This is not a serious constraint on deficit reduction.
services inflation printed at 7.3% and ur worried about deflation?
that's not a valid opinion atp. we're so far from overcorrecting its scary. spending is still up over pre corona levels. ppl still drawing down excess savings. bank crisis is a real concern and prob reads through to equivalent of a few rate hikes (slok @ apollo says 150bps, most say lower)
Disincentivize property investments in family homes.
Return R&D tax credits.
Return so a semblance of the glass & steagall act.
Up the amount of coverage the FDIC is authorized to cover even before regulators need to take over.
Allow an upfront loan privately for banks to lend against temporarily with stock put as collateral.
Up the corporate tax rate.
Remove the cap on SALT taxes for those under 400k.
Change marginal tax rates for individuals.
There insane amount of things congress can do if they just… do it.
Why would you want a fiscal policy to crack inflation? Better to crack it with monetary policy and use fiscal policy to mitigate adverse distributional effects of the monetary policy, since its easier not to overshoot badly that way than with contractionary fiscal policy.
Also, while monetary policy can be adjusted more frequently, those adjustments take a while to move through the economy, so maybe you want to be careful with it or you will crush a few too many banks.
Yes, you can stop inflation while also mitigating the adverse distributional effects (adverse short-term aggregate effects, no, but that’s not what I said to mitigate.)
> You stop inflation by making people poorer.
You stop inflation by making people poorer in aggregate. Ideally you want to do that by compressing available resources, rather than doing so in equal proportions across the spectrum of means, and either of those is better than disproportionately making those already poor poorer.
Monetary policy is good for addressing the aggregate target, but its not a very good tool for tuning distributional impacts; fiscal policy is much capable of steering distribution of impacts.
If you want to combat inflation, you need to reduce demand, which really means removing "hot" dollars from the economy, not "cold" dollars.
So no, you likely can't mitigate the adverse "distributional" effects the way you want, while also effectively fighting inflation. Everyone needs to get poorer.
No, I’m not.
> A dollar held by a startup or a poor person is much more inflationary than a dollar held by a big company or rich person
Rich people have to lose more money in aggregate for the same inflation effect as poorer people losing the same amount of money, sure.
But that's fine, because its a lot less bad for rich people to lose a lot of money than people whose ability to meet basic needs is marginal to lose a little money, so, yes, my statement that the distributional goal should be compression when the broad goals is anti-inflationary was exactly what I intended, even including consideration of velocity of money in the domestic economy.
The top 1% own about 25% of assets in the US, and of that the vast majority are likely illiquid and non-cash. If you assume that the top 1% hypothetically hold 10% of the cash, then draining their cash accounts to 0 and burning it would be equivalent (not counting money velocity) to everyone else taking a 10% haircut. If you attempt to account for the velocity of money, that would likely only be a small single-digit percentage. The CPI is higher than that, and many lower- and middle-class families are seeing a much bigger loss in purchasing power thanks to increases in the prices of food, fuel, and housing.
Moreover, the last 2 years have been an experiment in exactly what you are proposing - using monetary policy to control inflation while using fiscal policy to attempt to prevent it from hitting most people. It has not worked, and it will not work in the future. In fact, the policy has had the opposite effect that you probably want: real wealth is increasingly concentrated in the hands of the wealthy, and inflation is largely concentrated in products purchased by the poor.
> Change marginal tax rates for individuals.
Politician? Why are you trying to hide your intent here. Raise taxes across the board, just say it.
You can spend in a dis-inflationary manner: increasing production capacity, facilitating resource extraction, and generally anything that helps on the supply side of things.
But absolutely, given the current Administration and the Democrat agenda, this is anathema. If anything they would rather spend to destroy supply as much as possible, since this is generally what the SDG, DIE, and Green agendas consider "success".
A great example is the Inflation Reduction Act. The "green" portions were estimated to cost $390 BB initially, but are now estimated to cost $1045 BB (yes, over a trillion dollars), and this number will almost certain go up[1].
Not a penny of it goes to anything that would increase supply of what you'll need for the "green" infrastructure, it's all pure demand, the bulk of it EV incentives. You would have trouble coming up with a more inflationary plan if you tried.
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[1] https://budgetmodel.wharton.upenn.edu/estimates/2023/4/27/up...
If necessary put in a temporary price and wage freeze. This was done under Nixon.
if they increase spending, you get more inflation, and then they have to eventually pay higher rates on their own debt
if they cut spending, they can deflate the economy, and they can't attract the tax revenues to pay their own debt
no good options in a society that has OD'd on debt since the mid 90s
if we were honest, the President would go on TV and tell us we are just going to be poorer for a while, which is something most people already know anyway