We are a couple of months in front of an off-presidential year election. Before we go to the polls, we should brush away the political cobwebs that prevent us from seeing clearly what is right under our noses, and so …
What is debt inflation?
Inflation is a contributory cause in high prices, but
inflation is not the same as high prices. Inflation is a government caused market
distortion, a reduction in the purchasing power of money. Combined with currency devaluation, it can
significantly erode the real value of a currency both domestically and
internationally.
There are, we know, numerous ways to discharge debt.
Ordinary people discharge debt by increasing their income and paying off the
debt. There are different ways to increase your assets to pay off a debt. You
might increase your working hours, get a raise from your boss, or turn to a
life of crime and rob a bank. In any society in which criminal activity is
punished, this last option is not, in the long run, profitable.
One need hardly say that a government is an assembly of
ordinary people. Just as a church is the body of the faithful, so a government
is, in any republic worthy of the name, the body of people governed. The
Declaration of Independence, Americans cannot help but notice on the eve of the
250th year of its signing, begins with the words “We the people…” Our
ego-inflated politicians wish us to know they are above the common cut. They
can flout economic laws without fear of arrest.
The federal government may discharge
debt – deficits – by increasing taxes or borrowing money to pay off the debt,
or by printing money, a solution to the debt problem at the federal level;
states don’t print currency.
If you are a government, federal
or state, you may choose to neglect debt or acquire more debt by passing along
the debt payment to the children of taxpayers. There is in the United States no
debtor’s prison for politicians who resort to this option. Perhaps there should
be. Connecticut just now is hoisting a half century of accumulative debt.
Connecticut's comparable state-government
debt is $26 billion. The state’s
Audited total liabilities (ACFR), a measure that includes all state‑government
obligations plus long‑term unfunded benefits such as pensions and other post‑employment
benefits, is
about $94.43 billion, according to a 2023 report.
So then, why don’t politicians – like every householder in
the state of Connecticut – pay off their debts by raising taxes, thus increasing
the state’s net worth?
Good question.
Post and pre-revolutionary Americans have been through much
of their history tax-averse for two reasons: 1) they regard much of government
as an economic imposition. The whole of the French Revolution and a good part
of the American Revolution pivoted on the perception that the government, when
it overreaches, and the governed are inversely related to each other. The
stronger the government, the weaker the people; the richer the government, the poorer
the people. And 2) private and governmental income is an indispensable means of
acquiring power and agency. Americans have never been willing to surrender their
independence and agency to an immodest secular, political church of anointed
politicians.
Ordinary Americans are reservoirs of natural rights because
they live in a country -- secured by blood, sweat and tears -- in which
important rights are not dispensed by godlike secular deities. So says…
John Adams (1765): “Liberty must at all hazards be
supported. We have a right to it, derived from our Maker. But if we had not,
our fathers have earned and bought it for us, at the expense of their ease,
their estates, their pleasure, and their blood.”
James Wilson (1790): “Without liberty, law loses its nature
and its name, and becomes oppression. Without law, liberty also loses its
nature and its name, and becomes licentiousness.”
James Madison (1792): “In Europe, charters of liberty have
been granted by power. America has set the example… of charters of power
granted by liberty.”
Thomas Jefferson (1791): “I consider the foundation of the
Constitution as laid on this ground that ‘all powers not delegated to the
United States… are reserved to the states or to the people.’”
Connecticut’s political deities fear raising taxes for the
same reason King George III feared – and was said to have praised -- a resolute
George Washington. When the news was brought to the king that Washington would give up office and return to private
life after having served as the President of the United States for only two
terms, he was reported to have said, “If Washington does that, he will be the
greatest man alive.”
Modern scholars now tell us that the quote does not appear
in any credible archival records, royal correspondence, or contemporary
accounts of George III’s reign. No matter, here was a case of a larger truth overcoming
the absence of facts. Washington did what
kings fear most, and he was the
greatest man of his time.
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