It's always been incredible to me that inflation is treated as though it emerges organically, "aww shucks, I sure wish my money didn't keep losing value randomly!"
This is the result of policy decisions with well-understood outcomes. 0% interest rates for years, printing unprecedented amounts of money during COVID, historically high tariffs, etc.
Now we'll all be 3%-10% poorer, in a single year, yet I see no accountability. In fact, I see people pressuring the Fed to lower (!) rates, the tariffs don't seem to be going anywhere, and government spending and debt are at all-time highs.
I genuinely cannot understand this. If your actions will predictably make everyone poorer, and then the predictions come true, how can this not result in widespread loss of trust in governance?
I don't think the administration is taking positive steps combat inflation they basically received an economy at 3% and stayed at 3% inflation. Which is above the Fed target of 2%.
Now you might ask why the Fed targets 2% and not 0% and that's because a world where inflation is 0% is brutal for debtors which is basically everyone. The fact that inflations occurs basically guarantees that people who don't over leverage won't be stuck in perpetual debt. That means people can take out loans, start companies and buy equipment to grow the economy. If we had 0% inflation all of that activity becomes much harder.
Another way to see it is:
If you have mortgage inflation comes of the liability of that debt since inflation is not just inflating all the bad parts but all the parts of the economy. And de-risks investment mostly because debt is in nominal terms. Now you cannot have rabid inflation but its not just as though anything above 0% inflation is bad.
0% is also way too close to deflation, which the Fed wants to avoid more than anything else. With deflation, you stop consuming because tomorrow the prices will be lower. The economy can easily sink into a death spiral.
> That means people can take out loans, start companies and buy equipment to grow the economy. If we had 0% inflation all of that activity becomes much harder.
Then why did firms love to take out loans and grow during 0% rates and start shedding workers as soon as the rates went up?
Because this is the amount that that the population will tolerate without revolting (see how we’re reacting to higher currently). Permanent inflation is permanent devaluation of labor, and permanent growth for capital holders. Coins have ridges on them for a reason.
The root problem is a debt based economy. It is not needed, and serves only to increase the wealth gap and shrink the middle class. The capital class has put much money towards financing “experts” who say inflation is needed. Other systems exist - monetary policy should serve the people, not enslave them [1].
Take homes for example - if we simply worked towards making homes cheaper, nobody would need mortgages. People owned homes before the 30 year fixed existed. The problem is if we make homes cheaper there’s less left for the capital class to own.
The historical reasons aren't relevant. Coins are made of low-value metals nowadays and even if you could collect a large amount of coin shavings, exchanging them for their intrinsic value is not feasible without smelting, which is costly and impractical for almost everyone.
Excessive inflation is destructive but it requires a better explanation than that.
In a vacuum, if we all have 3-10% more money and things are 3-10% more expensive, we're not poorer unless there are secondary effects that make us poorer. It's the secondary effects that inflation has on investment, markets, and transfer of wealth that are negative. The effects of debt collapse during economic crisis is a considerably more expensive effect, and not one that's good for the poor, or the rich, or the middle class or anyone.
If you "genuinely cannot understand this", consider that the traditional perspective is that the point of an economy is to produce useful goods and services, not to produce an aesthetically pleasing inflation number. Recall that, in early 2020, markets were facing the greatest panic since the 1929 crash. The debt collapse and deflation that followed then precipitated an enormous amount of misery. I'm personally pretty happy we didn't get another Great Depression; Covid was bad enough without that happening.
To piggy-back, the economy runs on the re-circulation of money and the reluctant to spend/lend money in 1929 contributed to why it was so bad (This is what Bernake got a nobel prize for showing [1]).
So you really want the government to synthetically make the money supply larger so that the lower velocity of money ends up being the "correct" velocity. Its like ordering 2 sides of fries at a restaurant so when somebody takes one of your sides you still end up with the desired amount.
However, since the government doesn't turn off the money printing when the shock is over there really is strong argument that they shouldn't turn it on during the shock because it just makes the next shock even worse.
I'm no economist, but it feels like just adjusting the taxation the further up the marginal brackets (even creating more marginal brackets at different increments to make the resolution finer) is what would benefit the majority more.
