Inflationomics

It’s Too Late, Shelley

I recently read a quote from U.S. Senator Shelley Moore Capito (R-W.Va.), in which she reportedly stated, “I did not come to Washington to hurt people.”  She was apparently talking about the Senate’s attempt to repeal the Affordable Care Act or parts of it.  She obviously thinks that the Affordable Care Act helps people and doesn’t think about the people it harms.

Her comment made me wonder whether she knows that governments have to take from someone in order to give to someone else.  Governments are not profit-making organizations.  They don’t even try to produce a product or supply a service in an attempt to earn a profit.  If they start out small, they limit their income to the taxes they raise. The taxes must be taken from some people, thus harming them, and be given to others, starting with government employees and politicians, followed by the military, police, and legal system.  The tax recipients benefit while the taxpayers lose.

At some point, if the politicians do a poor enough job, they spend more than they bring in in taxes and may borrow additional funds to be distributed to other “poor” recipients or vendors.  If the government (read the U.S. government) has a central bank that tries to facilitate government borrowing, the bank may set interest rates near zero, thus allowing the government to borrow tremendous amounts of money to spend on anything it desires…wars for example.  This may benefit war materiel vendors, but it punishes savers who don’t receive a market rate of interest for their savings.

If the government continues to spend beyond its means, it must entice or threaten the central bank to purchase its bonds with newly printed money.  This inflated money supply can reduce the purchasing power of its users in the long run.  In short, the inflationary practices rob consumers and savers of their purchasing power and benefit debtors, of which the U.S. government is the largest debtor in the world.

Let’s assume that the government wants to “help” people better afford health insurance.  It may set up a system whereby some people (young people) subsidize the insurance costs of other (older) people by paying a new tax.  If participation were voluntary, it would fail immediately, but if they must pay a tax, it may survive a few years before additional subsidies are required or it fails due to rising costs.  In any event, the subsidizers lose and the subsidized benefit.  Who is hurt?

Or, let’s assume the government wants to punish someone for doing something “bad.”  For example, Mexico, for allowing its citizens to move to the U.S. for employment.  Or, China, for selling cheap goods to Americans.  Or, Canadians, for selling cheap lumber in the U.S.  Who benefits and who is harmed by the laws that prohibit the sale of cheap goods and/or labor to Americans?

Or, let’s assume the federal government wants to improve the country’s infrastructure.  Who’s going to pay for that?  Who’s going to be harmed?  And who’s going to benefit?

Of course, just about everything the government does these days is done without consideration or concern for what the market wants.  This hurts consumers and benefits government politicians, employees, and dependents.  In the long run, when the consumers lose their faith in the government’s ability to “fix” everything that goes wrong, it will be the politicians, government employees, and dependents who will be harmed by everything that it caused in the first place…read “Obamacare.”

Bottom line, Shelley, is that it’s too late.  So much harm has already been done by the U.S. Congress.  And it’s unlikely that you’ll be able to avoid hurting someone no matter how you vote…whether it’s to transfer more money, or transfer less money.  Good luck!

Robert F. Sennholz

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