This makes sense, since they have been the big gainers in the economy over the last four decades.

The Biden tax proposals have focused on increasing the amount of money that corporations and wealthy individuals pay in taxes. The Virtue of Financial Transactions Tax as a Pay For This is where a financial transactions tax comes in. We need not be concerned about getting the money in the bank, we have to reduce demand in the economy by enough to make room for the additional spending in Biden’s infrastructure agenda. This is the reason that we have to talk about “paying for” the infrastructure package. If the economy is already near its capacity when President Biden’s infrastructure package starts to come on line in 20, an increase in spending of a bit less than 2.0 percent of GDP could be large enough to create problems with inflation. If this excessive spending is sustained over a substantial period of time then we could see the sort of inflationary spiral that we had in the 1970s. If the federal government spends so much that it pushes the economy beyond its ability to produce goods and services, we will see inflation. Nonetheless the federal government does face a limit on its spending: the ability of the economy to produce goods and services. The federal government does not have this constraint. For them, more spending requires more income or taxes and/or more borrowing. Households and state and local governments actually need money in the bank to pay their bills. government from a household or state and local governments. Therefore, we have a large segment of the population that just thinks the program is massive or huge.Īs our MMT friends constantly remind us, a government that prints its own money, like the United States, does not need tax revenue to pay for its spending. Reporters all know that almost no one has any idea what $4 trillion over eight years means (especially if no one tells them it is over eight years), yet they refuse to take the two minutes that would be needed to add some context to make such really big numbers meaningful. It is infuriating that most of the reporting on these proposals make no effort to put the spending in any context that would make it meaningful for people.

This means that Biden is proposing to increase infrastructure spending by an amount that is roughly 60 percent of projected military spending. While that is hardly trivial, military spending to projected be around 3.3 percent of GDP over this period. This is a period in which GDP is projected to be more than $210 trillion, meaning that his package is projected to be around 1.9 percent of GDP. Over an eight-year period, Biden’s proposed spending averages $500 billion annually. In fact, much of the reporting doesn’t even bother to tell people that this spending is projected to take place over eight years, not one to two years, as was the case with Biden’s recovery package. While it would be helpful if media outlets could leave these adjectives to the opinion section, the bigger sin is using a very big number, that means almost nothing to its audience, without providing any context. At this point, many people probably think that Biden actually proposed a “huge infrastructure” package, with “huge” or “massive,” being part of proposal’s title. We have been told endlessly about Biden’s “massive” or “huge” proposal to spend $4 trillion. This is because the media have engaged in a feast of really big numbers, where they give us the size of the package with no context whatsoever, leaving their audience almost completely ignorant about the actual cost. First and foremost, there has been tremendous confusion about the size of the package. There has been a lot of silliness around President Biden’s proposed infrastructure packages and the extent to which they are affordable for the country.

Financial transaction tax