Written for Bacon’s Rebellion by James A. Bacon

This past year saw one of the greatest redistributions of wealth in U.S. history. People are upset by the 8.5% increase in inflation, but they’re not nearly as upset as they should be.

Wage earners, especially lower-income wage earners, have every right to be irate. Their hourly pay has increased, but not nearly as rapidly as the Consumer Price Index, and far less than those components of the CPI such as food, housing and gasoline that comprise a major share of their household budgets. Many were living paycheck to paycheck before the onset of inflation. Now they’re drowning.

Retirees ought to be enraged. Inflation is more devastating by far to their financial security than taxes. A retiree family with a middle-class standard of living might pay, say, $20,000 a year in federal taxes. But if they have a $1 million nest egg in 401(k), IRA and other investments, an 8.5% inflation rate pillages $85,000 from their net worth.

Who are the beneficiaries of inflation? Borrowers — homeowners with a mortgage, consumers with credit card debt, motorists paying off notes on their cars, corporations that have taken advantage of Federal Reserve Bank-engineered low interest rates to leverage their balance sheets, and, of course, the biggest borrower on the face of the planet… the U.S. federal government.

The U.S. government debt now amounts to $30.4 trillion, the equivalent of $91,000 per citizen (or $360,000 per family of four). An 8.5% inflation rate eroded the value of the national debt by nearly $2.6 trillion — a massive gift to the political class.

That compares to $15.6 trillion in total consumer debt at the end of 2021. Inflation reduced the real value of consumers’ obligations by $1.3 trillion, but that only partially offsets what it robbed from their savings.

How much did inflation cost households? Here are the numbers. According to the Federal Reserve Bank, total U.S. financial assets amounted to $118 trillion at the end of 2021. Poof! That’s $10 trillion in value up in smoke.

Corporations owed $10.5 trillion in mid-2021. Inflation erodes the debt burden by about $900 million.

If you’re retired, or approaching retirement, and you’ve played by the rules and done the right thing, building up a retirement savings and paying off the mortgage of your house, you are totally screwed. You’ve been monetarily raped.

Admittedly, seniors are among the biggest beneficiaries of federal spending, so the massive deficit spending and accumulating debt does cut two ways. Medicare Part B (covering physician services) and Part D (covering drugs) are significant drivers of deficit spending, and retirees are the biggest beneficiaries of the nation’s reckless fiscal policies. But rather than make the hard decisions that would put the nation on a sustainable fiscal course, Washington’s political class has become untethered from economic reality. Washington is making no effort to keep promises to elders — promises around which they have built their retirement planning.

Medicare Part A’s hospitalization trust fund runs out in 2026, and Social Security’s trust fund in 2034. Payouts will be limited to what Uncle Sam collects in payroll taxes — projected to be 74% of promised levels for Social Security.

In a column which Bacon’s Rebellion republished yesterday, Chris Saxman argued that a “silver surge” helped propel the Virginia GOP to electoral victory in 2021. If elders were aggravated when inflation was running between 6% and 7% in November, they’d be brandishing torches and pitchforks now if it weren’t for their bad knees and lumbago.

Compounding the resentment of fiscal looting is the increase in violent crime and general erosion of public order. Remember, seniors are less physically robust and more risk-averse than younger Americans, and, therefore, more fearful of crime and mayhem. Then there’s the transgender mania. Young people may be adaptable to the idea of multiple gender identities, but the erosion of the distinction between men and women strikes most elders as literally insane — as in a product of mental illness. Old guys and gals have a sense that the world is falling apart, and they’re none too happy about it.

As Saxman notes, old people vote.

The monetary policy responsible for inflation is beyond the control of state and local government officials. Governor Glenn Younkin has the right idea, though. The state’s fiscal cup floweth over. March 2022 revenues exceeded expectations by 22%, according to a press release issued by the Governor’s Office issued this morning.

Said Youngkin: “There’s plenty of money in the system to provide critical tax cuts and needed relief for Virginians struggling with rising gas prices and record-high inflation on groceries and the products they need every day.”

The tax breaks he has in mind are a pittance compared to the scorched earth left by federal fiscal and monetary policy, but at least it’s something. Voters will remember.