Lenin is said to have declared that the best way to destroy the capitalist system was to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some….Lenin was certainly right. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.

John Maynard Keynes, The Economic Consequences of the Peace, pp. 148-149

The Biden Administration’s mendacious exploitation of the public’s ignorance of economics and inherent envy of those making more than they do, promised during their campaign that they would provide many public goods, and only tax the “millionaires and billionaires”. Those who the system has benefitted so much, should, as Elizabeth Warren says, be willing to pay just a little more. For political purposes, Mr. Biden said that no one making <$400,000 per year would have a tax increase.* Of course we knew that was false, as the scale of promises made cannot be paid for simply by taxing the rich.

As in illustration of this, some of you are starting to see requests for your SSN from Venmo, Paypal and the like, as the $1.9T Covid relief package now requires them to report transactions totaling more than $600/year to the IRS. Formerly the law required reporting only sales totaling more than $20k. Now I have no particular problem with this in one sense, as we should all be paying our taxes. But there is a problem because now if you sell used items at a loss that total more than $600, you need to be prepared to prove the basis of your original purchase for your taxes–there is a tax on your time even if you aren’t a business. But the broader point is that the rich that are supposedly not paying their taxes don’t have side hustles where they are getting all this money and not paying taxes–it’s the millions of “little guys and gals” the Biden Administration was targeting.

But that is chicken feed compared to ongoing tax of inflation, from which no American, rich or poor, can escape. And as we posted recently, it has always been the case that poor people suffer a disproportionate impact from inflation. But as much as inflation is in the news, there is almost no discussion of the fact that inflation is just one more form of taxation that politicians choose from–yet it is a tax that no politician has to vote for, and offers some chance to blame others for. Isn’t it sad to watch Elizabeth Warren, who surely knows better, keep finding another industry to vilify for raising prices, when the increased demand that drives most of this is from the government spending she champions? We can’t escape the reality that when government spends more than it receives in tax revenue or borrowing from the private sector, the additional spending comes from the monetization of debt by the Federal Reserve. And monetize it has in the last two years–over doubling the money supply to fund both the U.S. government and the mortgage industry. And while Keynes (above) may be speaking in hyperbole, “not one man in a million is able to diagnose,” it is true that politicians like Warren can muddy the water. But history shows the governing politicians can’t escape. Yesterday we saw this explained by pollster Frank Luntz:

Inflation is “the voting issue of 2022.” If Luntz is right, and I think he is, that’s not good news for Democrats.

* Wow, someone making even half that seems like they could pay a little more too (in most parts of the country). The point is that any number given is purely arbitrary, and politically chosen–the number has nothing to do with need or misapplied idea of distributional justice.