money out of thin air to monetize spending, either; monetary policy is based on macroeconomic conditions, not fiscal demands. OTOH, the federal government inherently has a much lower cost of borrowing than the states, and California, like many (almost all, I think, though the details vary) has a State Constitutional requirement for a balanced operating budget and effectively relies on federal deficit spending for countercyclical spending. > If they’re giving out stimulus, they must be getting it from tax payers, right? Yes, the inflation relief tax rebate is paid out of current tax revenue (in fact, it is a plan to fulfill a constitutional mandate to return surplus tax revenue beyond a certain spending limit if not spent on education and infrastructure) and is not characterized as “stimulus”, contrary to the upthread misrepresentation. It's redistribution which probably has a very slight stimulative (and thus inflationary) effect because it goes to people with a higher propensity to spend in the domestic economy, per marginal dollar, than those it comes from, in order to relieve more of the impacts of inflation at the lower end of the income distribution.

UncleOxidant 4y ago

> Now if we can only get states (like California) to stop giving out stimulus payments (they literally calling it inflation stimulus; I agree with you on this. They're ostensibly to help people afford to buy more gasoline. We should let the high gas prices change behavior instead. > drop student debt forgiveness nonsense. Not sure I agree with you on this. While I don't think it would be a great idea to forgive all student debt, I think a targeted forgiveness (under certain income/net worth threshold) of some student debt makes sense.

unethical_ban 4y ago
>We should let the high gas prices change behavior instead. Yeah, quit their jobs to save money on the commute.
notch656a 4y ago
Student loan forgiveness is a regressive tax.
- UncleOxidant 4y ago
  Which is why I'm saying it should be means tested.
dhritzkiv 4y ago
Why means test for student loan forgiveness? It adds complexity/loopholes to be more trouble than it's worth, and it's likely not necessary: wealthy families don't need student loans, so those with a large familial net worth with student loans should be a rounding error. In addition, those from wealthy families are more likely to take unpaid internships, thereby qualifying for 'low income' in that way.

unethical_ban 4y ago

The student debt issue is a complicated one that we shouldn't want to recreate, but I don't see how debt forgiveness on education is nonsense.

boppo1 4y ago
The crisis is in part because of high uni prices. Giving everyone federally guaranteed loans killed price discovery for higher education. Forgive the loans without adding the possibility of bankruptcy to future loans (and forcing unis to cosign a significant fraction) and you'll just see prices skyrocket further.

standardUser 4y ago

Raising taxes on the wealthy could offset any changes to the money supply caused by a slightly more generous welfare state. An obvious solution.

8note 4y ago
That's unlikely to reduce demand though. If the inflation is trigger by a lack of supply for things poor people want, taxing the rich won't change anything
- standardUser 4y ago
  I agree, but most people like to pretend inflation is only caused by increases to the money supply.
al_mandi 4y ago
Who are the wealthy in your view? Anyone making more than N amount? Or worth more than M amount? And what's that amount?
- standardUser 4y ago
  Only three leading questions? Go on, ask a few more. Or feel free to make a point.
  - al_mandi 4y ago
    The point is that the model itself is broken and unfair. I'd recommend looking into Islam's Zakat system for something that works.

chickenpotpie 4y ago

This is not economics 101 and it's more nuanced than that. Stimulus checks can make inflation go up, but they can also do nothing. And it's important what type of inflation it causes, because California is only giving it to lower income citizens. If you quadruple the price of sports cars by giving every low income person a check, you still helped out the most vulnerable people.

01100011 4y ago
> California is only giving it to lower income citizens. Not last time I checked. I work at a FANG and am definitely not low income yet my wife and I will be getting a few hundred.
- nodesocket 4y ago
  Thanks for dispelling all these myths, the California inflation checks are indeed going out to single and married people with very high annual income. If you don’t think this is to help keep politician’s in office (Gavin) you aren’t paying attention and being naive.
  - pkaye 4y ago
    Quite a few states are doing this btw. https://www.cnet.com/personal-finance/taxes/state-stimulus-checks-2022-who-is-getting-a-payment/ https://www.cnet.com/personal-finance/taxes/state-stimulus-c...

zeroonetwothree 4y ago

CA isn’t printing money. If they don’t use it for this it will be used for something else. Now perhaps specifically this use of money is especially bad but it’s not obvious that’s the case.

notch656a 4y ago
In effect they are. When you gain the stimulus money from progressive taxes but return the money in a relatively flat (less progressive) way (like $X dollars for everyone meeting a fairly common threshold) then the velocity of the money changes. When goods/service/estate remains equal, change in velocity and change in money printed both have the inflationary/deflationary response.

AlexandrB 4y ago

This happens in reverse during recessions too, where governments will cut spending and do "austerity" when stimulation is what's called for. That's why the Fed is nominally independent - so it can implement unpopular policies.

dragonwriter 4y ago

> Now if we can only get states (like California) to stop giving out stimulus payments (they literally calling it inflation stimulus; learn economics 101 California is not giving out anything called stimulus payments. You seem to be referring to the inflation relief tax rebate which is the system that has been adopted to return tax revenue that exceeds the Constitutional cap on state spending (FY 1978-1979 spending adjusted for population and inflation), because of the enormous revenue windfall the state has received in the post-COVID boom (and that cap takes into account inflation, so this is even with the high inflation.)

nodesocket 4y ago
You realize the reason California in particular has a budget surplus is because of federal stimulus in addition to their outrageously high tax policies. That aside, why give money straight into people's pocket who will go out and spend it (foolishly) and thus increase inflation? How about, invest in the states infrastructure, address homelessness, work on crime, invest in education, work on wildfires. If after all that, there is still a surplus, give it back in the form of tax cuts. Don't just give everybody free money, most of those people pay little to no tax at all. If you don't pay taxes (or pay very little), you shouldn't get tax surplus money back.
- dragonwriter 4y ago
  > You realize the reason California in particular has a budget surplus is because of federal stimulus in addition to their outrageously high tax policies. California neither increased taxes nor got favoritism in federal stimulus, so that's not why it is doing outstandingly well in fiscal terms. It just manages it's economy better and so has GDP growth that consistently outstrips the national average (usually, it also gets hit harder in the brief GDP drops, but that wasn't the case with COVID—perhaps because California’s GDP is more reliant on remote-compatible work.) See, e.g. https://united-states.reaproject.org/analysis/comparative-trends-analysis/gross_domestic_product/tools/0/60000/ https://united-states.reaproject.org/analysis/comparative-tr... It did cut spending during the COVID downturn, which might have affected surplus numbers, but wouldn't have any impact on revenue overshooting the Gann Limit. > That aside, why give money straight into people's pocket who will go out and spend it (foolishly) and thus increase inflation? Because the very slight effect of the redistribution on expected overall inflation is much less than the expected effect it has in mitigating the impact of inflation on lower-to-high-middle income earners, especially lower income.