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The Real Cost of ‘Free’ Money: The Inflation Tax

Government cannot put a single dollar into the economy that it has not first taken out of the same economy

By Tom McClintock, June 3, 2021 10:57 am

When the Democrats passed Mr. Biden’s $1.9 trillion spending spree in March, a lot of people got a lot of free money – thousands of dollars in many cases.  But the bill is already coming due for that free money, and, as many of us warned, it turns out that free money is very expensive.  Indeed, it turns out that the very same families most harmed by the lockdowns will be the most harmed by paying the bill for the lockdown relief.  It comes to about $15,000 for an average family and the first installment is already reflected in the rising inflation sapping the purchasing power of working families.

The sad and sober reality is that government cannot put a single dollar into the economy that it has not first taken out of the same economy.  When government spends a dollar for you it has already decided to take a dollar from you – and it can only be taken back in three ways: from your current earnings through higher taxes, from your future earnings through borrowing and from your savings, retirement income and purchasing power through inflation.  There is no other way to pay for every dollar government spends.

 Inflation is the most insidious of these taxes because it silently hollows out everything that a family labors to achieve.

Anyone who has gone near a gas station or a grocery store in the last few months can now see where their relief checks came from and how they will be paid back.  The Democrats shut down productivity with their lockdowns and then flooded the economy with dollars!  More dollars chasing fewer goods is the classic recipe for inflation.  And this is just the beginning.

The Consumer Price Index increased 4.2 percent in April.  It was 2.6 percent in March.  Core inflation is already growing faster than at any time since the end of the Carter Administration.

What does that mean, exactly?  It means that if you’ve managed to save $100,000 for your retirement, the government has just taken $4,200 of it – because your savings are now worth that much less.  Your balance hasn’t declined – but its purchasing power has lost $4,200.

Check your grocery bill.  Or your utility bill.  How much more are you spending to put food on the table or heat your home?  There are other bad policies at work as well – green energy, for example – but a big part of that difference is your inflation tax, paid directly from the reduced purchasing power of your money.  And that is true of everything you buy.

It doesn’t stop there.  The Democrats are promising a massive increase in corporate taxes – while assuring the gullible not to worry, because the corporations will pay it.  But corporations don’t pay corporate taxes.  You do.  You pay them as a consumer through higher prices; you pay them as an employee through lower wages; and you pay them as an investor through lower earnings – your 401(k), for example.  There is no other way a corporate tax can be paid.  And the resulting reduction in productivity will further feed the inflation tax.

The Democrats’ sick joke is this: everything that the government has handed out to your family is already being taken back from your family through higher prices.

What makes the Democrats think that socialism will work any better here than every other country that has tried it?  It consistently produces shortages, unemployment, inflation, poverty, and malaise wherever it is imposed.  And we will continue down this dismal path until Americans awaken to the simple economic realities that the Democratic socialists have now unleashed upon our country.

In his inaugural address, Thomas Jefferson surveyed the boundless bounties our nation enjoyed and asked, “With all these blessings, what more is necessary to make us a happy and a prosperous people? Still one thing more, fellow-citizens—a wise and frugal Government, which shall restrain men from injuring one another, shall leave them otherwise free to regulate their own pursuits of industry and improvement, and shall not take from the mouth of labor the bread it has earned. This is the sum of good government.”

Americans deserve a wise and frugal government.  But it is not enough to deserve it – we have to demand it at the ballot box.

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6 thoughts on “The Real Cost of ‘Free’ Money: The Inflation Tax

  1. My feelings the same. You need to be our Governor. However, you make too much sense and that doesn’t fly in California any longer.

  2. Congressman McClintock,
    I hope this important lesson on inflation reaches those who need to hear this.
    There is no free lunch. Taking away our economic drive and forcing businesses to close will have lasting effects. It is hurts those who can ill afford to lose 4% percent buying power, it will hit the elderly, the disabled and the working poor.

    We get the the government that we voted for, Again, conservatives have been warning this would happen but in the land of unicorns, rainbows and butterflies it was not taken seriously.
    Hope ya all love hamburger helper without the hamburger!
    Wake Up California voters!

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