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Government Borrowing Thought Model:

Assume:

1. the Inflation Tax is implemented
2. Fed discount rate for Federal government is 0.15%

What if:

1. the government borrows one billion dollars from Fed at discount rate
2. government hires 20,000 people for medical research
3. each researcher is paid $50,000 per year
4. researcher was previously unemployed

Then:

1. each researcher now pays federal tax of 2% on income
2. each researcher spends 90% of after tax money on goods and services
3. government has earned 1.85% on one billion dollars
4. the economy has received 900 million increased demand
5. thus additional jobs are created

What is the effect on the average tax payer?

1. government needs less income tax
2. market has produced more goods and services to choose from
3. unemployment rate is reduced
4. cure is found for disease which 10,000 suffer from

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