How Would You Prefer to Fight Inflation?

Nov 28, 2010
79,752
32,972
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Maryland
Most of us think of inflation as a problem. But as should have become clear in the GOP Recession of 2008, inflation is also a tool.

As the recent Jackson Hole paper on inflation pointed out, we spent a lot of money to ward off the worst economic impacts of the pandemic. The question is how to pay for that.

Logically, we would pay for it by raising revenues. If the outlays stimulated economic growth, then that might happen naturally as more economic activity brought in more taxes. But the money spent during the pandemic wasn't to stimulate growth, it was to fend off collapse. No "natural" increase in revenues.

We could also pay for it by raising taxes. The Dems actually tried to do this in some of their legislation, but were mostly shut down by the GOP/Manchin/Sinema hydra.

So that leaves inflation. Inflation lets you pay off debt with cheaper dollars. But then you, um, have inflation to deal with.

The Fed has decided that raising rates will stamp out inflation, if they just keep at it long and hard enough. But higher interest rates can't fix broken supply chains and war dislocations. So that's only a partial solution that is likely to cause its own problems, perhaps even another recession.

So . . . how would you tackle inflation?
 

Finance85

HR Legend
Oct 22, 2003
18,325
19,710
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Historically, increasing the GDP and growing the economy produces more total tax revenue than increasing tax rates. That takes time, however.

The two current causes of inflation are federal spending and energy prices. We have to stop the insane deficit spending, and reverse the energy policies implemented in the last year and a half that are chilling production.
 

seminole97

HR Legend
Jun 14, 2005
19,105
19,461
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Most of us think of inflation as a problem. But as should have become clear in the GOP Recession of 2008, inflation is also a tool.
Inflation is a regressive tax.
The process by which we foster inflation in our monetary system (injecting new credit) benefits the rich because they have better access to credit and are better positioned to use credit to buy assets that appreciate in price above the inflation rate.
Inflation drives up the expenses of the poor and the price of assets for the rich.

So . . . how would you tackle inflation?
Quit inflating the money supply.
If inflating the money supply was a net benefit we wouldn't make counterfeiting a crime, we'd hail their individual initiative to generate economic 'stimulus'.
 

Capital1Hawk

HR All-American
Jan 23, 2007
3,626
2,130
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Historically, increasing the GDP and growing the economy produces more total tax revenue than increasing tax rates. That takes time, however.

The two current causes of inflation are federal spending and energy prices. We have to stop the insane deficit spending, and reverse the energy policies implemented in the last year and a half that are chilling production.
Cut spending, get out of here! Natural gas is going back to 2008 prices, glad I have geothermal.
 
Nov 28, 2010
79,752
32,972
113
Maryland
Historically, increasing the GDP and growing the economy produces more total tax revenue than increasing tax rates. That takes time, however.

The two current causes of inflation are federal spending and energy prices. We have to stop the insane deficit spending, and reverse the energy policies implemented in the last year and a half that are chilling production.
I agree with you on deficit spending. You, I'm guessing, would prefer to cut spending; I would rather raise taxes.

Strongly disagree on energy because, you know, the climate crisis.

I would make a modest exception on deficits if that spending supported aggressive investment in green energy and related infrastructure. But I would prefer to raise revenues to pay for that up front.
 
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sober_teacher

HR Legend
Mar 26, 2007
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Historically, increasing the GDP and growing the economy produces more total tax revenue than increasing tax rates. That takes time, however.

The two current causes of inflation are federal spending and energy prices. We have to stop the insane deficit spending, and reverse the energy policies implemented in the last year and a half that are chilling production.
well Oil production has overall been rising, its been a refining problem that has at least partly contributed to a supply bottleneck but that should gradually improve as existing refining factories come back online and new ones are built. I disagree with your premise that US energy policies have been a major cause of inflation.

we’re in a weird situation economically where imo a lot of the factors that contributed to the rise in inflation have lingered longer than most people realistically expected. Covid lingered longer than was thought it would, obviously the war in Ukraine has contributed as well, etc.

just feels like a lot of the traditional models for inflation aren’t totally accurate because in many ways we’re in an unprecedented situation.

not a finance expert, just my .02.
 

mthawkeyes

HR Heisman
Mar 22, 2007
7,425
13,201
113
Fourmile Creek
From the silence, I can only conclude that supply side economics is dead. If lowering taxes on the wealthy can stimulate demand and fire up the economy, we can also decrease demand by raising taxes on the wealthy. I'm relieved to know that after 40+ years conservatives have finally lost faith in this experiment and, being intellectually consistent, won't try to advance it again any time in the foreseeable future.
 
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BanjoSaysWoof

HR MVP
Dec 2, 2017
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Inflation is a regressive tax.
The process by which we foster inflation in our monetary system (injecting new credit) benefits the rich because they have better access to credit and are better positioned to use credit to buy assets that appreciate in price above the inflation rate.
Inflation drives up the expenses of the poor and the price of assets for the rich.


Quit inflating the money supply.
If inflating the money supply was a net benefit we wouldn't make counterfeiting a crime, we'd hail their individual initiative to generate economic 'stimulus'.

You’re on my Xmas list. Def gonna repeat that one when I need to make a point.
 

wcbtee

HR All-American
Gold Member
Apr 21, 2002
2,554
3,247
113
Most of us think of inflation as a problem. But as should have become clear in the GOP Recession of 2008, inflation is also a tool.

As the recent Jackson Hole paper on inflation pointed out, we spent a lot of money to ward off the worst economic impacts of the pandemic. The question is how to pay for that.

Logically, we would pay for it by raising revenues. If the outlays stimulated economic growth, then that might happen naturally as more economic activity brought in more taxes. But the money spent during the pandemic wasn't to stimulate growth, it was to fend off collapse. No "natural" increase in revenues.

We could also pay for it by raising taxes. The Dems actually tried to do this in some of their legislation, but were mostly shut down by the GOP/Manchin/Sinema hydra.

So that leaves inflation. Inflation lets you pay off debt with cheaper dollars. But then you, um, have inflation to deal with.

The Fed has decided that raising rates will stamp out inflation, if they just keep at it long and hard enough. But higher interest rates can't fix broken supply chains and war dislocations. So that's only a partial solution that is likely to cause its own problems, perhaps even another recession.

So . . . how would you tackle inflation?
Stop all added f@#King governmental spending would be be a nice start.

Huge deficits and sky high interest rates will return us to the prosperity of the 1970's.
 

AreWeCross

All-Conference
May 2, 2022
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I stopped reading the OP when he he referenced inflation and GFC in the same sentence.
 

sober_teacher

HR Legend
Mar 26, 2007
14,007
17,494
113
I would take one.

Either on its own won’t solve anything. Added taxes won’t create an incentive to reign in spending. Slashing spending enough to make a dent would starve many parts of the budget that most agree are essential.

Hard choices will be needed at some point, but we don’t have anyone with moral courage to tell public what is needed vs what is popular.
 
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onlyTheObvious

HR Heisman
Jan 3, 2021
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Either on its own won’t solve anything. Added taxes won’t create an incentive to reign in spending. Slashing spending enough to make a dent would starve many parts of the budget that most agree are essential.

Hard choices will be needed at some point, but we don’t have anyone with moral courage to tell public what is needed vs what is popular.
Until the interest on the debt gets closer to the total revenue taken in, I don’t see anything changing.
 

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