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I think one part that’s missing from this narrative that’s otherwise solid is that the Clinton administration raised taxes while simultaneously expanding global

by gen220 3y ago

I think one part that’s missing from this narrative that’s otherwise solid is that the Clinton administration raised taxes while simultaneously expanding globalization (NAFTA, expanded ties with China). Nowadays, we’d be raising taxes while globalization is contracting. On-shoring is inflationary, because the same goods as before cost more. Raising taxes in an inflationary environment is scarier than raising taxes in a deflationary environment.

rhelz 3y ago
> Raising taxes in an inflationary environment is scarier than raising taxes in a deflationary environment. I know it can be scary, but, we are going to have to muster the courage to try unorthodox things--like actually paying the bills. Raising taxes in an inflationary environment can be a very beneficial move. Why? Higher taxes reduce demand, which helps fight inflation. This takes some pressure off of the Fed. The Federal Reserve only has a very few policy tools to control inflation or to stimulate the economy: basically they can either rase rates or lower rates. But if inflation is being controlled by increased taxes, the Fed doesn't have to raise interest rates as much--or even at all--to control inflation. And a lower interest rate means that companies can afford invest in things which will increase profits and will raise the productivity of its workers. Which fights inflation. In addition, higher taxes means lower deficits, which means the government isn't hoovering up all the money available for investment. It will issue fewer bonds, and people who would have bought those bonds will have to start investing their money in actual productive businesses. Which also helps inflation. It doesn't have to be a doom spiral--we can spiral up if we just stop buying into the notion that we can get out of this if only we make the deficit large enough.
- gen220 3y ago
  I mean I totally agree with you, I just don't think there's political willpower to swallow the pill and actually pass legislation that would increase taxes. Because, all else equal, capital owners (who set the policy agenda in Congress) would prefer to keep their wealth continue rolling the dice until they can't anymore.
  - rhelz 3y ago
    Its easy to forget--but we are the many; they are the few. And Trump hasn't quite succeeded in rendering our votes moot. Capital owners can only control congress by persuading us that we should let them. I believe its a very good thing that we have billionaires--look at what China's economy did once they let some people become billionaires. But in China or anywhere else, there are only billionaires because we believe that their existence benefits us--that we are better off if there are billionaires around. If it doesn't benefit us to have them around, eventually we will all figure that out and change things so that once again they do benefit us.

by gen220 3y ago

rhelz 3y ago

> Raising taxes in an inflationary environment is scarier than raising taxes in a deflationary environment. I know it can be scary, but, we are going to have to muster the courage to try unorthodox things--like actually paying the bills. Raising taxes in an inflationary environment can be a very beneficial move. Why? Higher taxes reduce demand, which helps fight inflation. This takes some pressure off of the Fed. The Federal Reserve only has a very few policy tools to control inflation or to stimulate the economy: basically they can either rase rates or lower rates. But if inflation is being controlled by increased taxes, the Fed doesn't have to raise interest rates as much--or even at all--to control inflation. And a lower interest rate means that companies can afford invest in things which will increase profits and will raise the productivity of its workers. Which fights inflation. In addition, higher taxes means lower deficits, which means the government isn't hoovering up all the money available for investment. It will issue fewer bonds, and people who would have bought those bonds will have to start investing their money in actual productive businesses. Which also helps inflation. It doesn't have to be a doom spiral--we can spiral up if we just stop buying into the notion that we can get out of this if only we make the deficit large enough.

gen220 3y ago
I mean I totally agree with you, I just don't think there's political willpower to swallow the pill and actually pass legislation that would increase taxes. Because, all else equal, capital owners (who set the policy agenda in Congress) would prefer to keep their wealth continue rolling the dice until they can't anymore.
- rhelz 3y ago
  Its easy to forget--but we are the many; they are the few. And Trump hasn't quite succeeded in rendering our votes moot. Capital owners can only control congress by persuading us that we should let them. I believe its a very good thing that we have billionaires--look at what China's economy did once they let some people become billionaires. But in China or anywhere else, there are only billionaires because we believe that their existence benefits us--that we are better off if there are billionaires around. If it doesn't benefit us to have them around, eventually we will all figure that out and change things so that once again they do benefit us.