You may be right about the Fed's possible actions, though I don't think the Fed can ignore the will of the American people, whatever that may be. They do have some accountability, even if only through the tepid Humphrey-Hawkins hearings.
You or I might consider a tax cut as being fiscally irresponsible (I don't, BTW), but that is for the executive and legislative branches to decide, and not for the Fed to attempt to counteract. A Fed hike, after all, is a tax in another form. Their charter is not to decide what the right level of taxes are, but to promote price stability. They may argue that a tax cut would destabilize prices, thus needing a rate hike, but I suspect they would become embroiled in a political maelstrom if they took that position.
As far as taxes, when $3 or $4 of an individual's marginal earnings flow back into government coffers, that reduces the incentive to produce wealth, and fosters reliance on ever-more grandiose government programs. Granted, government spending and federal debt are major reasons for those excessive rates, but the answer, IMHO, is to reduce govt spending (and tax rates), not to maintain excessive tax rates in order to maintain current spending levels. |
