2. Put in place a permanent VAT (or land tax, or just an across the board income tax hike, or whatever else you want to choose) to fund a UBI, delivered as weekly direct deposits to everyone's Postal Bank Account.
3. Authorize the Fed to bump the UBI payments up and down to stabilize demand.
The federal payroll tax only applies to compensation up to (currently) about $160k. A variable tax on amounts above that could be sellable.
A better approach would be to privatize unemployment insurance, so that everyone pays some percentage of their compensation into a personally owned account. The percentage ought to vary by the employer’s likelihood of laying you off (like the current system). And it could also vary by an anti-inflation percentage, which would have the benefit of not delivering money to politicians to spend.
(Note: I read a whole proposal on this a couple decades ago. One of the components of the plan is that, when you draw benefits from your account that reduce your account balance below zero, the bank loans you money into your account at a federal rate. If you die with a balance, the federal government pays it off. If you get to retirement age, you can just close the account and spend the balance. The federal payoff component means taxes somewhere in the system, obviously, but far far less than today.)
I agree with most of the main points here-been saying for a long time that managing inflation with interest rates is very weird. And times like these are a good excuse to get some tax increases on the rich that we need. But I don't buy the argument that increasing VAT is the best way to go, even in theory. You mention some of the problems: interfering with the budgeting process, directly adding to inflation, Congressional powers in the Constitution, etc. And I think it deserves special focus that the populace would probably hate this, especially in America.
Luckily, there are alternative tools for demand management that have none of these problems. Nathan Tankus wrote an excellent report about them fairly recently:
I was also struck by this quote: "Monetary policy sounds (and is) complicated and technical in a way that raising taxes isn’t". This is true right now, but it doesn't have to be! Something Tankus focuses on that I'm a big fan of is simplifying monetary and fiscal policy so that it's legible to the populace. One example is the whole mess of the Treasury needing to issue debt for spending, which the Fed then buys in the market to do monetary policy. Instead, we can allow the Fed to issue whatever securities they need to do monetary policy, and just mint coins instead. This also cleans up the discourse about spending: "it increases/decreases the debt" would no longer come up, and we could focus on the stuff that matters.
The ideal stabilizer mechanism, IMHO, would be:
1. Set up Postal Banking.
2. Put in place a permanent VAT (or land tax, or just an across the board income tax hike, or whatever else you want to choose) to fund a UBI, delivered as weekly direct deposits to everyone's Postal Bank Account.
3. Authorize the Fed to bump the UBI payments up and down to stabilize demand.
The federal payroll tax only applies to compensation up to (currently) about $160k. A variable tax on amounts above that could be sellable.
A better approach would be to privatize unemployment insurance, so that everyone pays some percentage of their compensation into a personally owned account. The percentage ought to vary by the employer’s likelihood of laying you off (like the current system). And it could also vary by an anti-inflation percentage, which would have the benefit of not delivering money to politicians to spend.
(Note: I read a whole proposal on this a couple decades ago. One of the components of the plan is that, when you draw benefits from your account that reduce your account balance below zero, the bank loans you money into your account at a federal rate. If you die with a balance, the federal government pays it off. If you get to retirement age, you can just close the account and spend the balance. The federal payoff component means taxes somewhere in the system, obviously, but far far less than today.)
I agree with most of the main points here-been saying for a long time that managing inflation with interest rates is very weird. And times like these are a good excuse to get some tax increases on the rich that we need. But I don't buy the argument that increasing VAT is the best way to go, even in theory. You mention some of the problems: interfering with the budgeting process, directly adding to inflation, Congressional powers in the Constitution, etc. And I think it deserves special focus that the populace would probably hate this, especially in America.
Luckily, there are alternative tools for demand management that have none of these problems. Nathan Tankus wrote an excellent report about them fairly recently:
https://twitter.com/NathanTankus/status/1637918999722831878?s=20
I was also struck by this quote: "Monetary policy sounds (and is) complicated and technical in a way that raising taxes isn’t". This is true right now, but it doesn't have to be! Something Tankus focuses on that I'm a big fan of is simplifying monetary and fiscal policy so that it's legible to the populace. One example is the whole mess of the Treasury needing to issue debt for spending, which the Fed then buys in the market to do monetary policy. Instead, we can allow the Fed to issue whatever securities they need to do monetary policy, and just mint coins instead. This also cleans up the discourse about spending: "it increases/decreases the debt" would no longer come up, and we could focus on the stuff that matters.