Tuesday, May 07, 2013

I disagree with Matthew Yglesias about something other than monetary policy

He wrote "Earning profits on investments would be trivially easy for the U.S. government, were it determined to do so, but it would also be pointless."

I comment.
Why would it be pointless ?  I note that the US government would earn the profits by buying assets at higher than their current prices and so it would benefit current owners.  Also it would reduce the need for taxes.  You don't have to be a supply sider to believe that collecting taxes implies some dead weight loss.  Of course the US government would lose big in a downturn.  Now we wouldn't want large budget deficits to automatically occur whenever there is a recession. Why that would be an automatic stabilizer and we can't have that.

What lead you to write that it would be pointless for the US government to earn the profits which it can earn trivially easily ?  I ask for information.

The logic might be that if a policy seems obviously better than current policy, then there must be some non obvious problem.  Similarly there must be some terrible problem with unlicensed cosmeticians and barbers.

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