Taxes and DEflation

Economists Barrow and Perotti are saying that each $1 increase in government taxes reduces private spending by about $1, with no net benefit to GDP. All that is left is a higher level of government debt creating slower economic growth.

This is more consistent with deflation than the expected inflation.

Indeed, Christina Romer who chairs Obama's Council of Economic Advisors, wrote in 2007 that the tax multiplier is 3X. This means that each $1 rise in taxes will reduce private spending by $3.