5 ms·

Thank you congress for passing the IRA, which did nothing but further increase inflation.

tablespoon 4y ago
> Thank you congress for passing the IRA, which did nothing but further increase inflation. And now many states are planning to "fight inflation" by literally sending people "inflation relief checks." :/
- chickenpotpie 4y ago
  If you cut checks for the bottom x% of wealth, thay bottom percentage is still better off. For example, if everyone in the bottom 25% of wealth got cut a check that doubled their wealth, inflation would not double but those peoples buying power would. The problem with the checks during the pandemic is that so many people qualified that inflation outweighed a significant amount of peoples increased buying power
  - prottog 4y ago
    > inflation would not double but those peoples buying power would I mean, inflation wouldn't double as a result of giving the bottom 25% additional money, but unless there was a matching increase in the supply of goods and services, the additional money would make prices rise.
    - p0pcult 4y ago
      Right, thereby increasing the purchasing power of those who need it most, aka, inflation relief. I dont like the recent inflation, but as someone one the upper end of the income distribution (likely true of many HN readers), my life isn't fucked up by it. Merely my discretionary income.
  - svggrfgovgf 4y ago
    "if everyone in the bottom 25% of wealth got cut a check that doubled their wealth, inflation would not double" What makes you say inflation wouldn't double? It's not clear to me that there's a linear relation between money supply/money velocity and inflation. In addition, I think there's a large psychological component to inflation: people spending money sooner than they would otherwise, i.e., quick buy it now before prices go up more; and, demanding increases in wages to match the expected increases in prices.
- dragonwriter 4y ago
  Downward redistribution is not an effort by states to fight inflation, its an effort by states to mitigate its effect on their non-rich residents end while other entities fight it.
- mgkimsal 4y ago
  Which states? I believe Michigan has north of $5B 'extra' money sitting around, which is anticipated to grow close to $10B by end of year. Maybe there will be a one-time refund check to citizens/taxpayers there, but is that marketed as 'inflation relief'? I wouldn't think so.
- naasking 4y ago
  > And now many states are planning to "fight inflation" by literally sending people "inflation relief checks." You're out of touch with reality if you think people who need inflation relief are the ones driving inflation.
bryanlarsen 4y ago
The IRA increased taxes. Taxes are the most effective means of fighting inflation.[1] Long term, the IRA will reduce energy prices. Energy is a huge component of inflation. 1: https://www.slowboring.com/p/tax-increases-are-the-best-cure-for https://www.slowboring.com/p/tax-increases-are-the-best-cure...
- throwayyy479087 4y ago
  For the rest of the class, this is an economic fringe theory taken by economists about as seriously as astronomers take flat earthers
  - JumpCrisscross 4y ago
    > this is an economic fringe theory Fiscal policy's monetary effects are not a fringe theory. Increasing taxes reduces the money supply, and a smaller money supply decreases price levels ceteris paribus. This is conventional economics. Modern monetary theory goes a step further, arguing deficits and debts don't matter, all that matters is inflation. Which is sort of true, in a way, but also useless since it provides us with no system for predicting when inflation might become problematic beyond deficits and debts.
    - wolverine876 4y ago
      > Increasing taxes reduces the money supply I don't doubt it, but I'm curious about how it works: If I buy a car from GM, who then uses the money to buy things from suppliers, who use the money to pay some people and build a new factory, etc. - that all increases the velocity of money which increases inflation. If I pay the same amount to the government, who then uses the money to buy things from suppliers ... how does that have a different inflationary effect? I'd guess that the government, with less revenue than expenses, doesn't save the tax revenue. It's not stuffed in a giant mattress at the Treasury. I would guess that it's spent, pretty soon. In fact, there might be more velocity if I give the money to the government than to a company sitting on fat cash reserves. EDIT: I just realized: Higher taxes reduce return on investment and thus reduce investment. Is that the only mechanism in play?
throwaway20222 4y ago
Or, thank you for not having the willpower to raise taxes. /s It is easier certainly to call out the IRA (even though it is doing a lot to drive a transition to a cleaner economy) because it happened, as opposed to “what ifs,” but not touching taxes as far as slowing the economy should be called out imho.
- bryanlarsen 4y ago
  The IRA raised corporate taxes, which is a very effective means of fighting inflation. The CBO called out the IRA for being ineffective because the IRA only reduced the deficit by a few hundred billion dollars, when trillions in relief were needed. Sure, trillions of dollars in increased taxes would have killed the economy, but interest rate rises are also killing the economy.
  - AnimalMuppet 4y ago
    > The IRA raised corporate taxes, which is a very effective means of fighting inflation. Can you justify the "very effective" part of that statement?
noelsusman 4y ago
I assume you mean the American Rescue Plan Act? The IRA was marginally deflationary legislation.
kccqzy 4y ago
I see people mostly refer to the IRA as an infrastructure bill. Reducing the inflation is only a secondary goal.

