Mary Manning Cleveland — Is Paul Krugman's Liquidity Trap Really an Inequality Trap?

Mary Manning Cleveland makes a good case that if are going to fund deficits with through Treasury "debt" offset, then we also need to address hoarding through tax policy as disincentive. There is no reason for the government to make up for increased saving desire based on hoarding at the top, when this leads to gross inequalities. Hoarding needs to be discouraged at the same time that increased nongovernment saving desire needs to be offset. 

The macro solution is clear based on sectoral balances but there are different policy approaches through targeted expenditure and taxation.

While increasing taxation to address saving desire seems to go against functional finance, it can be argued that it is possible to offset increased saving desire through expenditure and also discourage hoarding by tax policy.

The Huffington Post
Is Paul Krugman's Liquidity Trap Really an Inequality Trap?
Mary Manning Cleveland | Adjunct Professor of Environmental Economics, Columbia University