Inflation for thee, but not for Uncle Sam (or his dependents)
Rising prices – inflation – affects us all. Or does it? For the federal government, inflation is something to measure, but not necessarily to worry about, thanks to automatic adjustments built into the budgeting process.
As Phil Gramm and Mike Solon write in the Wall Street Journal, the folks who get the worst end of this only-in-DC bargain are those who can least afford it, but are expected to cheerfully comply – the middle class:
Perhaps the greatest insult that is added to the injury of inflation is how the people pulling the wagon are so much less protected than those riding in it. When funding for the War on Poverty started to increase in 1967, 68% of Americans in the bottom quintile of earners who were between 18 and 66 and neither full-time students nor retired had jobs. By 2017 the average real level of federal transfer payments to the bottom quintile of households exceeded $45,389, and the labor-force participation rate among those prime working-age Americans had plummeted to 36%. Today those not working are largely protected from inflation; those who are working see inflation erode the value of their wages. Their life savings also suffer as inflation eats into the purchasing power of their savings accounts. With a one-year certificate of deposit earning roughly 0.2%, a $50,000 nest egg has lost almost $2,000 of purchasing power in the past seven months.
Washington has plenty of compassion for those riding in the wagon, yet little for those pulling it. When an inflation-protected middle-class income can be had for not working, when do the wagon-pullers shrug?
The polite answer is probably “when they demand it.” Until then, pull harder, because those inflation-protected programs aren’t getting any smaller.