Right, so the theory is that in good times you put on the brakes so there is something in the tank you can spend during bad times. Spending can take many forms, but the traditional ones are lower interest rates and tax cuts.
The issue is that we lowered taxes significantly in the middle of good times. It's like feeding ice cream to kids already on a sugar high.
There is no room to lower taxes anymore as we are already running a significant deficit, and there is a recession coming where we are going to need to juice the economy.
This is simplistic thinking in line with the “what if the government budget was a household budget” memes that float around.
> theory is that in good times you put on the brakes so there is something in the tank you can spend during bad times
The government is not a squirrel with acorns. It can spend during both good and bad times, as the past 30+ years have shown. The only backpressure is inflation. Nobody seems to actually care about debt, despite the hand wringing.
> There is no room to lower taxes anymore as we are already running a significant deficit, and there is a recession coming where we are going to need to juice the economy.
Yes there is, they just adjust the tax rates down further. There is no floor other than zero.
I’m not talking about rubbing the country like a household, still there are considerable reasons to do some accounting.
1. Even the most spend willing economists agree there is some limit to debt that is sustainable. It’s just way higher than what most are comfortable with.
2. There is also political/popular will. If this is not there it doesn’t matter what makes economical sense. In the U.S. we are firmly against that.
Tax-cuts to the rich meant they had more money to invest in stock-market. And the tax-cuts to the corporations meant they made more profits which made them a more attractive target for stock-investors. Both effects meant the stock-market went higher and higher. And so here we are stock market doesn't seem to be going up because there are no new tax-cuts to the rich.
There is inflation which is bad for the poor people. But people have work and are getting paid. That increases demand which causes inflation. Would it be better if people did not have money to buy anything, which would cause prices to go down?
If supply-side could flex then inflation would not happen, but it can not because of pandemic which is still closing up China and Russia whose oil is out of the market for many would be buyers, and Ukraine whose wheat is not reaching world markets.
Trying to blame Biden and Fed for the inflation is Monday-morning-quarter-backing. For anybody who blames them I would like to say: Are you seriously asking us to believe that if you had been elected president of USA, or of Fed, things would be so much better now?
I think, even without hindsight, that I could have done a better job for the economy than the previous president. Biden? Probably not, he has not done much yet. He also does not have large enough majorities to do anything as any tax increases will probably be blocked by the more conservative members of his party.
You could have done (a better job). But that is uncertain, and untestable. Nobody can prove you are wrong when you say so. But not a lot of people will believe you either. Or they say yeah maybe. As to the previous president, I believe you. :-)
Decades of deficit spending demonstrate the feds can print adequate amounts of fiat currency, and issue debt, to continue to bail out the banksters, bail out foreign cruise line owners, and attempt to police the world and police outer space. USA could drop the federal personal income tax and continue on with the charade.
First two years of Trump were economically pretty good. Low unemployment - particularly for minorities. The Fed was raising rates!