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Holy shit, I just realized that tax cuts are basically stock buybacks at a national level. It's basically just a fiscal way to self cannibalize an entity to the

Holy shit, I just realized that tax cuts are basically stock buybacks at a national level. It's basically just a fiscal way to self cannibalize an entity to the benefit of those already within it at the expense of it's long term health. Also, it's nice to know that bad fiscal policy actually has demonstrable repercussions on an international stage, even if currency value is a very neoliberal indicator.

nine_zeros 4y ago
Most non-US countries are very aware of tax cuts because they can see the impact of it immediately in currency drops. In America, tax cuts lead to inflation but only a year or two late. We are suffering now and blaming everything but the tax cuts and handouts for companies.
- landemva 4y ago
  > In America, tax cuts lead to inflation I would find this surprising. Do you have charts for this, and which historical timeframes?
  - shitpostbot 4y ago
  - voxic11 4y ago
    Doesn't it make pretty intuitive sense? If the government cuts taxes while keeping spending the same it causes an increase in the overall supply of money. A basic market principle is that increasing supply in the face of stable demand leads to a decrease in price. A decrease in the price of money is inflation.
    - albertop 4y ago
      Nope. Tax cuts as shown throughout history increase growth and inflation tends to be low during high growth since there is an rise in production and productivity.
      - voxic11 4y ago
        How much growth did we see from the Tax Cuts and Jobs Act? Doesn't seem like much if any https://www.brookings.edu/research/searching-for-supply-side-effects-of-the-tax-cuts-and-jobs-act https://www.brookings.edu/research/searching-for-supply-side...
        albertop 4y ago
        Tax cuts are an effective way to bolster a weak economy and create jobs—as long as they are targeted at the bottom 90% of income earners. - findings from NBER - https://www.nber.org/papers/w21035 https://www.nber.org/papers/w21035
    - radford-neal 4y ago
      You've got to look at the combination: (1) Cut taxes, (2) Cut spending too? Or not, (3) If not, is the increased deficit financed by selling bonds to the public, or to the central bank? An increase in the money supply comes about only if (1) taxes are cut, (2) spending isn't cut, (3) the central bank buys the bonds issued as a result, creating the money to do so out of nothing. A deficit financed by selling bonds to the public might perhaps increase expectations that sometime in the future the central bank will buy bonds using newly created money, but that is likely to have a more muted effect than them actually creating money now.
      - imtringued 4y ago
        The central bank buys the bonds off commercial banks so you need the commercial banks to create the deposits that the government can actually spend. If the goverment was sitting on central bank money it would have to issue physical dollar notes to actually spend the money.
        radford-neal 4y ago
        I'm not familiar with all the technical details, which in any case differ from country to country. But if you're trying to claim that the central banks of countries with fiat currencies can't create money to finance government deficits, you're just wrong. They very much can, and when they do to excess, the result is hyperinflation, as seen in places like Wiemar Germany and Zimbabwe. In moderation, it is a crucial part of central bank monetary policy, being the main mechanism by which central banks can expand the supply of base money, which is typically desired in a growing economy in order to prevent deflation. The process is known in economics as "monetizing debt". That this is a thing that central banks can do, and do do, is not in the least bit controversial.
    - janee 4y ago
      Not really. My intuition would be less tax just means different kinds of things purchased, not really a change in the total amount available in the pool... I'm not well learned about this stuff, but I don't see it being intuitive at all I.e. tax money I would think eventually circulates back into the same pool, same pool non-gov entities trade in. My intuition tells me the total pool size available at any given moment shouldn't be drastically different and wouldn't be correlated to tax amounts in an obvious way.
      - voxic11 4y ago
        I guess another way of thinking about it is that cutting taxes (in theory) leads to increased consumer spending which equates to a increase in demand. In supply constrained environments like what we see today increases in demand will result in increases in price. Widespread increases in price is inflation. Idk it seems pretty intuitive to me and is a pretty common theory, for instance its mentioned here https://www.forbes.com/sites/howardgleckman/2022/06/02/should-congress-raise-taxes-to-fight-inflation/?sh=35a91cf4424b https://www.forbes.com/sites/howardgleckman/2022/06/02/shoul...
        janee 4y ago
