Yet it’s very tempting for politicians to implement exactly that, because to tax people to pay for stuff is not very popular politically. They will always, always, always kick the can down the road.
Yeah, I get the feeling that this theory is mostly based on the fact that the consent of elected representatives is required to raise taxes, but not to print money.
> Yeah, I get the feeling that this theory is mostly based on the fact that the consent of elected representatives is required to raise taxes, but not to print money.
It's required for both; the fact that Congress has delegated monetary policy and not recalled it, and not done the same with fiscal policy doesn't change that, it's just the mechanism by which it provides ongoing consent to the Feds decisions in monetary policy.
Now spend $100. Tax it at 1%. Then the next person gets $99 income. Spend it all again. Tax that at 1%. Then the next person gets $99.01. Tax that at 1%. And so on like a stone skipping across a pond.
When you get to the end of the sequence and total up the tax take, what is the value?
You'll be surprised.
Now work out why that doesn't happen in the actual world. The answer is that somebody didn't spend everything they earned straight away. And that's what a deficit is.