Whether that has negative effects elsewhere, I have no idea and thank goodness I'm not in charge of that.
Inflation looks a lot like taxation, yes. But assets, the markets for equities, etc rise with inflation. The upper class has most of their net worth in assets/equities, whereas the poorer people are living paycheck to paycheck just buying the essentials each month, and each month those essentials become more expensive. Only one of these groups feels any real impact.
So yes it's a tax but it's a tax on a very specific segment of the population.
That is a discussion that inflation resembles a tax. And in any case, how does that refute the idea that taxation in general is not a solution? That’s like saying soda taxes are bad so we shouldn’t have income taxes either.
It's less about raising taxes on people making less than 250,000 a year and more on getting people who make over 1,000,000 pay taxes at all. Sure there's plenty of people who aren't rich that commit tax fraud but the IRS is pretty good at getting them. Getting the millionaires who can throw lawyers at them to waste time makes it not worth it. The rich get richer and the poor get poorer
When the top 5% makes 3x more than the bottom 50%? The top 5% makes 38% of the total, while the top 1% alone makes 22%, per the same sources you just quoted. Yes, the ones who make the most can afford to pay the most in taxes.
You didn't even cover GP's main point about getting the top to even pay taxes; the top 1%, per your own source, only pays 26%, while the top 50% pays 16%.
Argue for higher tax rates and more enforcement all you want, but the fact is that the current setup results in a situation where the bulk of actual taxes collected come from the rich.
This situation has persisted for as many decades as I've been able to find data for.
Here's a quote from my source: "The top 1 percent earned 22.4 percent of total AGI and paid 40.4 percent of all federal income taxes.
In all, the top 1 percent of taxpayers accounted for more income taxes paid than the bottom 90 percent combined."
And we haven't even talked about the avalanche of payroll and sales taxes generated by the businesses they run.
> The top 5% of taxpayers in the USA pay 61% of the taxes.
Only if you ignore the payroll tax.
For the median US worker, they pay ~15% in payroll tax, and significantly less in income tax. The median US worker makes $40k year, paying like $6k in payroll tax and like $2.8k in federal income tax.
So yes, if you ignore the majority of tax that the average worker pays, then the top 5% pay the majority of tax.
The useful statistic is not "what percentage of the taxes do each quintile/decile/etc pay?"
It's "What percentage of their disposable income (ie, net of housing, food, health care, and other necessary expenses) do each quintile/decile/etc pay in taxes?"
And the answer is going to be that the middle and working classes pay a huge percentage—close to 100% for many—while for the wealthy it's effectively nothing.
....Right. Which is why what I described would ensure that the people who feel the least pain from funding the state are asked to pay the greatest share.
People making one million dollars a year are people like doctors and lawyers and are most certainly paying taxes. One million dollars today was ~$680k in 2008.
Completely unrelated but thanks for bringing the always forever true left agenda... the solution to our problems is to "tax the very wealthiest people" because that will solve the woes of society. As well it feels very unfair so lets do it.
Ill throw that one right in the category of let's solve our housing crisis by a rent freeze.
Neither try to solve the problem but are great tag lines for the uninformed if your a politician seeking power!
Why. We used to have much higher tax rates on the super wealthy. That was when America was doing stuff rather than floundering.
I'd even argue it's in their own interest to have higher taxes. There is no guarantee the current structure of society will continue indefinitely. Without a more reasonable distribution of wealth, we may end up repeating the "let them eat cake" episode.
Such that one person doesn't have the power to buy, legally, a presidential election, multiple regional elections, or half the politicians via lobbying/corruption.
The problem you are describing is revoking Citizen's United. What your trying to do is a patch job to another problem which is going to cause all sorts of unintended consequences.
First principles people, not these lazy slap dash approaches.
Very astute. Of course my comment is saying no it won't - its called mathematics. Its all posturing without any meaningful effort but people lap it up because it doesn't require anyone else to anything different.
many aspects of business and financial planning are adversely impacted by excessive inflation. Sure, you can theoretically bake inflation hedges into any financial instrument, but a very small percentage of business and financial planning is done that way -- and the hedges also impose a cost.
Inflation is effectively a tax on savings. There is absolutely no upside, it is considered a tolerable side-effect of the Fed's employment mandate.