        I suppose where my assumption could be wrong is that consumer vs gov spending sort of cancel each other out, i.e. fluxuations in the two are quickly negated because they take place in the same overall "market" and eventually anyway end ups in non-gov hands because there's a lot more of us in the market Not sure if I'm explaining myself well
    - visiblink 4y ago
      It does to me. During World War II, the Canadian government raised taxes in a bid to reduce demand and curb inflation (along with wage and price controls, mandatory savings, and other measures). Inversely, reducing taxes holds the potential to leave money in people's pockets, increase demand, and trigger inflation. Whether it does so will depend on a host of other factors, of course.
      - imtringued 4y ago
        Tax raises obviously increase the deadweight loss associated with that tax because at some point the cost exceeds the marginal utility of the product and people buy less until things are in balance again. But when there isn't enough product to go buy and the government pays off debt, then the deadweight loss may actually be reduced over the long term.
    - landemva 4y ago
      > Doesn't it make pretty intuitive sense? It may seem intuitive, but it does not match what happens in the #1 economy which issues the reserve currency of the world. > A decrease in the price of money is inflation. Federal Reserve sets price of money by manipulating interest rates. Federal Reserve is increasing interest rates and consumer prices and producer prices are increasing. This may contradict your belief about what causes increased prices.
- nso95 4y ago
  Why is it different for the US? Genuinely curious.
  - nine_zeros 4y ago
    Being the reserve currency, every country wants dollars. Every other country needs dollars to do trade, even among each other. With a tax cut, US consumers have more money which they spend on imported goods. This supplies dollars to the rest of the world, increasing the value of 196 currencies marginally. You can think of USD being in demand from 8 billion people. If US dollar wasn't a reserve currency, a tax cut would have increased supply of dollars with consumers but demand would only be from the 330 million people in America. High supply of money, no change in supply of goods would then cause inflation.
    - landemva 4y ago
      > With a tax cut, US consumers have more money which they spend on imported goods. So the dollars go overseas buying imported goods and then partially those overseas dollars buy USA treasury debt. This puts the price inflation, if any, overseas and then "sterilized" into Treasuries. This is why USA consumer prices and gold didn't go to the moon after 2008 bank bailouts.
ParksNet 4y ago
Given the demographic challenges of Europe (sub-replacement fertility of the most productive and the vast influx of net-negative aliens), it is wise to crash the system: Abandon welfare, pensions and subsidized healthcare. With those shackles thrown off, countries have a chance of regrowth. The nation state can maintain national (and border) security, run natural monopolies, regulate pollutants, and that's it. Fund those services with Land Value Taxes. The alternative is endlessly raising taxes and throwing the country into a deaths-spiral.
- kwere 4y ago
  the supidiest thing european people (italian here) did was trusting politicans into handling their pension contribution and return it 40 years later with inflation adjusted distibution, its literally a ponzi scheme
- feoren 4y ago
  > (sub-replacement fertility of the most productive and the vast influx of net-negative aliens) Is there really anything more to this comment than "white children good; brown children bad"? Every study I've ever seen on the effects of immigration conclude that immigration (at the levels seen in Europe and UK) is extremely healthy and that immigrants are "net-positive" (to use your heavily judgy wording) in almost every sense.
- imtringued 4y ago
  Please don't throw things out that work, only throw the things out that are actually broken. For the vast majority of people in Germany public healthcare works fine and it isn't really subsidized, just mandatory to for employees to pay in. Government managed healthcare only has one goal in Germany, prevent long term diseases and cure diseases rather prolonged treatment of symptoms as the latter is money thrown out the window.
aauchter 4y ago
Isn't it the opposite, i.e. share issuance? With lower taxes the government leaves more money in the system (and generally borrows/prints more) which lowers the value of each unit of currency, hence the pound declines.
- SQueeeeeL 4y ago
  Typically, they just print more to compensate. In this case, the UK explicitly stated this was a debt funded tax cut, so spending remained constant while revenue declined.
- imtringued 4y ago
  If you could somehow revive Keynes for a day he would have said "raise taxes and pay off government debt to keep inflation in check" Keynes policy proposals for the government have an obvious flaw, nobody really follows them unless he gives the government permission to spend (which is obviously a valid move in a depression or during COVID). This is why I think Keynes theories have had more success in montary policy than fiscal policy.

