Hacker News new | ask | show | jobs
by silotis 488 days ago
It's usually not stated so explicitly, but often implied by people who advocate for expansive entitlement programs. When pressed on how to pay for such programs, "tax the rich" is often their only answer.
2 comments

I think you’re misusing the word “entitlement” as it is used with respect to US government spending. Can you elaborate what you think the connection is?
When the real answer is, you pay for it by spending the money.

Because money is a circuit, tax is a percentage and money doesn’t stop at its first use.

The technical term for the number of times a dollar is spent in a given time period is the velocity of money [1]. The velocity of money in the United States has dropped sharply over the past 30 years [2] as inflation on inelastic goods like housing, education, healthcare, and food have far outstripped the consumer price index and people opt to spend their money buying things from large corporations instead of small businesses in their communities.

The velocity of money is about as good a high-level measure of where the balance between “Wall Street and Main Street” lies as you’ll find - and there’s not much juice left to wring out from your typical American when a typical dollar is spent 1.2 times before it winds up accumulating interest in a billionaire’s bank account all over again (and that’s with the Federal government spending at unforeseen levels running an all time high and increasing deficit).

[1] https://en.m.wikipedia.org/wiki/Velocity_of_money

[2] https://fred.stlouisfed.org/series/M2V

“Velocity of money” is an abstract theoretical concept from the monetarist book which is defined tautologically and has nothing to do with what it claims to be (which is annoyingly common in economics, “productivity” is the same)
Nobody can measure the 'velocity of money', since that is determined by what you divide GDP by.

And nobody knows what that is.

Anybody decomposing GDP into "MV" first needs to explain what M is, and they can't.