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> It raises taxes more than it increases spending, so it reduces the money supply. Taxation should be thought of separately from monetary policy. To put this

by bko 4y ago

> It raises taxes more than it increases spending, so it reduces the money supply. Taxation should be thought of separately from monetary policy. To put this into perspective, M2 money supply grew from 15.33T on Dec 31 2019 to 21.71T on July 31 2022, a growth of 41% in two years ($6.38T). In 2019 it grew 6.6%. The net revenue of the Inflation Reduction Act is 324 billion over over ten years. It's just not in the same ballpark > OTOH, it encourages investments in green energy, likely leading to a substantial reduction in the cost of energy in the long term. Subsidies and investments don't necessarily lead to a reduction in costs. Think about the sectors that have the most public spending in the US (health care through medicare and medicaid, education, real estate via fannie/freddie, etc). These are the fastest growing industries in terms of prices https://ycharts.com/indicators/us_m2_money_supply https://ycharts.com/indicators/us_m2_money_supply https://taxfoundation.org/inflation-reduction-act/ https://taxfoundation.org/inflation-reduction-act/

bryanlarsen 4y ago
Energy is fungible. Medicare, education and real estate aren't. Medicare and education are strongly impacted by Baumol's cost disease.
- bko 4y ago
  > Medicare and education are strongly impacted by Baumol's cost disease. I disagree. Healthcare isn't necessarily labor intensive. New technologies should make care cheaper. If anything labor efficiencies have made the actual labor required of medical care a lot less. Doctors used to make house calls and spend more time with you. Now you go into a doctor's office, wait up to an hour sometimes, sit in a room, have some lower paid aids take your vitals, get your information, etc and you end up seeing the doctor for 15 min. Doctors see about 20 patients a day and spend normally 15 minutes per patient. Compare that to 50 years ago and you can bet that there have been "labor efficiencies" since that time. That doesn't even account for tele-medicine for routine stuff like getting ear drops for a sick child. As for education, teachers aren't paid a lot, all the new costs are administration. Education expenses did not grow proportionally to educator's salaries, but far exceeded them, so your theory doesn't hold up. https://www.excel-medical.com/a-typical-primary-care-physician-practice-sees-how-many-patients/ https://www.excel-medical.com/a-typical-primary-care-physici...
  - bryanlarsen 4y ago
    In my jurisdiction, 71% of the education budget goes to teacher salaries, so education expenses couldn't have grown substantially faster than teacher salaries. And Baumol doesn't require salaries going up, it works just fine if salaries stay constant while the price of consumer goods goes down.
    - bko 4y ago
      Here's an alternative explanation that explains the rise in both education and health care as well as the drop in the price of consumer electronics: the customer doesn't pay. In both health care and education, the final customer often does not pay. When I go to a doctor and ask them how much something will cost, I get bewildered looks. They rarely hear that question. I don't pay, my insurance pays and I pay some co-pay. Same thing for education. I'm pretty much stuck with my local school district, or if its college, I get subsidized no questions asked student loans. But compare that to something that's paid out of pocket by the consumer. Consider something like Lasik surgery. It costs about $2-3k per eye an. Pretty incredible considering its relatively new procedure. I can't find a single outpatient surgery covered by insurance that costs that little. Cosmetic surgery is similarly cheap. And the difference is that the Lasik surgery is paid by the consumer and most people would shop around, ask about prices, etc. No subsidized Lasik loans, no insurance coverage, just straight forward pricing.
      - bryanlarsen 4y ago
        You're helping my argument, not yours. :) The energy market is different/better than education and health care, so subsidies are more likely to flow to the consumer.

by bko 4y ago

bryanlarsen 4y ago

Energy is fungible. Medicare, education and real estate aren't. Medicare and education are strongly impacted by Baumol's cost disease.

bko 4y ago
> Medicare and education are strongly impacted by Baumol's cost disease. I disagree. Healthcare isn't necessarily labor intensive. New technologies should make care cheaper. If anything labor efficiencies have made the actual labor required of medical care a lot less. Doctors used to make house calls and spend more time with you. Now you go into a doctor's office, wait up to an hour sometimes, sit in a room, have some lower paid aids take your vitals, get your information, etc and you end up seeing the doctor for 15 min. Doctors see about 20 patients a day and spend normally 15 minutes per patient. Compare that to 50 years ago and you can bet that there have been "labor efficiencies" since that time. That doesn't even account for tele-medicine for routine stuff like getting ear drops for a sick child. As for education, teachers aren't paid a lot, all the new costs are administration. Education expenses did not grow proportionally to educator's salaries, but far exceeded them, so your theory doesn't hold up. https://www.excel-medical.com/a-typical-primary-care-physician-practice-sees-how-many-patients/ https://www.excel-medical.com/a-typical-primary-care-physici...
- bryanlarsen 4y ago
  In my jurisdiction, 71% of the education budget goes to teacher salaries, so education expenses couldn't have grown substantially faster than teacher salaries. And Baumol doesn't require salaries going up, it works just fine if salaries stay constant while the price of consumer goods goes down.
  - bko 4y ago
    Here's an alternative explanation that explains the rise in both education and health care as well as the drop in the price of consumer electronics: the customer doesn't pay. In both health care and education, the final customer often does not pay. When I go to a doctor and ask them how much something will cost, I get bewildered looks. They rarely hear that question. I don't pay, my insurance pays and I pay some co-pay. Same thing for education. I'm pretty much stuck with my local school district, or if its college, I get subsidized no questions asked student loans. But compare that to something that's paid out of pocket by the consumer. Consider something like Lasik surgery. It costs about $2-3k per eye an. Pretty incredible considering its relatively new procedure. I can't find a single outpatient surgery covered by insurance that costs that little. Cosmetic surgery is similarly cheap. And the difference is that the Lasik surgery is paid by the consumer and most people would shop around, ask about prices, etc. No subsidized Lasik loans, no insurance coverage, just straight forward pricing.
    - bryanlarsen 4y ago
      You're helping my argument, not yours. :) The energy market is different/better than education and health care, so subsidies are more likely to flow to the consumer.