Permanent aggregate demand and fiscal policy
- Country : Spain
- Subject : Macroeconomics
A tax policy entails a manual and plastic control of the budget. Such control requires an omnipotent management of public matters (res publica). We believe in the existence of Leviathan and it is obvious that Leviathan is ungovernable, thus any practical possibility of conducting a tax policy is born dead. An even better and more extreme idea than that of Leviathan is our mechanistic concept of the State as an impersonal, amoral and autonomous Machine. No one controls it. From here on we will speak of The Machine in order to invalidate the practical possibility of conducting a tax policy. In general, tax policies seek to control the budget: control public taxes and expenditure in order to manipulate aggregate demand and by doing this achieve GDP growth goals, full employment and/or control inflation. It means that the State plays the role of a buyer or influences other buyers to further influence producers. Such replacement is not wanted because the consumers’ behavior follows an stable social and psychological path that determines a permanent demand, which producers use as a guide. The State’s behavior is neither permanent nor stable but erratic, and it causes trouble in the system in a much larger proportion than it offers solutions. Budget manipulations have an impact on the monetary market: the amount of money and interest rates. Such impacts are not wanted and neutralize the supposed accomplishments of a tax policy. Offsetting monetary activities intersect with fiscal activities and disconcert the goods market.