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Sunday, August 2, 2020

The Extremely Boring Idea That Could Save the Economy — Jordan Weissmann


Automatic stabilizers.
 Automatic stabilizers won’t entirely eliminate the need for Congress to act when the economy tanks, since each recession has its own unique root causes that usually need to be addressed. In 2008, there was a housing crash and financial crisis; today, there’s a pandemic that’s shut down normal life. Lawmakers will still have to come up with solutions to tomorrow’s calamities as they arise.
What stablizers would do is spare our elected officials the need to reinvent the wheel every time a crisis comes up, by making the basic, well-established steps for fighting a recession an automatic routine that doesn’t require a massive partisan fight to enact.
The MMT JG is also an automatic stabilizer, but the article doesn't mention it.

Spending is not the only tool, either. Another automatic stabilizer that is often not considered in the tax rate. Targeted variable tax rates could be employed along with flexible spending to moderate cyclical swings, although secular issues might have to be addressed with specific legislation to target particular emergent challenges.
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4 comments:

  1. Andrew AndersonAugust 2, 2020 at 2:40 PM

    An equal Citizen's Dividend, to replace all fiat creation for private interests, such as for the banks, is the IDEAL, ethical way to counter deflation and without paying people to waste their time.

    ReplyDelete
  2. NeilWAugust 3, 2020 at 1:57 AM

    Taxation is generally a poor auto-stabiliser - due to the delay in payment.

    To beef it up it needs to be a payroll tax - preferably paid by the employer.

    ReplyDelete
  3. Tom HickeyAugust 3, 2020 at 1:30 PM

    @ NeilW

    Agree. I was thinking in addition that Carlos (beowulf) Mucha also proposed a variable tax rate structure but I don't have a link to that now.The variable tax rate structure is not a fast acting interventional type but a way to adjust taxes to changing conditions along the cycle.

    ReplyDelete
  4. Andrew AndersonAugust 3, 2020 at 2:26 PM

    Poor Neil and Tom, the replacement they have for "tax and spend" is spend and tax the non-rich.

    Hint: Increasing the DEMAND for fiat would ALSO INCREASE the amount that could be created for the general welfare for a given amount of price inflation risk.

    But increasing the demand for fiat would mean de-privileging the banks (and private bank deposits) and we can't have that, can we Neil?

    ReplyDelete