CHRIS POWELL: Inflation shows new goodies for Connecticut aren't free

Published on Monday, 16 August 2021 20:58

Nearly every day a member of Connecticut's congressional delegation announces some major federal grant for a local capital project or civic organization, many of the awards credited to the "American Rescue Plan." More such announcements will come upon passage of what is being called the Biden administration's national "infrastructure" legislation, though apparently much of the money contained therein will go for social welfare programs, not "infrastructure."

Until recently few in politics seem to have known just how easily infinite money could be tapped for such patronage purposes. Indeed, there has been little if any discussion about where all this money is coming from – not mere billions of dollars but trillions. These days in government it seems that money is no object.

Those familiar with economics may wonder if the federal government now is operating under what is called Modern Monetary Theory, which is actually the very old understanding that a government that issues its own currency does not need to impose taxes to raise revenue but instead can create money until the currency is destroyed by inflation. While MMT is not formally government policy now, as a practical matter it is policy, what with the Federal Reserve and foreign governments monetizing so much U.S. government debt.

But while Americans are not being openly taxed for all the largesse being bestowed on them by their beaming members of Congress, they are being taxed indirectly – for inflation has broken out all over. The federal government's Consumer Price Index long has been rewritten and rigged to understate inflation, but nothing can conceal all the price increases of recent months. While the government contends that annualized inflation lately is running around 5% and the Federal Reserve keeps saying this inflation will be "transitory," traditional measures put the rate well above 10 percent.

Whatever the exact rate, a recent analysis by Harvard University economics Professor Jason Furman concluded that recent consumer price increases already have wiped out the nominal wage gains enjoyed since President Biden was inaugurated. Prices, Furman concluded, are rising faster than wages.

That is in large part how Americans are starting to pay for all those seemingly free goodies. The inflation tax burden will grow heavier as foreign governments, scared by the federal government's unprecedented profligacy, reduce their purchases of U.S. government debt.

This doesn't mean that much recent money creation wasn't necessary to repair the damage to the economy done by government's frightened and often ham-handed response to the virus epidemic. Instead it means that, as always, there is no free lunch – that there are limits and that the government is far exceeding them, amassing trillions more dollars in debt for the Fed to monetize eventually, promising more inflation or else rationing, price controls, and the destruction of what's left of the market economy.

Then today's goodies will be forgotten, but the members of Congress who bestowed them and got re-elected on them will be retired and collecting their ample government pensions – adjusted for inflation every year, of course.

* * *

THE REAL MILITIA: Public life is usually understood as what happens in government, politics, and other civic doings, but as was demonstrated last month by a remarkable event in Cornwall, public life can be much more important than those things.

As reported by Leila Hawken in the Tri-Corner News, CBS News reporter Richard Schlesinger was out for his daily walk on a rural road near his home when he suffered a heart attack and collapsed unconscious, as good as dead. And yet, miraculously, within minutes a dozen people – passers-by from out of state, a state trooper, volunteer emergency personnel, and neighbors had come to his aid, doing chest compressions, restoring Schlesinger's heartbeat, and getting him into an ambulance to Sharon Hospital and thence into a Lifestar helicopter to Hartford Hospital, where he underwent successful heart bypass surgery and was sent home to recover and try to track down and thank all who had saved him.

These heroes showed that what is called the militia is not really anti-government gun fanatics running through the woods preparing for the end times but all of us – citizens ready to drop everything to help in an emergency.

Chris Powell is a columnist for the Journal Inquirer in Manchester.

Posted in The Bristol Press, Column on Monday, 16 August 2021 20:58. Updated: Monday, 16 August 2021 21:00.