Congress, taxpayers and the Fed

When the Fed lowers rates below inflation, many taxpayers think they need to set aside more short term reserves as the return on cash has dropped.  They write to Congress to reduce taxes, and Congress thinks taxes will not support flow. The effect is temporary, after a couple of quarters, Congress recalibrates the real sustainable flow.  The real sustainable flow is decreasing, but not as much as the taxpayers think when rates are low. The Fed effect is a short term volatility on government planning of a few quarters.

Congress is learning that they are in real trouble. The Fed just recites backwards poetry. But it is not the Fed that causes a permanently increasing losses from government, the Fed just induces short term volatility. Congress worries to much when the Fed sets rates low and worries to little when the Fed sets them too high.  It is backwards, in the short term,  from standard thinking. But the long term trend of increasing government unsustainability is real.