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Is there a difference between deleting money and paying taxes?

HonestJoe said:
I can’t help wondering what you believe would change as a result of this policy. I’m not sure why it’s even being suggested it in the first place.
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yes, agreed its a senseless question and OP does not say why on earth he thinks its not senseless. Monetary policy is largely settled at this point: no inflation. the main economic problem these days is why do liberals think taxing and spending stimulates the economy when taxing is unspending??
 
Lafayette said:
And who would chose how much and to whom? The Secretary of the Treasury?
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The same way they decide on how much to tax people.

Lafayette said:
The US Treasury simply sells T-notes to banks, and banks make the funds available. If there is no Demand for those funds, they do not seep into the economy and do not help. Which is exactly what happened post-GreatRecession.
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Forgive me, I've been away for a while, I forget the context of this statement.

Lafayette said:
The Replicants in the HofR refused adamantly any further stimulus-spending from 2010 onwards in order to thwart Obama's reelection. That failed, of course. But, neither did the economy create any net new-jobs from 2010 to 2014 because there was no stimulus-spending to do so!
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I agree.

Lafayette said:
I think Europe has proven that governments should do "the least possible" to interfere in a market-economy. Because by doing so, they screw it up the most.
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There is a difference between doing "things" and doing the "wrong things". In other words, it's not that governments are making decisions and setting policy, it's that the decisions and policy either fail to meet the goals set for them, or the goals set results in negative consequences. Why that happens is, IMO, the fact that most people don't understand the economy at a macroeconomic level.

Lafayette said:
Getting into economic Deep-Sneakers is a lot easier than getting out. (Every recession proves this point - and yet we remain blind to the fact when it comes to economic governance.) But governments should also do the most possible to assure that those who suffer most are NOT 14% of the population.
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Here you are advocating economic policy based on your understanding of economic accounting. Now I don't disagree with you, I'm just trying to make a distinction between policy and accounting. If your understanding of accounting was wrong, your support of policy would also be wrong.

The problem isn't that government is making decisions, it's that our representatives that set policy don't understand economic accounting.

Lafayette said:
And I am convinced that to do so would reduce crime-rates magnificently in the US! Where there is a great need to do so!
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Again, forgive me, I'm not sure what this is addressing.
 
HonestJoe said:
Ignoring the practical consequences of implementing the policy, if that money was literally deleted from the system, the main consequence would be spiralling inflation as there’d be less money but the same assets.
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Today, the government taxes ~$3 trillion and spends $4 trillion, a net +$1 trillion to the economy.

Now defacto, most people believe that the government takes the $3 trillion and puts it into account that it spends from and when it comes up short it "borrows" the rest.

What I'm saying is, hypothetically, if people deleted the money in their accounts equal to what they would have paid in taxes (in keeping with my example above, let's say all together people delete $3 trillion) and the government creats and spends $4 trillion and adds a net $1 trillion to the economy ($3 trillion was removed via deletion and $4 trillion was added via creation).

My question is, what's the difference?

There wouldn't be any inflation as the net money added to the economy would be the same. The government would still in this scenario sell bonds to cover the difference between the amount deleted and the amount created and spent into the economy.


HonestJoe said:
Government wouldn’t have any income but still have expenses and debts.
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Today when you get a tax return, the US Treasury doesn't transfer money from some pool of taxes it collected (fiscally speaking, spending actually comes before tax collection so there is no pool to draw from). The US Treasury simply sends an instruction via the Fed to credit your account the amount of you're return. That money is litterally created from thin air. The opposite is true when it collects taxes.


So the Treasury starts the year sending $4 trillion into the economy. The Treasury can do this because it knows that later that year the Treasury will collect at least some of the money as taxes thus preventing potental, inflation. If it collects less in taxes than it spends, it will sell bonds which will simply exchange one US government liability for another. THe selling of Treasuries simply moves money from a highly liquid state (the money in our bank accounts) to a less liquid state (like money in our savings) because that's what Treasuries are, savings accounts in US dollars.


HonestJoe said:
Their obvious solution would be to print more money, both balancing out the “deletion” (and thus the inflation) and giving them the income. If they printed the same amount they would have received in taxation, the practical difference would be theoretically zero but I doubt any government would be able to resist printing a little more than people delete to increase popularist spending or line their own pockets.

I can’t help wondering what you believe would change as a result of this policy. I’m not sure why it’s even being suggested it in the first place.
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That's the point, I don't think anything would change. I'm not advocating that we do things like this. It's just a thought experiment ment to get people to think about the nature of the government as it relates to money. Thus, statments about what people might do if this were to take place are beyond the scope of what I'm getting at.
 
csbrown28 said:
That's the point, I don't think anything would change. I'm not advocating that we do things like this. It's just a thought experiment ment to get people to think about the nature of the government as it relates to money. Thus, statments about what people might do if this were to take place are beyond the scope of what I'm getting at.
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If you're actually talking about citizens "deleting" the money in their accounts and the government "creating" exactly the same amount of money, with everything else around borrowing and spending remaining the same then sure, that wouldn't have any technical difference. I'm not sure the fact actually says anything special about government and money though. Sorry.
 
Lafayette said:
And who would chose how much and to whom? The Secretary of the Treasury?

The US Treasury simply sells T-notes to banks, and banks make the funds available. If there is no Demand for those funds, they do not seep into the economy and do not help. Which is exactly what happened post-GreatRecession.

The Replicants in the HofR refused adamantly any further stimulus-spending from 2010 onwards in order to thwart Obama's reelection. That failed, of course. But, neither did the economy create any net new-jobs from 2010 to 2014 because there was no stimulus-spending to do so!

I think Europe has proven that governments should do "the least possible" to interfere in a market-economy. Because by doing so, they screw it up the most.

Getting into economic Deep-Sneakers is a lot easier than getting out. (Every recession proves this point - and yet we remain blind to the fact when it comes to economic governance.) But governments should also do the most possible to assure that those who suffer most are NOT 14% of the population.

And I am am convinced that to do so would reduce crime-rates magnificently in the US! Where there is a great need to do so!
Top-Ten-Countries-With-Highest-Reported-Crime-Rates.jpg
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Are you sure that 11 millions is a rate?
 
HonestJoe said:
If you're actually talking about citizens "deleting" the money in their accounts and the government "creating" exactly the same amount of money, with everything else around borrowing and spending remaining the same then sure, that wouldn't have any technical difference. I'm not sure the fact actually says anything special about government and money though. Sorry.
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It's ok, it's not easy to "see" what's going on. I submit to you that what it really means is that the government isn't operationally constrained by the number of tax dollars it collects. You actually understand this whether you realize it or not. Your last reply was spot on. The real consideration is inflation, not the number of dollars the government collects when deciding how much it can spend.

In other words, if there are spare capacity and labor, the government can (some combination of) fewer taxes/ more spending. This is because inflation, despite the econ 101 belief that more dollars=more inflation, happens when demand outstrips supply. If there is existing unused capacity to meet potential future demand, then additional net dollar creation will have little effect on inflation.

And indeed that's exactly what we see in our economy. As of this week, our industries are using 77.1% of their potential productive capacity.

In that case, will creating more dollars create a situation where demand outstrips supply? It shouldn't if companies have capital assets sitting unused.

Does that make sense?
 
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csbrown28 said:
The real consideration is inflation, not the number of dollars the government collects when deciding how much it can spend.
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yes inflation of about 25% a year would be one huge concern that would lead to depression. Another would be it would punish anyone who held cash, was poor, and had no inflating assets.
 
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