4 ms·

I’ve wondered - wouldn’t it be simpler to raise taxes vs raising interest rates?

ceejayoz 4y ago
Sure, if the Dems had like an 80% supermajority in both parts of Congress. Republicans tend to be universally opposed, and swing Dems typically won't touch the idea either.
exabrial 4y ago
No. We stop financing the elite 1%'s lifestyles with tax money is the only sensible out.
- endisneigh 4y ago
  You could tax the lifestyles and elite in question no?
  - exabrial 4y ago
    Omg. When someone has a spending problem, literally nobody says "OH, go make more money!", we tell them to cull their bad habits. Raising taxes has _never_ balanced the budget.
    - kmeisthax 4y ago
      No, but taxing is a good way to pull dollars out of circulation and destroy demand. In fact, it's probably a better lever to pull than the Fed funds rate. The spending problem in question is deliberately supported by voters, who oppose lowering spending or raising taxes. Running the government on a deficit lets you simulate the benefits of economic growth without all that pesky growing.
  - adra 4y ago
    Nope, the "elite" will just pick up their money in trusts and corporations, then constantly take out loans against their equity and take out enough from their shelters to pay the interest.. because the interest is less than the taxes they dodge, they come out ahead. Maybe if you significantly increased consumption taxes you'd have a chance, but the "elites" will just buy their goods in another country. Net result, you're boned.
aaronbrethorst 4y ago
Raising taxes goes through the Senate, where you have 51 Senators who are generally opposed to any tax rate hike, even (especially) on the plutocrat class.
bigyikes 4y ago
Fiscal policy is not in the Fed’s charter. They are independent from the rest of the federal government and only control monetary policy. Adjusting taxes isn’t a tool in their toolbox. As for congress, raising taxes is wildly unpopular with a large portion of the country. It takes a lot more political capital to make changes there.
fennecfoxen 4y ago
In principle, fiscal policy (taxing, spending) can substitute with monetary policy to some extent, and achieve many of the same goals, yes! But you'd be hard-pressed to find an economist who describes either recent or proposed fiscal policies of the Biden administration as something that's great at being remarkably anti-inflationary. Student loan forgiveness, for instance — some may say it's a worthy policy, but it's definitely freeing up money to be used on other things, and that's something that increases price pressures. I'm not sure it's on the table. There's other disadvantages in that the impact of fiscal policy is usually somewhat on the slow side, leaving a risk that your fiscal tightening hits as you enter the recession or your fiscal stimulus hits as the economy is already booming after the recession. So it's not quite that simple. Take the case of the Inflation Reduction Act, for instance; it purports to reduce inflation by "making a historic down payment on the deficit". Let's take this at face value just to limit any possibility for argument: maybe that'll help!!! but ... if you look closely, this is actually kind of spread out over the next ten years, while we have real inflation now. Does it have an impact? Maybe. Does it have an impact today? Probably not as strong as one would like.
bhaney 4y ago
Simpler? Definitely not. Interest rates are controlled by the Federal Reserve, which is an independent entity that can change interest rates without needing any kind of approval from the federal government. It's very simple for them to actually implement once the decision is made. Taxes need to be voted in by citizens, or more accurately, the representatives of the citizens. Citizens do not tend to enjoy enforcing more taxes on themselves, and representatives tend to want to get re-elected, so they have incentive to avoid raising taxes and upsetting their constituency, even if they know it's a good idea in the long-run.
- peppertree 4y ago
  I find it interesting the Feds is an independent branch run by unelected officials. Because your average voters are idiots that can't be trusted with important levers of society. If you look at Turkey it makes perfect sense.
ksherlock 4y ago
On one hand, there are 7 federal reserve board governors. They're appointed for 14 year terms and don't have to worry about being re-elected. They are, generally speaking, economists and spend their time thinking about money. On the other hand, there are 535 members of congress. They're elected to 2 or 6 year terms and do need to worry about being re-elected. They are, generally speaking, lawyers and career politicians and spend their time thinking about how to fuck over the other party. Now, which is simpler?

