4 ms·
Also, worth noting that the "tax cuts" they are opposing in this election cycle are the ending of the cuts put in during Bush. Those cuts reduced the tax rate
by nirvana 14y ago
Also, worth noting that the "tax cuts" they are opposing in this election cycle are the ending of the cuts put in during Bush. Those cuts reduced the tax rate for the poorest people in the country by %50, from %15 to %10, and for the richest by %3, from %39 to %36.
When you take %50 more of a poor person's income in taxes, you take money they need to live, and this will hurt the economy, both because they can't spend it, and also because some of them will be forced to make less beneficial choices, merely to survive.
Meanwhile, the effective reality is that inflation is a tax. Since inflation devalues the dollars in circulation, the deficit spending that the "anti-tax cut" crowd tends to want to do is really just another form of tax.
Taxes themselves are better, because they don't rely on obscuring the fact that your being taxed (By changing the underlying value of money) and thus they tend to cause fewer bad decisions on the part of economic actors.
Many people make bad investments (eg: houses) thinking they are getting a positive return, when in real dollars they are not. (Houses don't appreciate, the dollar devalues.)
- fauigerzigerk 14y agoInflation is not a tax for everyone. It's actually a tax cut for debtors. The U.S as a whole is a country of debtors. The balance of payments is negative as well so it's getting worse. The worst thing that could happen is deflation. Inflation is a net positive in this situation. The effect of inflation on working income depends on whether or not wage inflation is above or below CPI.
- seanmcdirmid 14y agoInflation in moderation has its uses. It acts to cut debt and encourages people to spend money and stimulate the economy today, which is preferable sometimes over encouraging saving. Compared to inflation, deflation is quite evil: your debt load goes up, what you want will be cheaper tomorrow, your best option is to save. Look at Japan's lost decade to see what that would bring us.
- fauigerzigerk 14y agoI totally agree with you on inflation. I would just add that Japan's experience has some unique aspects that will hopefully make it easier for the U.S to avoid that kind of development (I'm more pessimistic about Europe in that regard). Particularly, Japan has a shrinking population and the asset price bubble in the late 80s was a lot bigger than the real estate bubble in the U.S up to 2006.
- seanmcdirmid 14y agoOur birth rate and relatively friendly immigration policies (compared to Japan at least) are an advantage here. We also have enough room to grow to 400 or 500 million in the next few decades, which would definitely solve any demographic problem if that growth came from births and young immigration.