3 ms·

Decreasing taxes to fight inflation. We've clearly got the experts in the driver's seat here. Was listening to doomberg musing on energy policy last night and

by anm89 4y ago

Decreasing taxes to fight inflation. We've clearly got the experts in the driver's seat here. Was listening to doomberg musing on energy policy last night and he made the observation that if we could just barely kind of get our shit together, we could be in an unbelievably dominant geopolitical position in the short term but instead we are almost certainly going to footgun ourselves and then wonder what happened. I couldn't agree more

edmundsauto 4y ago
Can you elaborate on why you think it’s a bad idea to increase the standard deduction? I am not an economist so it doesn’t appear like a clearly bad idea to me, and it gets money into peoples hands when they need it.
- anm89 4y ago
  Counterintuitively, I'm not really against the deduction. At least as a mostly apolitical person I'll say, I believe it's a net gain for me personally. But if you were an economic planner the equations involved here are really simple. The more cash you push out to consumers, the harder it is to fight inflation. You could make an argument that it is neutral to inflation if you believe this would mean a cut in government spending that was proportional to the increase in consumer spending, but back here in reality, the government just spends what ever it's going to spend on deficit and prints debt so the meaningful metric is private sector liquidity.
- thoughtstheseus 4y ago
  Currently the Federal Reserve is attempting to reduce demand for goods and services by raising interest rates dramatically. Reducing taxes increases demand and works against the Federal Reserve here. The US needs a credible tax policy otherwise no one will buy Federal Government Debt. How does the government source money? Via taxes or new debt issuances. Without sufficient taxes you cannot issue more government debt. UK just had this issue, EU looks like it’s next. Maybe even the USD after that.
  - slaw 4y ago
    Where exactly do you see dramatic interest rate increase? Are you referring to these tiny .75% increases? We have 3-3.25% interest rate with 9% inflation.
    - thoughtstheseus 4y ago
      The Fed Funds rate was 0.25% one year ago, now it 3.25% or >10x higher…
      - Red_Leaves_Flyy 4y ago
        0.25% was never sustainable and everyone not on the take was sending the alarm in the teens . Had the fed taken the bandaid off faster following 08 they would have had the tools to support the economy without needing to pump trillions of dollars in during COVID. Now the Fed’s in a corner and if they don’t continue squeezing we’ll see 40% inflation in no time, if they do we’ll see mass suffering in 50-90% off the population. Perhaps a retroactive excess profits tax, land value tax, meaningful inheritance tax, nationalization of healthcare, mobilization of a CCC to build infrastructure/provide jobs, and massive housing build out, could ease the suffering. Alas, each of these individually are helpful enough to the common human as to be non negotiable for the half of Congress committed only to themselves and their puppeteers.
        slaw 4y ago
        Fed quickly pumped trillions of dollars to stock market, because it is good for the wealthy. Keeping interest rate above inflation is good for common people so it is not as important.
teraflop 4y ago
> Decreasing taxes to fight inflation. We've clearly got the experts in the driver's seat here. This article is not describing any kind of policy change or decision that was made by the IRS. The size of the standard deduction is set by a federal law passed by Congress. That law fixed the deduction at $3,000 (for single filers) in 1988, and specified that it should be adjusted for inflation in future years by multiplying by the change in CPI, so that the real value of the deduction stays constant. The IRS is just doing the arithmetic and updating the forms, as they're legally required to.

by anm89 4y ago

edmundsauto 4y ago

Can you elaborate on why you think it’s a bad idea to increase the standard deduction? I am not an economist so it doesn’t appear like a clearly bad idea to me, and it gets money into peoples hands when they need it.

anm89 4y ago
Counterintuitively, I'm not really against the deduction. At least as a mostly apolitical person I'll say, I believe it's a net gain for me personally. But if you were an economic planner the equations involved here are really simple. The more cash you push out to consumers, the harder it is to fight inflation. You could make an argument that it is neutral to inflation if you believe this would mean a cut in government spending that was proportional to the increase in consumer spending, but back here in reality, the government just spends what ever it's going to spend on deficit and prints debt so the meaningful metric is private sector liquidity.
thoughtstheseus 4y ago
Currently the Federal Reserve is attempting to reduce demand for goods and services by raising interest rates dramatically. Reducing taxes increases demand and works against the Federal Reserve here. The US needs a credible tax policy otherwise no one will buy Federal Government Debt. How does the government source money? Via taxes or new debt issuances. Without sufficient taxes you cannot issue more government debt. UK just had this issue, EU looks like it’s next. Maybe even the USD after that.
- slaw 4y ago
  Where exactly do you see dramatic interest rate increase? Are you referring to these tiny .75% increases? We have 3-3.25% interest rate with 9% inflation.
  - thoughtstheseus 4y ago
    The Fed Funds rate was 0.25% one year ago, now it 3.25% or >10x higher…
    - Red_Leaves_Flyy 4y ago
      0.25% was never sustainable and everyone not on the take was sending the alarm in the teens . Had the fed taken the bandaid off faster following 08 they would have had the tools to support the economy without needing to pump trillions of dollars in during COVID. Now the Fed’s in a corner and if they don’t continue squeezing we’ll see 40% inflation in no time, if they do we’ll see mass suffering in 50-90% off the population. Perhaps a retroactive excess profits tax, land value tax, meaningful inheritance tax, nationalization of healthcare, mobilization of a CCC to build infrastructure/provide jobs, and massive housing build out, could ease the suffering. Alas, each of these individually are helpful enough to the common human as to be non negotiable for the half of Congress committed only to themselves and their puppeteers.
      - slaw 4y ago
        Fed quickly pumped trillions of dollars to stock market, because it is good for the wealthy. Keeping interest rate above inflation is good for common people so it is not as important.

teraflop 4y ago

> Decreasing taxes to fight inflation. We've clearly got the experts in the driver's seat here. This article is not describing any kind of policy change or decision that was made by the IRS. The size of the standard deduction is set by a federal law passed by Congress. That law fixed the deduction at $3,000 (for single filers) in 1988, and specified that it should be adjusted for inflation in future years by multiplying by the change in CPI, so that the real value of the deduction stays constant. The IRS is just doing the arithmetic and updating the forms, as they're legally required to.