A string of recent columnists have defended the trillion-dollar spending proposals being debated in Washington right now, along with the taxes required to fund them. Rose Bender’s recent op-ed claimed tax hikes on the wealthy and corporations will usher in a “fair economic recovery,” ensuring that the wealthiest Americans pay their “fair share.”
There’s Nothing Fair About Inflation
/ Op-Eds
There’s Nothing Fair About Inflation
Given the disproportionate harm done to lower-income people, fueling inflation by adding trillions to the national debt hardly seems fair to working Montanans.
Notably absent from Bender’s argument was any mention of the least fair tax of all: the inflation tax.
The Federal Reserve spent the last year and a half creating trillions of dollars in new money at an unprecedented pace and, right on cue, everything seems to be getting more expensive for the average American. The price of bacon jumped 19% in the last year. The price of eggs has gone up 13%. It’s getting downright painful to fill up our cars at the gas pump. Without any change to income, the average American is starting to feel poorer.
Despite promises from our leaders that higher prices would only be temporary as our economy recovers from the COVID recession, there is increasing evidence that heightened inflation is here to stay.
Inflation first and foremost harms working people. Compared to the wealthy, people with lower incomes spend a larger share of their income on necessities like gas and groceries. When inflation makes these necessities cost more, the pain is felt most by low-income families with the tightest budgets. Economists note the presence of “inflation inequality” when prices often increase more for necessities than for the luxury items that wealthy people purchase. In this way, inflation contributes to a wider gap between the wealthy and the poor.
Trillions of dollars of new borrowing by Congress fuels inflation. The White House has falsely said their new spending proposals would add “zero debt.” In reality, the Tax Foundation estimates the federal spending proposals being debated in Washington would add at least another $1 to $2 trillion to the national debt.
Congress pays for more debt by issuing more IOUs (Treasuries) that the Federal Reserve buys by quite literally creating money. This process leads to inflation by increasing our money supply, devaluing our dollar and making everything cost more over time.
Given the disproportionate harm done to lower-income people, fueling inflation by adding trillions to the national debt hardly seems fair to working Montanans.
Make no mistake, the pace of our national debt has been rapidly accelerating for years. I remember once attending an event at Montana State University in 2012 that marked when the national debt passed $16 trillion. Today our national debt is over $28 trillion. Just since the COVID pandemic began, the national debt has grown by $5 trillion.
Several commentators in this paper have leveled claims of hypocrisy against Republicans for their lack of concern about the trillions of debt and deficit spending run up during the Trump presidency. That’s a fair criticism. In fact, the national debt increased by nearly $8 trillion during President Trump’s administration alone.
If we really want a fair economic recovery, both Republicans and Democrats must stand up in equal opposition to reckless and wasteful spending. Both sides must again embrace fiscal responsibility. When the government spends within its means, keeping taxes low and helping to keep inflation at bay, all people have a fairer shot at prosperity.
This article originally appeared in Lee Newspapers