Quote:
Originally Posted by cuserounder
But we're not talking about deficit spending here, we're talking about tax cuts adding to the deficit. So we're taking the current level of spending (actually, likely cutting it somewhat) and just taking in less revenue to increase the deficit. That, analytically, seems like it almost HAS to cause inflation. If you're talking about the type of deficit spending (like say a big infrastructure package) that is likely to stimulate the economy, then I would agree it does not directly cause inflation in many cases.
Inflation as a consequence of the deficit happens when e.g. a store is selling beef for $2.50/lb, the economy booms because the government puts out so much more money than takes in, the store is overrun with customers (demand) but can't readily get more beef (supply) so they raise price.
If there is slack in the economy then supply increases with demand and there's no change in price.
The bad thing about tax cuts for the rich isn't inflation, it's the opportunity cost of taking money that could be targeted for the poor- and middle-class people and rerouting most of it to sit in rich people's savings accounts.