With interest rate rises, the people in the most debt suffer the most. With tax rises, the highest paid suffer the most, and the govt has extra revenue to help the ones struggling the most. This is never considered by any govt. Why not?
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It’s a lot easier procedurally for the fed to raise the federal funds rate than it is for congress to vote in a tax increase. Tax increases also don’t slow the economy the way a funds rate does. The funds rate basically serves to determine how expensive it is for businesses to obtain money to invest and grow. Lowering it makes it more advantageous for businesses to expand, and raising it leads to businesses being more cautious about new ventures, as it takes a greater return to pay off the loan. In both cases, the amounts of money involved dwarf the amounts of money a tax increase would bring in, which means they have a much greater impact on the overall economy.
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