04/15/2019

How Big Government Politicians Cause The Inequality They Claim To Fight

Daniel Kowalski, Foundation for Economic Education

With the 2020 presidential election on the horizon, there are currently over 15 serious Democratic contenders competing for the party’s nomination. Some candidates, like Andrew Yang, have detailed policy proposals they are consistent about. Others seem to keep maneuvering left with their positions in order to outflank their competitors, while a few seem content to be like weather vanes, ready to move in whatever direction the winds of populism are blowing.

It’s a diverse group, but the one thing they have in common is that they are running on the platform that capitalism is broken—and only politicians can fix it. We’re told that income inequality is a great threat to American society, that the gap between rich and poor has been widening for almost 50 years, and that if it keeps on going like this, the bottom half will grab the pitchforks and society will collapse. According to them, the only solution to save the middle class is the implementation of massive government social programs that can redistribute wealth to make everything fairer.

Monetary Policy

With $22 trillion dollars in federal government debt that is now adding $1 trillion more to the pile every year, a sane person can recognize that more massive spending is not a good idea because we can’t even properly manage our already massive spending. To be fair, Republicans are also guilty of not practicing what they preach when it comes to fiscal conservatism. Since 2000, we have had 12 years of Republican presidents and 14 years of Republicans controlling the House of Representatives, and the debt increased by more than $15 trillion dollars in that time.

Assuming that defaulting on the debt is not an acceptable solution, the United States needs to reverse spending and pay down the debt. One tool in their box to silently do this without causing much attention is through manipulating monetary policy. Deflation and inflation are two disastrous consequences of poor monetary policy.

 However, this has the unintended consequence of hurting the poor and middle classes.

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The Fed vs. the Middle Class

With interest rates flattened [by the Federal Reserve], government zeroes out the future. Abandoned were 80 percent of private defined-benefit pension plans. Public plans faced a similar evisceration in the future. With no acknowledgement, the U.S. government had casually dispossessed the American middle class of its retirement assets and pushed millions of Americans into acute dependency on government programs. ... Government dependency negated the American dream.

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