Yes, because it increases the money supply. We are supposed to tighten when things are good by raising rates. At this point they need to raise rates to pull money out of the system. Because with covid, not only did we cut rates, we put in a HUGE amount of money and that was really irresponsible. And now we are seeing the repercussions with inflation lowering the value of the dollar.
We should recall that not only did the US cut rates and spend a lot of money through the covid recession, when things were bad, it ignored that first bit of advice before Covid when things were good (it's hard to remember now how hot the economy was in 2016-2019, but it was really hot), by cutting taxes and continuing to print money and keep the rates low to cover it. As the tax cut detractors correctly predicted, those tax cuts (and the growth that didn't happen enough to cover them) reduced the US's leverage to respond when an actual crisis came up.
a) higher taxes enable the government to apply deflationary pressure on the economy (by removing currency from circulation)
b) Reducing taxes without cutting spending (because it will "pay for itself in growth") leads to a larger deficit, which requires increased debt to cover, which triggers the money-printers.
Your first point is only valid if the government doesn’t spend that money or uses it to pay down debt, a dubious assumption with the US federal government.
Your second point is wrong: you can continue to run deficits without printing money. You just have to find lenders in the marketplace willing to buy your bonds.
Yes, the Federal Reserve is buying vast quantities of US treasuries right now, effectively monetizing the debt, but the sequence of events you describe isn’t typically how things work.
Wasn’t that during Yellen’s term who was replaced by Powell in 2018? The same year the tax cuts went into effect. The following year the rate cuts started and then Covid hit.
I am not sure if it is really useful to evaluate what happened vs the other outcomes that we were not able to experience. We don't really even have that many precedents for the situation. It was, and still is, an extremely complex problem to address. Injecting large amounts into the system ultimately doesn't create long term wealth, but in that short term gap during the first 1 of the pandemic many people were undoubtedly pulled out of a hole.
