0.15 percent GDP". There are perhaps one or two other factors that happen in planet over past 25 years that impact rate of govt spending "At some point while I was at Bankers, the Fed raised the discount rate. Our trading manager, Alan Rogers, said he hoped the Fed didn't just give the banks the money. He said the money supply was too high and the Fed needed to take some of it away." When the discount target rate is raised by the Fed, it uses open market operations to reduce base money and not to increase it. actually, the fed used to keep the banks net borrowed for a small amount, and so all it had to do when it changed its target rate was change the rate it charged the banking system for the needed funds. quantity didn't change at all. today, with excess reserves in place, all it needs to do to hike rates is raise the rate it pays on reserves. "Question: If the government doesn't tax because it needs the money to spend, why tax at all? Answer: The federal government taxes to regulate what economists call "aggregate demand" which is a fancy word for "spending power." In short, that means that if the economy is "too hot," then raising taxes will cool it down, and if it's "too cold," likewise, cutting taxes will warm it up. Taxes aren't about getting money to spend, they are about regulating our spending power to make sure we