> Thank you congress for passing the IRA, which did nothing but further increase inflation. And now many states are planning to "fight inflation" by literally sending people "inflation relief checks." :/

chickenpotpie 4y ago
If you cut checks for the bottom x% of wealth, thay bottom percentage is still better off. For example, if everyone in the bottom 25% of wealth got cut a check that doubled their wealth, inflation would not double but those peoples buying power would. The problem with the checks during the pandemic is that so many people qualified that inflation outweighed a significant amount of peoples increased buying power
- prottog 4y ago
  > inflation would not double but those peoples buying power would I mean, inflation wouldn't double as a result of giving the bottom 25% additional money, but unless there was a matching increase in the supply of goods and services, the additional money would make prices rise.
  - p0pcult 4y ago
    Right, thereby increasing the purchasing power of those who need it most, aka, inflation relief. I dont like the recent inflation, but as someone one the upper end of the income distribution (likely true of many HN readers), my life isn't fucked up by it. Merely my discretionary income.
- svggrfgovgf 4y ago
  "if everyone in the bottom 25% of wealth got cut a check that doubled their wealth, inflation would not double" What makes you say inflation wouldn't double? It's not clear to me that there's a linear relation between money supply/money velocity and inflation. In addition, I think there's a large psychological component to inflation: people spending money sooner than they would otherwise, i.e., quick buy it now before prices go up more; and, demanding increases in wages to match the expected increases in prices.
dragonwriter 4y ago
Downward redistribution is not an effort by states to fight inflation, its an effort by states to mitigate its effect on their non-rich residents end while other entities fight it.
mgkimsal 4y ago
Which states? I believe Michigan has north of $5B 'extra' money sitting around, which is anticipated to grow close to $10B by end of year. Maybe there will be a one-time refund check to citizens/taxpayers there, but is that marketed as 'inflation relief'? I wouldn't think so.
naasking 4y ago
> And now many states are planning to "fight inflation" by literally sending people "inflation relief checks." You're out of touch with reality if you think people who need inflation relief are the ones driving inflation.

bryanlarsen 4y ago

The IRA increased taxes. Taxes are the most effective means of fighting inflation.[1] Long term, the IRA will reduce energy prices. Energy is a huge component of inflation. 1: https://www.slowboring.com/p/tax-increases-are-the-best-cure-for https://www.slowboring.com/p/tax-increases-are-the-best-cure...

throwayyy479087 4y ago
For the rest of the class, this is an economic fringe theory taken by economists about as seriously as astronomers take flat earthers
- JumpCrisscross 4y ago
  > this is an economic fringe theory Fiscal policy's monetary effects are not a fringe theory. Increasing taxes reduces the money supply, and a smaller money supply decreases price levels ceteris paribus. This is conventional economics. Modern monetary theory goes a step further, arguing deficits and debts don't matter, all that matters is inflation. Which is sort of true, in a way, but also useless since it provides us with no system for predicting when inflation might become problematic beyond deficits and debts.
  - wolverine876 4y ago
    > Increasing taxes reduces the money supply I don't doubt it, but I'm curious about how it works: If I buy a car from GM, who then uses the money to buy things from suppliers, who use the money to pay some people and build a new factory, etc. - that all increases the velocity of money which increases inflation. If I pay the same amount to the government, who then uses the money to buy things from suppliers ... how does that have a different inflationary effect? I'd guess that the government, with less revenue than expenses, doesn't save the tax revenue. It's not stuffed in a giant mattress at the Treasury. I would guess that it's spent, pretty soon. In fact, there might be more velocity if I give the money to the government than to a company sitting on fat cash reserves. EDIT: I just realized: Higher taxes reduce return on investment and thus reduce investment. Is that the only mechanism in play?

throwaway20222 4y ago

Or, thank you for not having the willpower to raise taxes. /s It is easier certainly to call out the IRA (even though it is doing a lot to drive a transition to a cleaner economy) because it happened, as opposed to “what ifs,” but not touching taxes as far as slowing the economy should be called out imho.

bryanlarsen 4y ago
The IRA raised corporate taxes, which is a very effective means of fighting inflation. The CBO called out the IRA for being ineffective because the IRA only reduced the deficit by a few hundred billion dollars, when trillions in relief were needed. Sure, trillions of dollars in increased taxes would have killed the economy, but interest rate rises are also killing the economy.
- AnimalMuppet 4y ago
  > The IRA raised corporate taxes, which is a very effective means of fighting inflation. Can you justify the "very effective" part of that statement?

noelsusman 4y ago

I assume you mean the American Rescue Plan Act? The IRA was marginally deflationary legislation.

kccqzy 4y ago

I see people mostly refer to the IRA as an infrastructure bill. Reducing the inflation is only a secondary goal.