I think this only works to a point. For example the house you own will be in a weird situation if the government debt is so big it is paying all the tax revenue to pay debt. The area will likely become less desirable as people leave to go to less debt ridden places.
People who have so much in assets that they can live (and support their family) with the interest they earn on those assets, and by a huge margin, not just comfortably retired people. Those are the people who get richer, at the expense of your kids. Inflationary housing expenses are a drop in the bucket when someone's assets are in the billions.
Untrue -- inflation hurts people at the bottom the most most certainly - but it wreaks havoc on everyone. There are other factors at plays as well -- level of inflation, current prices of assets, how people own the assets (mortgages etc).
> This is the result of policy decisions with well-understood outcomes. 0% interest rates for years, printing unprecedented amounts of money during COVID, historically high tariffs, etc.
This seems like a bit of an odd take, because the topic is wholesale prices in July 2025, whereas you conflate historically high tariffs, which indeed have begun recently, with other factors from years ago. As you yourself noted, interest rates are now high enough that there's a demand (by Trump) to lower them.
Speaking of the pandemic, you didn't mention supply chain disruptions, panic purchases, and hoarding, which resulted in product shortages and price gouging.
Moreover, a lot of the money from the government during the pandemic went directly to businesses, often wealthy businesses, rather than to consumers. But the poor consumers always get the blame for just wanting to be able to pay their bills in the face of massive job losses and other difficulties outside their control. Business bailouts and subsidies are somehow never considered "printing money". To me, the printing money complaint, which almost always is directed toward the government checks to individuals, has a very "let them eat cake" feel.
We won't all, because we can invest savings instead of holding them in cash.
A positive inflation rate, around 2% per year, is deliberately targeted as a long-term average. This is because having a constant expectation of declining value pressures consumers to consume, which keeps money moving through the economy. (We aren't all entrepreneurs, so we can't all be motivated by the opportunity cost of not starting a business.)
> In fact, I see people pressuring the Fed to lower (!) rates
There have been such calls because the inflation problem that prompted spiking the interest rates appeared to have been mostly resolved, because interest rates at the current level are expected to continue exerting downward pressure on inflation, and mostly because high rates have other negative effects.
Boom-bust cycles are not inherently bad. In the long run, history shows that the booms more than outweigh the busts, and suggests (at least to me) that the net result is better than it would be with slower constant growth (which is hard to manage, since you never know when the next big technological innovation will come).
> the tariffs don't seem to be going anywhere
While high in historical perspective, the tariffs are not effectively as high as the headlines make them sound, and there is a lot more to the economy than foreign trade.
> government spending and debt are at all-time highs.
The system is largely designed to work this way — in all developed nations, not just the US.
While high in historical perspective, the tariffs are not effectively as high as the headlines make them sound, and there is a lot more to the economy than foreign trade.
Agree. the service sector is a huge part of the economy. Imported durable goods, which are most affected by the tariffs, are only a small part of US consumer spending.
Now we'll all be 3%-10% poorer, in a single year, yet I see no accountability. In fact, I see people pressuring the Fed to lower (!) rates, the tariffs don't seem to be going anywhere, and government spending and debt are at all-time highs.
This would only be true if you kept your money under a mattress. Stocks and real estate have posted strong real returns. Even risk-free interest exceeds 3%. Same for increased wages.
Stocks and home ownership are time-tested, effective hedges against loss of purchasing power.
the tariffs don't seem to be going anywhere, and government spending and debt are at all-time highs.
I agree the tariffs were a mistake, but the national debt at all time highs does not mean Americans become poorer. The fallacy of composition is to assume that the national debt is like a household debt. The national debt does not affect the ability of Americans to accumulate significant real-levels of wealth with investments and income.
I mean, that's a bit of a simplistic take. I'm all for accountability for politicians, but a lot of inflation does kind of happen on it's own.
The biggest inflation shock of recent era was Russian invasion of Ukraine. And, fine, that didn't "just" happen, but hard to blame Western politicians for it. Western governments had to make a choice between inflation and security. You might disagree with the choice, but it's a balance.
