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Comment by rjbwork | Hacker News Reader

The Fed's biggest problem is a gridlocked congress and a categorical reluctance to take money out of existence at the rate it needs to be (e.g. tax the rich). It's tantamount to trying to fly a hot air balloon. You might be able to keep the thing from crashing, but all you've got is one lever and you've got no real control over where it's going.

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Taxes were, up until the 80s, how the government controlled inflation. They run a deficit and print to spend (or more accurately, borrow from the fed who prints), and then they tax to remove some of that from circulation. Now they don't do the last part. But you've got to ask yourself, why do it this way? How is it better for everyone?

First, consider that in a democratic system, there will always be political will to spend, and there will always be political will to reduce taxes. It was inevitable that taxes would come down and inflation would then soar. So "run a deficit and then tax the rich/corporations/just a little more" doesn't work forever. Eventually people demand more for less.

It also has the added feature that the cantillion effect can be used to redistribute wealth. Sounds good, but then you're at the mercy of whatever is more politically expedient to the representative voting on the tax rates. If he is more beholden to his constituents, capital flows to them. If he's more beholden to his donors, guess who benefits from it. If his constituents are corn farmers, prepare for farming subsidies. Also think of this: rich people understand this wealth redistribution mechanism, most regular people or poor people do not. So while it sounds good, tax the rich more and redistribute wealth, it is more likely to be used in the opposite direction, and inevitably it will be. Better if the tool just doesn't exist at all.

To me, just getting rid of this complexity and budgeting based on tax revenue, the old way, and keeping money supply out of the hands of government, solve all these problems. Government can't print and spend, it taxes who can afford to pay based on what it needs, and it can't spend money on things that aren't in the interest of the people and businesses it is sovereign over. It doesn't find itself in a political conundrum that ensures that it spends more and taxes less, it spends only based on its ability to pay and it taxes people only based on their ability to pay. And you get rid of the cantillion effect, so no siphoning wealth to the top from the working stiff.

Not sure what political will is, here. If it is doing what the population wants, wouldn't taxing the rich be hugely popular?

Political will doesn't directly equal majority vote, for better or worse. There are factions within an electorate that matter that can imbalance even with a small contingent of the population changing their support. A guy's district has 5% who work at some steel mill for example, and he wins elections with 52%, and those steel workers support him. He might not be able to do something that all his supporters would want that they wouldn't, or to do it he might have to do things to win over another contingent to ensure his reelection. Also he needs patronage from businesses to fund his reelection, he has to think about that too. So political will is quite a bit more complex than just more than half of people wanting it. Objectives that people want have to align and not interfere with each other.

The population that matters politically is not the general population.

Democracy is two wolves and one sheep deciding what's for dinner.

Taxing the rich won't fix the fact that centrally planning interest rates doesn't fucking work.

Let the treasury auctions decide yields.

Yes, more taxes will solve all the problems. /s

The solution is making government significantly smaller, more efficient and stop handing out all kinds of subsidies, welfare payments and other transfers.

Let the economy breath again.

>stop handing out all kinds of subsidies, welfare payments and other transfers.

We can agree there as well. But unprecedented wealth accumulation at the top is not some mysterious magical force - it's what happens when we stop taxing capital accumulation the way we used to. Both are necessary to control money supply.

No its what happens when the government is involved in any way.

Power will be seized by the powerful. Take the power away from the government.

Think about all the meddling the government has done in the economy for the last few decades and where all the money has gone.

The problem is that such calls inevitably get neutralized and perverted by the political establishment, which of course does not wish to shrink itself. Entrenched interests have been very good at making sure the trough of corporate welfare is never called into question (including the artificially low rates powering the overleveraged financial industry), by construing that message of "smaller government" to mean only cutting back on spending and legislation that's aimed at mitigating the damage from the overwhelming government welfare going to companies. So while I'm a proponent of decentralization in general, as long as the corporate welfare (and the rest of the general corporate legislative agenda) continues unabated it does make sense to point out how much taxes have been cut for the same upper class that is the chief beneficiary of most types of government handouts.

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