(UnitedVoice.com) – There’s no limit to how much money politicians want to take from the people to achieve their political ambitions. It’s a little-talked-about fact that the government doesn’t make money. It takes money. It manipulates money. However, it doesn’t make money. The private sector makes money and expands and contracts the economy through economic activity.
However, the federal government does have extreme powers to manipulate and control the economy. As President Biden pushes trillions of dollars in spending, there must be a mechanism to pay for all that spending. There are three primary ways the government can add revenues to its coffers:
- Increase taxes
- Increase regulations
The first two are direct, and American’s experience government policies transparently and intentionally. For example, in 2017, the Republican tax plan to reduce corporate taxes and former President Trump’s termination of business “unfriendly” regulations spurred job and economic growth. Companies handed out bonuses and pay increases as they recovered lost money that went to taxes and regulations. However, few ever consider inflation’s impact as a hidden tax, and Biden and liberal government economists may be trying to fool America into a tax increase without any legislation whatsoever.
Inflation Is a Hidden Tax
Over the last year, politicians spent upwards of $4 trillion in the absence of businesses. Then, the government manipulated the economy to prop it up as business revenues collapsed and tens of millions of people ended up on unemployment. Now that the economy is re-opening and trillions of dollars sitting on the sidelines are flooding the economy, it’s driving up prices as manufacturers and supply chains struggle to keep up with the all-at-once demand.
However, what if the government knew this would happen. What if Biden was fully aware of it and endorsed the economic theory that’s becoming a reality — especially knowing his tax increase plan was bound to fail in the Senate?
Inflation is a horrible beast to the everyday Americans working hard and building a better life as the prices for virtually everything from food, shelter to clothing and entertainment rise. Yet, it’s wonderful for the government. It acts as a hidden tax that brings in significant new revenue. Ultimately, it pits the interests of the government against those of its people. We’ve been here before. Americans in the 1970s experienced the terrible impact of runaway inflation due to government policies.
Guess who wins and loses?
How Inflation Hurts the Middle and Lower Class
When oil and gasoline prices rise, the government benefits as it gets a larger share of your dollars through direct and indirect taxes. Directly, there’s a national gas tax. If prices go up, so does revenue to the Treasury Department. Indirectly, the prices of many things you buy depend on the oil used to make plastics. There are taxes buried in the manufacturing processes that are passed on to consumers by the businesses.
Want to sell your home? As home prices explode through the roof, so does the new money to the government. In some situations, there could be a hefty capital gains tax.
Let’s not forget about wage growth. While the Biden administration and Democrats can’t break through a Senate filibuster to raise the minimum wage to $15 per hour, they found another way. Those on unemployment are getting extra unemployment money from the federal government to stay home. As a result, businesses must raise their wages to attract employees or turn away business. Can you guess who gains from the wage growth? You got it, the government.
Inflation also creates cheap money for the government. As a debtor, the government benefits because they repay creditors with devalued money.
Clinton Treasury Secretary Warns of Problem
There you have it. Inflation acts as a hidden tax on the middle and lower classes. The government will automatically get more tax revenues as the prices of goods and services rise. So, inflation is a positive for the government despite its negative impact on its citizens.
Clinton-era Treasury Secretary Larry Summers is sounding the alarm that inflation may not be a temporary thing as the Biden administration claims. He’s warning that the Democratic agenda to drive wages higher, strengthen unions, and demand increased employee benefits the government can tax will drive up business costs and prices. That will hurt workers and benefit big government at their expense.
When things get bad enough, will politician’s point to the policies they created to manipulate the government as the problem?
Of course not. Instead, they’ll try to convince us they are the saviors and can fix the problems they caused.
It’s a vicious cycle that only Americans can break.
Don Purdum, Independent Political Analyst
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