nine_zeros 4y ago

Most non-US countries are very aware of tax cuts because they can see the impact of it immediately in currency drops. In America, tax cuts lead to inflation but only a year or two late. We are suffering now and blaming everything but the tax cuts and handouts for companies.

landemva 4y ago
> In America, tax cuts lead to inflation I would find this surprising. Do you have charts for this, and which historical timeframes?
- shitpostbot 4y ago
- voxic11 4y ago
  Doesn't it make pretty intuitive sense? If the government cuts taxes while keeping spending the same it causes an increase in the overall supply of money. A basic market principle is that increasing supply in the face of stable demand leads to a decrease in price. A decrease in the price of money is inflation.
  - albertop 4y ago
    Nope. Tax cuts as shown throughout history increase growth and inflation tends to be low during high growth since there is an rise in production and productivity.
    - voxic11 4y ago
      How much growth did we see from the Tax Cuts and Jobs Act? Doesn't seem like much if any https://www.brookings.edu/research/searching-for-supply-side-effects-of-the-tax-cuts-and-jobs-act https://www.brookings.edu/research/searching-for-supply-side...
      - albertop 4y ago
        Tax cuts are an effective way to bolster a weak economy and create jobs—as long as they are targeted at the bottom 90% of income earners. - findings from NBER - https://www.nber.org/papers/w21035 https://www.nber.org/papers/w21035
  - radford-neal 4y ago
    You've got to look at the combination: (1) Cut taxes, (2) Cut spending too? Or not, (3) If not, is the increased deficit financed by selling bonds to the public, or to the central bank? An increase in the money supply comes about only if (1) taxes are cut, (2) spending isn't cut, (3) the central bank buys the bonds issued as a result, creating the money to do so out of nothing. A deficit financed by selling bonds to the public might perhaps increase expectations that sometime in the future the central bank will buy bonds using newly created money, but that is likely to have a more muted effect than them actually creating money now.
    - imtringued 4y ago
      The central bank buys the bonds off commercial banks so you need the commercial banks to create the deposits that the government can actually spend. If the goverment was sitting on central bank money it would have to issue physical dollar notes to actually spend the money.
      - radford-neal 4y ago
        I'm not familiar with all the technical details, which in any case differ from country to country. But if you're trying to claim that the central banks of countries with fiat currencies can't create money to finance government deficits, you're just wrong. They very much can, and when they do to excess, the result is hyperinflation, as seen in places like Wiemar Germany and Zimbabwe. In moderation, it is a crucial part of central bank monetary policy, being the main mechanism by which central banks can expand the supply of base money, which is typically desired in a growing economy in order to prevent deflation. The process is known in economics as "monetizing debt". That this is a thing that central banks can do, and do do, is not in the least bit controversial.
  - janee 4y ago
    Not really. My intuition would be less tax just means different kinds of things purchased, not really a change in the total amount available in the pool... I'm not well learned about this stuff, but I don't see it being intuitive at all I.e. tax money I would think eventually circulates back into the same pool, same pool non-gov entities trade in. My intuition tells me the total pool size available at any given moment shouldn't be drastically different and wouldn't be correlated to tax amounts in an obvious way.
    - voxic11 4y ago
      I guess another way of thinking about it is that cutting taxes (in theory) leads to increased consumer spending which equates to a increase in demand. In supply constrained environments like what we see today increases in demand will result in increases in price. Widespread increases in price is inflation. Idk it seems pretty intuitive to me and is a pretty common theory, for instance its mentioned here https://www.forbes.com/sites/howardgleckman/2022/06/02/should-congress-raise-taxes-to-fight-inflation/?sh=35a91cf4424b https://www.forbes.com/sites/howardgleckman/2022/06/02/shoul...
      - janee 4y ago
        I suppose where my assumption could be wrong is that consumer vs gov spending sort of cancel each other out, i.e. fluxuations in the two are quickly negated because they take place in the same overall "market" and eventually anyway end ups in non-gov hands because there's a lot more of us in the market Not sure if I'm explaining myself well
  - visiblink 4y ago
    It does to me. During World War II, the Canadian government raised taxes in a bid to reduce demand and curb inflation (along with wage and price controls, mandatory savings, and other measures). Inversely, reducing taxes holds the potential to leave money in people's pockets, increase demand, and trigger inflation. Whether it does so will depend on a host of other factors, of course.
    - imtringued 4y ago
      Tax raises obviously increase the deadweight loss associated with that tax because at some point the cost exceeds the marginal utility of the product and people buy less until things are in balance again. But when there isn't enough product to go buy and the government pays off debt, then the deadweight loss may actually be reduced over the long term.
  - landemva 4y ago
    > Doesn't it make pretty intuitive sense? It may seem intuitive, but it does not match what happens in the #1 economy which issues the reserve currency of the world. > A decrease in the price of money is inflation. Federal Reserve sets price of money by manipulating interest rates. Federal Reserve is increasing interest rates and consumer prices and producer prices are increasing. This may contradict your belief about what causes increased prices.
nso95 4y ago
Why is it different for the US? Genuinely curious.
- nine_zeros 4y ago
  Being the reserve currency, every country wants dollars. Every other country needs dollars to do trade, even among each other. With a tax cut, US consumers have more money which they spend on imported goods. This supplies dollars to the rest of the world, increasing the value of 196 currencies marginally. You can think of USD being in demand from 8 billion people. If US dollar wasn't a reserve currency, a tax cut would have increased supply of dollars with consumers but demand would only be from the 330 million people in America. High supply of money, no change in supply of goods would then cause inflation.
  - landemva 4y ago
    > With a tax cut, US consumers have more money which they spend on imported goods. So the dollars go overseas buying imported goods and then partially those overseas dollars buy USA treasury debt. This puts the price inflation, if any, overseas and then "sterilized" into Treasuries. This is why USA consumer prices and gold didn't go to the moon after 2008 bank bailouts.

