to offset inflation the higher the cost of living. It seems to me if you have the tax holiday you suggest it will just cause more inflation. Am I missing something? After some thought I realized that not all deficit spending leads to inflation. I believe though that much of it does. While I agree social security is not in danger as you say, wouldn't less people paying it and more collecting it lead to inflation? Yes, firms expand and contract production (supply) relative to changes in effective demand. As long as supply increases to accomodate rising demand due to more funding, there is no tendency to inflation although it doesn't mean that prices won't change -- just that the price level will not rise continuously, getting so far ahead of real wages as to result in wage pressure. The usual dynamic is asset price rise due to looser credit and more leverage, then goods prices rise, and then wages. Then the monetary authority raises interest rates to contract the economy and increase the buffer stock of unemployed to reduce wage pressure. The key is really wages. Hello! I know this is somewhat off topic but I was wondering if you knew where I could get a captcha plugin for my comment form? I'm using the same blog platform as yours and I'm having problems finding one? Thanks a lot!