This week, while you were focused on your work, President Biden enacted what he describes as “one of the most significant laws in our history.”
This legislation, known as the Inflation Reduction Act (IRA) of 2022, carries the promise of reducing inflation. However, the mechanism by which an infusion of $750 billion into favored sectors is expected to achieve this remains ambiguous.
What is abundantly clear, as confirmed by the Congressional Budget Office, is that this bill is set to burden working-class Americans with approximately $20 billion in additional taxes over the next decade.
This initiative aligns with the Biden administration’s broader objectives of consolidating power, advancing a socialist agenda, imposing heavy taxation on workers, and eroding the middle class through rampant inflation. While the Build Back Better Act may have faltered, the IRA, which amalgamates many elements of BBB, is now officially law.
We’ll delve deeper into this shortly, but first, let’s establish some context.
To understand the implications, we need to start at the beginning…
Money serves as a means of exchanging available goods and services. To enhance one’s share of these goods and services, one must first boost productivity. This can be accomplished in two primary ways: by either working harder or working smarter.
Slurping and Spewing
Consider a lobbyist on K Street in Washington or a quality engineer at Lockheed Martin; they are among the first to benefit from the fresh money released by the Treasury. This positions them advantageously, allowing them to utilize the newly introduced funds before their value is diluted.
In contrast, a mechanic on Main Street faces a grim reality: no amount of hard work or clever strategies can mitigate the devaluation that occurs by the time funds reach their pocket. While the money may appear unchanged, it loses its true worth, akin to an O’Doul’s beer—seemingly the same, but devoid of substance.
The critical takeaway is that one’s position in the financial hierarchy determines if they belong to the state-sponsored elite or the marginalized class. This inequality is deeply unjust, but it is an undeniable reality. Here’s why…
When the state controls the creation of money, its value becomes subject to political whims. Politicians, needing to fulfill voter promises, require increasing monetary supplies.
To secure their positions, politicians often permit central banks to indulge in expanding the monetary supply, provided that inflation does not reach levels that threaten their political survival.
Many politicians operate under the belief that the volume of paper currency is limitless as long as the price stability of essential goods, like gasoline and milk, is maintained. However, the flawed reasoning here is that money’s value is intrinsically linked to its circulation volume.
$750 Billion Giveaway
Central banks perpetually compromise the value of money by increasing its availability in the economy. Their actions are often justified by ongoing crises—be it a pandemic, war, or recession—which create a façade for ramping up money supply.
As new monetary units flood the economy, the purchasing power of existing money diminishes. Unfortunately, the ramifications of this devaluation often go unnoticed until they reach a critical point, usually manifesting as significant consumer price inflation.
Only when the repercussions become too severe does the central bank acknowledge its policy missteps and take corrective measures, often by raising interest rates. The state also attempts to curb inflation, yet their limited understanding of economics frequently results in conflicting approaches with central bank actions.
The Inflation Reduction Act exemplifies this disconnect. As consumer price inflation reaches a 40-year high and the Federal Reserve aggressively raises interest rates, Congress has enacted a $750 billion expenditure that misleadingly claims to combat inflation.
In the distorted logic of some lawmakers, inflation justifies increased fiscal expenditure, which inherently leads to further monetary expansion. The underlying mechanisms are inherently inflationary.
Is the IRS Coming for You?
If you earn a wage, it’s likely you contribute more than your fair share of federal income taxes. This is money deducted directly from your paycheck before you even see it. Adding insult to injury, you also encounter an inflation tax, a direct consequence of government actions.
When you factor in state taxes, sales taxes, and numerous government fees, it’s plausible that over half of your earnings are consumed by taxes and inflation. Nevertheless, for Washington lawmakers, your hard-earned money seemingly never suffices.
The IRA—this monumental $750 billion spending package—allocates $80 billion to recruit nearly 87,000 new Internal Revenue Service (IRS) agents, who will focus their scrutiny on middle-class Americans, regardless of the Biden administration’s claims.
In a letter to the IRS commissioner, Treasury Secretary Janet Yellen stated that “any additional resources … shall not be used to increase the share of small businesses or households below the $400,000 threshold that are audited relative to historical levels.”
Do you find this reassuring?
Keep in mind that this is the same Janet Yellen who previously suggested that inflation was transitory while it spiraled out of control. She also endorsed granting the IRS access to any bank transactions exceeding $600 under the Build Back Better Act. Defending these intrusive measures, Yellen asserted:
“I don’t believe it’s an invasion of privacy; the IRS needs access to sufficient information to ensure taxpayer compliance with the tax code.”
In any case, the federal government gets what it wants. While Build Back Better may have been stymied, the IRA has empowered the IRS to invade the financial lives of everyday Americans.
[Editor’s note: The IRA will enable government agents to scrutinize your finances and pinpoint reasons for demanding additional taxes. Indeed, it’s troubling. Anticipating such developments, I have dedicated the past six months to researching manageable steps that Americans can take to safeguard their wealth and financial privacy. My findings are compiled in the Financial First Aid Kit. If you’re interested in learning more about this essential publication and how to obtain a copy, please visit here today!]
Sincerely,
MN Gordon
for Economic Prism
