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Little gems like this are just vestige of an obviously dysfunctional system of revenue. They’ll never get the details right because the premise is wrong to begi
by jl2718 3y ago
Little gems like this are just vestige of an obviously dysfunctional system of revenue. They’ll never get the details right because the premise is wrong to begin with.
It seems to me that the tax system is budget-negative for the US federal government. If we say that the budget is sustainable when the ratio of spending to GDP decreases year-over-year, then the only thing that matters is that economic growth is greater than inflation plus the cost of financing. Elimination of the tax system would imply an immediate economic expansion, and much better allocation of resources toward growth. We’re already quite far from ever thinking that we will fund the government with tax revenues, and the side effect of ongoing multi-trillion-dollar bond issuance is learning that tax revenues are probably irrelevant. So let’s just drop taxes and manage the budget in accordance with interest rate stability.
- JamesBarney 3y agoImagine the government printed 4.44 trillion dollars and passed twice the total covid stimulus every year. We'd either have massive inflation or the fed would need to jack up interest rates to the 20-40%. Economies don't do well with exploding inflation or sky high interest rates.
- jl2718 3y agoI would have thought so too. Then I looked at the data. In the first 11 months of 2023, the treasury ‘printed’ $22.7 Trillion. Tax revenue is about 10% of cash flow. https://www.sifma.org/resources/research/us-treasury-securities-statistics/ https://www.sifma.org/resources/research/us-treasury-securit...
- paulryanrogers 3y agoTaxes are also a soft power, levered to accomplish things without the direct threat of violence. Not sure it's worked out so well in practice, but that is the argument.
- iraqmtpizza 3y ago[flagged]
- rayiner 3y agoIt’s a basic premise of MMT that you need taxes to take money out of the economy to check inflation.
- tptacek 3y agoOK, but MMT is a fringe theory.
- dctoedt 3y ago> MMT is a fringe theory. MMT makes intuitive sense as long as you keep in mind its predicate assumptions: 1) The government borrows in the currency that it issues (dollars, pounds, yen), thus the goverment can inject more money into the economy at will — thus increasing "consumer" demand for goods and services; AND 2) there's enough slack productive capacity in the economy to meet the increased demand without causing price inflation. Stephanie Kelton's book, The Deficit Myth, was a good read. Disclaimer: I'm unburdened by any formal economics training at all (apart from what I picked up from antitrust law). Quaere whether MMT critics are like Ptolemaic geocentric astronomers criticizing the Copernican / Keplerian model ....
- tptacek 3y agoThere's probably a better word that captures "fringe" without implying a value judgement (though: I'm not a fan) --- I'd just say, MMT was never operationalized in this administration (Janet Yellen is not an MMT-er). What you do see is partisan claims that any kind of overspending represents "MMT", which is of course a transparently silly argument.
- JamesBarney 3y agoIf the government borrows and slack remains in the economy, standard economic theory also predicts limited effects on inflation. What about MMT is different? The two concerns that standard economics seems to have around the government borrowing excess money is higher debt load, and crowding out.
- 3y ago