3 ms·

> (Also, again, that 35% already includes interest payments already.) Again, no, because if the 35% included interest payments, then if hypothetically there we

> (Also, again, that 35% already includes interest payments already.) Again, no, because if the 35% included interest payments, then if hypothetically there were no interest payments, my tax burden would be 30% now (no 5% taxes to interest). I understand that if nominal debt remained the same, then 2% inflation would eventually whittle it away (or whichever inflation/monetizing rate), but effectively whether by monetary inflation or taxes, taxpayers still pays the same amount, just a matter of when and in what way.

JumpCrisscross 2y ago
> no, because if the 35% included interest payments, then if hypothetically there were no interest payments, my tax burden would be 30% now (no 5% taxes to interest) No. To illustrate one element of the complexity, imagine we just defaulted on our debt and ignore the credit (but not asset) consequences. No more government debt. Let's now assume that no new spending is allowed, and the surplus must be returned in the form of tax cuts. You would expect the surplus to vastly exceed the amount of interest being paid. Because now we're talking about principal, too. You'd also expect tax receipts to fall as everyone who expected those interest payments pulls back spending. That money paid to Americans supports the economy--and through it, taxation--in a complicatedly circular way. (You're also conflating personal income and GDP, but we'll let that slip and count any taxes you incur directly or indirectly, as taxes you pay.) > effectively whether by monetary inflation or taxes, taxpayers still pays the same amount, just a matter of when and in what way No, that's the point. Inflation is heterogenous in a way taxation is not. You could erode the purchasing power of a Treasury by $1 without causing a commensurate amount of inflation. It might be more or less depending on a number of factors. Your mental model works for a small country with a pegged currency, e.g. Panama. It doesn't when we consider monetary effects.

JumpCrisscross 2y ago

> no, because if the 35% included interest payments, then if hypothetically there were no interest payments, my tax burden would be 30% now (no 5% taxes to interest) No. To illustrate one element of the complexity, imagine we just defaulted on our debt and ignore the credit (but not asset) consequences. No more government debt. Let's now assume that no new spending is allowed, and the surplus must be returned in the form of tax cuts. You would expect the surplus to vastly exceed the amount of interest being paid. Because now we're talking about principal, too. You'd also expect tax receipts to fall as everyone who expected those interest payments pulls back spending. That money paid to Americans supports the economy--and through it, taxation--in a complicatedly circular way. (You're also conflating personal income and GDP, but we'll let that slip and count any taxes you incur directly or indirectly, as taxes you pay.) > effectively whether by monetary inflation or taxes, taxpayers still pays the same amount, just a matter of when and in what way No, that's the point. Inflation is heterogenous in a way taxation is not. You could erode the purchasing power of a Treasury by $1 without causing a commensurate amount of inflation. It might be more or less depending on a number of factors. Your mental model works for a small country with a pegged currency, e.g. Panama. It doesn't when we consider monetary effects.