You’re about to get hit with a huge tax. No, it’s not to pay for the new infrastructure bill or the Green New Deal, which will cost trillions of dollars in new taxes, though they do play a role. Nor does it come from paying for the trillions of COVID-19 “stimulus” packages that Congress has passed, even as the economy roared out of its recession late last year. No, this tax is far more insidious than all that.
It’s inflation. A tax that costs everyone dearly, rich and poor alike.
Americans have gotten used to having little or no inflation. They’ve forgotten how awful it is. Economically speaking, it’s the most devastating of all taxes, because it comes entirely from government. And citizens don’t realize they’re paying it until too late.
If you’re under 45, you might not understand. After all, more than 90% of your life has been spent with declining or even non-existent inflation. When you got a raise, your pay really went up. And when you went to the store to buy things, prices often were below where they were a year earlier.
But guess what? With a tidal wave of tax hikes and new spending from the Biden Democrats, a raft of new “green” federal regulations on the way, key global shortages of foodstuffs, a rising minimum wage, and tight markets for industrial goods such as lumber, steel and even microchips, not to mention a Fed that loves to print money, we may be on the verge of an inflation surge that could take down our financial markets and cut deeply into average Americans’ standard of living.
Just a few recent headlines show what we mean:
- INFLATION: Reality Sets in Amid Biden’s Incomprehensible Spending Sprees
- Rising Prices, Diminishing Wages – A Double Whammy for The Financially Vulnerable
- Chipotle will raise prices if a $15 minimum wage passes. Here’s how much more a burrito could cost
Then there’s this stark warning from the Bank of America: Buckle Up! Inflation Is Here!
And so on. We could cite literally dozens of similar stories in recent weeks.
But our own journalistic experience goes all the way back to the 1970s, when inflation raged. It destroyed jobs, made businesses insolvent, and robbed purchasing power from millions of Americans, seriously damaging the middle-class dreams of many. Poor people struggled just to keep up with inflation. It was the beginning of the postwar stagnation.
We mentioned higher spending by the federal government as one cause. Right now, 34% of all income is provided by the federal government, the highest ever. But small businesses say the portion of jobs they can’t fill (42%) is at record levels, even as Washington prepares to raise the minimum wage to $15 an hour.
As the edgy but frequently prophetic website ZeroHedge recently put it, “trillions in Biden stimulus are now incentivizing potential workers not to seek gainful employment.” Instead, many plan “to sit back and collect the next stimmy check for doing absolutely nothing in what is becoming the world’s greatest ‘under the radar’ experiment in Universal Basic Income.”
In short, the federal government is dumping trillions of dollars on Americans to encourage them not to work. There are 100 million working-age adults out of the labor force, but only 6 million say they want jobs. Joe Biden’s party likes dependent voters.
“Main Street is doing better as state and local restrictions are eased, but finding qualified labor is a critical issue for small businesses nationwide,” says William Dunkelberg, chief economist of the National Federation of Independent Business. “Small business owners are competing with the pandemic and increased unemployment benefits that are keeping some workers out of the labor force.”
As pressures on other costs rise, consumers shouldn’t be surprised when they have to pay more than they’ve become accustomed to.
“Procter & Gamble, Kimberly-Clark and Coca-Cola have all warned that they’ll raise prices on many of their products as raw material costs rise,” a recent news report noted. “Plastic, paper, sugar, grain and other commodities are all getting more expensive as demand outpaces supply. Companies are also paying more for shipping as fuel costs rise and ports experience longer delays because of congestion.”
The $6 trillion in new spending, massive disincentives to work, more regulations, a wildly accommodative Fed, plus higher taxes on the horizon, will all contribute to higher prices and less productivity, an inflation squeeze on all Americans.
Already, consumer price inflation in February came in a higher-than-expected annual rate of 2.6%, well above the 2% target. With higher prices in the pipeline, some analysts see inflation of 5% or more later this year.
Grocery bills are already rising, an ominous sign. “According to the Bureau of Labor Statistics,” notes the Foundation for Economic Education, “food prices jumped 3.9% in 2020, nearly triple the rate of inflation,” and are expected to rise by 3% or higher this year, too.
Even billionaire Warren Buffett says “we’re seeing very substantial inflation.”
“It’s very interesting,” he told investors last weekend. “We’re raising prices. People are raising prices to us and it’s being accepted.”
So the trend isn’t “temporary,” as some seem to think.
What does it mean? Well, as we said, inflation’s a tax. And for those at the bottom rungs of the economic ladder, it’s demoralizing and destabilizing. High inflation holds real wage growth for unskilled or less-educated workers below the pace of price increases.
And if your income doesn’t keep up with inflation, your standard of living steadily declines. That’s where millions of Americans will likely find themselves soon. But don’t worry: Biden’s Democrats will find a way to blame the GOP.
The point is, all of Biden’s Keynesian and socialist policy moves seem intended to boost inflation and lower private-sector output. Even his Treasury secretary, former Fed chief Janet Yellen, says interest rates might have to rise. It’s like the bad old days of Jimmy Carter in the stagflationary 1970s are here again. Will we make the same mistake?
— Written by the I&I Editorial Board