ParksNet 4y ago

Given the demographic challenges of Europe (sub-replacement fertility of the most productive and the vast influx of net-negative aliens), it is wise to crash the system: Abandon welfare, pensions and subsidized healthcare. With those shackles thrown off, countries have a chance of regrowth. The nation state can maintain national (and border) security, run natural monopolies, regulate pollutants, and that's it. Fund those services with Land Value Taxes. The alternative is endlessly raising taxes and throwing the country into a deaths-spiral.

kwere 4y ago
the supidiest thing european people (italian here) did was trusting politicans into handling their pension contribution and return it 40 years later with inflation adjusted distibution, its literally a ponzi scheme
feoren 4y ago
> (sub-replacement fertility of the most productive and the vast influx of net-negative aliens) Is there really anything more to this comment than "white children good; brown children bad"? Every study I've ever seen on the effects of immigration conclude that immigration (at the levels seen in Europe and UK) is extremely healthy and that immigrants are "net-positive" (to use your heavily judgy wording) in almost every sense.
imtringued 4y ago
Please don't throw things out that work, only throw the things out that are actually broken. For the vast majority of people in Germany public healthcare works fine and it isn't really subsidized, just mandatory to for employees to pay in. Government managed healthcare only has one goal in Germany, prevent long term diseases and cure diseases rather prolonged treatment of symptoms as the latter is money thrown out the window.

aauchter 4y ago

Isn't it the opposite, i.e. share issuance? With lower taxes the government leaves more money in the system (and generally borrows/prints more) which lowers the value of each unit of currency, hence the pound declines.

SQueeeeeL 4y ago
Typically, they just print more to compensate. In this case, the UK explicitly stated this was a debt funded tax cut, so spending remained constant while revenue declined.
imtringued 4y ago
If you could somehow revive Keynes for a day he would have said "raise taxes and pay off government debt to keep inflation in check" Keynes policy proposals for the government have an obvious flaw, nobody really follows them unless he gives the government permission to spend (which is obviously a valid move in a depression or during COVID). This is why I think Keynes theories have had more success in montary policy than fiscal policy.