Sure, if the Dems had like an 80% supermajority in both parts of Congress. Republicans tend to be universally opposed, and swing Dems typically won't touch the idea either.

exabrial 4y ago

No. We stop financing the elite 1%'s lifestyles with tax money is the only sensible out.

endisneigh 4y ago
You could tax the lifestyles and elite in question no?
- exabrial 4y ago
  Omg. When someone has a spending problem, literally nobody says "OH, go make more money!", we tell them to cull their bad habits. Raising taxes has _never_ balanced the budget.
  - kmeisthax 4y ago
    No, but taxing is a good way to pull dollars out of circulation and destroy demand. In fact, it's probably a better lever to pull than the Fed funds rate. The spending problem in question is deliberately supported by voters, who oppose lowering spending or raising taxes. Running the government on a deficit lets you simulate the benefits of economic growth without all that pesky growing.
- adra 4y ago
  Nope, the "elite" will just pick up their money in trusts and corporations, then constantly take out loans against their equity and take out enough from their shelters to pay the interest.. because the interest is less than the taxes they dodge, they come out ahead. Maybe if you significantly increased consumption taxes you'd have a chance, but the "elites" will just buy their goods in another country. Net result, you're boned.

aaronbrethorst 4y ago

Raising taxes goes through the Senate, where you have 51 Senators who are generally opposed to any tax rate hike, even (especially) on the plutocrat class.

bigyikes 4y ago

Fiscal policy is not in the Fed’s charter. They are independent from the rest of the federal government and only control monetary policy. Adjusting taxes isn’t a tool in their toolbox. As for congress, raising taxes is wildly unpopular with a large portion of the country. It takes a lot more political capital to make changes there.

fennecfoxen 4y ago

In principle, fiscal policy (taxing, spending) can substitute with monetary policy to some extent, and achieve many of the same goals, yes! But you'd be hard-pressed to find an economist who describes either recent or proposed fiscal policies of the Biden administration as something that's great at being remarkably anti-inflationary. Student loan forgiveness, for instance — some may say it's a worthy policy, but it's definitely freeing up money to be used on other things, and that's something that increases price pressures. I'm not sure it's on the table. There's other disadvantages in that the impact of fiscal policy is usually somewhat on the slow side, leaving a risk that your fiscal tightening hits as you enter the recession or your fiscal stimulus hits as the economy is already booming after the recession. So it's not quite that simple. Take the case of the Inflation Reduction Act, for instance; it purports to reduce inflation by "making a historic down payment on the deficit". Let's take this at face value just to limit any possibility for argument: maybe that'll help!!! but ... if you look closely, this is actually kind of spread out over the next ten years, while we have real inflation now. Does it have an impact? Maybe. Does it have an impact today? Probably not as strong as one would like.

bhaney 4y ago

Simpler? Definitely not. Interest rates are controlled by the Federal Reserve, which is an independent entity that can change interest rates without needing any kind of approval from the federal government. It's very simple for them to actually implement once the decision is made. Taxes need to be voted in by citizens, or more accurately, the representatives of the citizens. Citizens do not tend to enjoy enforcing more taxes on themselves, and representatives tend to want to get re-elected, so they have incentive to avoid raising taxes and upsetting their constituency, even if they know it's a good idea in the long-run.

peppertree 4y ago
I find it interesting the Feds is an independent branch run by unelected officials. Because your average voters are idiots that can't be trusted with important levers of society. If you look at Turkey it makes perfect sense.

ksherlock 4y ago

On one hand, there are 7 federal reserve board governors. They're appointed for 14 year terms and don't have to worry about being re-elected. They are, generally speaking, economists and spend their time thinking about money. On the other hand, there are 535 members of congress. They're elected to 2 or 6 year terms and do need to worry about being re-elected. They are, generally speaking, lawyers and career politicians and spend their time thinking about how to fuck over the other party. Now, which is simpler?