Inflation and Your Employment

You work and create wealth.  Congress tries to help you by creating an environment for you to work in, they don’t help you with the work.  The Federal Reserve System (FED) sometimes tries to help you by creating an environment for you to work in, they also don’t help you with the work.  But, sometimes they create an environment that makes it impossible for you to even be employed.

Congress
The Congress is able to use (1) the income tax rate and (2) government spending to try to keep the economic cycle functioning.  (1) When the Congress raises income tax rates and you have less of your money to spend, this reduces demand.  Contrariwise, when Congress lowers taxes and you have more of your money to spend, this increases demand.  (2) Also, the Congress can increase spending and that increases demand.

The Federal Reserve's Open Market Committee.
The Congress does not act quickly, and many times it does not act responsibly.  So, most of the burden maintaining the economic cycle falls on the Federal Reserve.  Currently the FED uses open market buying and selling of U.S. securities to affect interest rates to try to adjust economic activity.  It requires a long time before it takes effect.  It affects businesses that are sensitive to interest rates.  They raise interest rates to deliberately destroy wealth producing firms in order to force some people out of their jobs so that there will be less demand for products and services.  Unemployed people do not buy as much as employed people.  This is very wasteful.  It is very disruptive.  It is very hurtful. Is there another way to reduce demand?  If ice cream is a nickel a scoop, you will buy a lot of it.  If it is a dollar a scoop, you will buy less of it.

National Sales Tax
Let's authorize the Fed to adjust a federal sales tax between 1/2% and 20% - and stop creating unemployment just to reduce demand.  When the economy is sluggish, the rate will be 1/2%.  You will pay 50 cents tax on a $100 purchase - the tax mechanism/structure/procedures must be working at all times.  When the economy is overheating, the rate will be raised - to 20% if necessary.  At that rate you will pay a $20 tax on a $100 purchase.  This will reduce demand by making every thing cost 20% more.   The demand for all products will be reduced, not just the interest-sensitive products.  We will not eliminate any jobs, we will just reduce the demand for everything.  This is much better than destroying the jobs of thousands of Americans who have families to feed, mortgages to pay, and children to send to college.