> No, the states and the federal government can too, by destroying money (IE increasing taxes).
Destroying money (taxes, when fiscal policy is viewed through the lens of monetary effects) is counterinflationary. Creating money (spending) is inflationary. Broadly speaking.
It seems that you're largely restating what the comment you replied to was saying. If not, please correct me because I may be missing some nuance that I shouldn't have. In that line of thought though, cutting taxes without cutting spending increases inflation. Because the borrowing of newly printed money doesn't stop. Without 1:1 cuts in spending it's problematic. That's what happened in 2017[0], a ~2.3 trillion dollar "charge" without increasing wages or jobs. As we see today. We were already at historically low tax rates while deficit spending, and then taxes were cut. I'm not a "supply side" guy so I'm not surprised that things didn't work out. Maybe someone will try to link growth in 10 years back to it. :)
I'm for low taxes of course. I don't know too many that aren't. But they have to make sense as well.
Oh my bad, I must’ve read the parent incorrectly. Rereading it now, I see my error. Yes I agree with you. It is a pretty simple concept. Any mechanism that reduces the amount of money in circulation has a deflationary effect.
I don't nobody loves taxes, and government wastes a lot of money, but doesn't some of that money goes back to the economy via government spending on infrastructure, workers, software, new projects, etc? So how is that destroying money?
Is that through treasuries sold by the US gov? If so, we wouldn't be "destroying" money by funding these.
The federal reserve has large holdings as well, which I believe it generated buying corporate bonds and MBS during covid - would we be "destroying" money by giving the federal reserve the cash to balance the books on all of those holdings so it can hold them to fruition (after buying them at a loss) without ever having to sell? It could then just toss away all of that money it received to cover the loss.
This could work, but I don't know the details or if this is the plan.
Just confused, and I've never had a real conversation about this - I hear "print money, tax money" but it seems too simplistic.
I'm not sure as to the specifics of this scenario, but as a general rule, the paying of debt is the destruction of money, because the debt now no longer exists on the balance sheet of the creditor. And I believe that's applicable here.
Inflation, especially dollar inflation, is more complicated than 'printing more = inflation'.