alt Hacker News> control inflation
I think you are confusing cost inflation with an increase in the money supply. The way the US government funds deficit spending is not by increasing money supply (though it could) but by issuing debt in the form of US Treasury bonds. That is a transfer of money from bond investors to the government. No new money is made. This is distinct from the way that banks issue loans which is by creating new money in the form of credit (but that credit money gets "burned" as loan principal is paid back). So federal taxes do not actually control inflation in the way you are describing. Since federal deficit spending is not financed by increasing the money supply, it can only cause price inflation if it increases aggregate demand over the current productive capacity of the economy. An example would be paying more for healthcare subsidies when there's a shortage of doctors. Or subsidizing demand for housing with more mortgage subsidies when there's a housing shortage. Taxes could also increase inflation if they have the effect of reducing supply of some goods or services (like tariffs do).
Edit: I want to mention that the Federal Reserve can and does increase money supply by buying US Treasury Bonds from banks (converting the asset into cash reserves). There are various reasons why they do this but overall it's done with their dual mandate in mind: control inflation and minimize unemployment.
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> That is a transfer of money from bond investors to the government. No new money is made.
All forms of debt are money creation. All loans are money creation. Fractional reserve banking is money creation. It doesn't have to be "oh now we are making dollar bills" to count.
The debt cycle causes short term upward and downward inflation spirals, but overall the inflation is caused by total money supply multiplied by the ratio that the debt is allowed to be compounded to. the ratio is determined by both current regulations regarding loaning practices and the interest rate.
Given that these were constant then then inflation is just a ratio of Productivity(how much things cost) to total money supply (money printing).
So if the government just prints a similar amount of cash relative to the supply as the percentage productivity increase then we get a constant value of for the dollar.
In practice though a small amount of inflation is good in a currency as it encourages spending, if you have deflation this can cause people to speculate on holding cash and not engage in commerce which lowers productivity and thus can cause even more inflation itself.
The real problem is that wages are not growing at the same rate as inflation meaning wealth is being transferred from the working class to the owing class as their businesses get more efficient from the cheapened relative labor costs.
Taxation reduces the money supply. Government spending increases the money supply.
> I want to mention that the Federal Reserve can and does increase money supply by buying US Treasury Bonds from banks (converting the asset into cash reserves).
Fun small print. As though that's not the exact mechanism of the brutal inflation the US has suffered the past 5-6 years. The US money supply says it all. There are no other serious buyers for $20 trillion in new garbage paper debt every ten years. It's inflation by currency destruction plain and simple and there are no other paths. It's also why gold is $5,000 instead of $500.
> The way the US government funds deficit spending is not by increasing money supply (though it could) but by issuing debt in the form of US Treasury bonds.
Sure it does. That Treasury debt is often bought up by the FED in huge tranches by increasing the money supply, they call it things like "unlimited QE (quantative easing)". For example, the FED announced unlimited QE on March 23rd, 2020 causing the stock market and real estate market to bounce. Trillions of new dollars were created in these last 5-6 years, and that's why everything costs more. The USG continues to overspend, and too often on dumb shit too (e.g. tax breaks for the ultra wealthy).