Further, inflation and growth are largely affected by a single lever, central bank rates, and making growth better makes inflation worse, in general. Central banks (mostly) diligently try to walk the right path. Of course I'm not referring to cases where politicians just say, hey you there Independent Central Bank Head, lower rates or else. But that case is an exception.
Then, salaries may or may not keep up with inflation. Inflation is generally bad, as businesses have a hard time lowering notional salaries - but they can more easily not increase them with inflation. But as a strict matter they can do it anyway and labour force can get screwed if they don't hold enough bargaining power.
So I would say that largely, yes, inflation does just happen, and it can be exacerbated by some degree (none to massively) by bad politics. But I think to say it's always just bad government is not right.
> This is the result of policy decisions with well-understood outcomes.
All the things you mentioned, certainly, but there's a more direct, more obvious route for policy to control inflation. It is (at least in Australia) one of several artificial measures generated based on the weighted changes in pricing of a "basket of goods" selected by the Australian Bureau of Statistics, the specifics of which is altered unilaterally, somewhat regularly and relatively opaquely (the info is public but you have to go digging and general discussions tend to ignore it and just say "inflation" or "the CPI".
So inflation is literally defined by these decisions. And while I'm sure the majority are well-meaning, there are still so many very plausible, very easily defendable ways to influence the outcome. eg. iirc around 2021 they decided to count capital gains on housing against the CPI "because families' net worth was increasing" despite the fact that a whole bunch of people were struggling to buy groceries. Such an accountant-ish thing to do.
Go back and listen to the first 10 minutes of the debate again.
Kamala tried to warn us about this. It's also quite clear that Kamala lost the first 10 minutes of the debate. It's only later on when Trump went full-Trump that Kamala was able to turn the debate around.
You can blame it on Kamala, Trump, the media or the American public, but this sort of stuff is very hard to communicate effectively.
Tariffs are taxes and are inflationary. "China is going to pay" is a lie. People tried to communicate this, but weren't believed, so gave up.
It’s not “people” pressuring the Fed to lower rates, it’s one person in particular. All the other intelligent people around know that lowering interest rates when you just added a boatload of inflationary pressure is idiotic, but that doesn’t count for anything anymore.
I hear you, he's the most vocal at the moment, but low interest rates have been popular among many policymakers and intellectuals throughout the history of monetary policy.
_The Price of Time: The Real Story of Interest_ by Edward Chancellor goes in depth on this, a really interesting read.
They have just done a full turnaround. But speaking of "the markets" is a bit problematic at the moment since the mag7 now constitute a third of the SP500 market cap and they have been affected little by tariffs. Instead the great AI story keeps chugging along pretty nicely while the rest of the market - the SP493 - goes basically nowhere.
losses recovered, indexes near record highs again. No one seems to care. Multinationals making record profits still. This does not change the propensity of consumers to keep spending, or of large companies to keep generating cash. People may complain about high prices but will not modify their spending habits much.
You're right — but all week when I've checked after some new bad numbers, the markets were up. But, sure, they'll be back in the black soon enough today.
Another thing to watch for is the BLS import prices which show prices excluding tariffs. If these remain flat for July as they did for June, it would be another data point suggesting tariffs induced inflation.
News outlets have been feeding us with annualized rates, which is making this 0.9 figure sound pale, but it's pretty big because it's for July only. Times 12, it means inflation over 10%. The 3.3% annualized figure in the article is because they've been averaging the past 12 months.
Something in July made the prices jack up in a really serious way.
Just to be pedantic, but the 10% number is the one that is annualized (that is, if an entire year had that monthly rate, what would its inflation be?). It's also not times 12, inflation composes, so it totals to ~11.3%.
The 3.3% figure is annual, normally called "last 12 months" to avoid confusion with a fixed year.
I think that what they're saying is because inflation numbers are typically presented as an annual number (3.3%), when you hear a number like 0.9% it sounds lower to somebody who is not economically literate.
"Prices increased 0.9% in July, which would translate to an annual inflation rate of 11.3%" is one way to say it with more clarity.
Also, Trump has a habit of picking numbers out of context when they suit his personal narrative. For example, not long ago he said something like "The price of gas is down to $1.98 per gallon" when in fact that that number was something along of the lines of the wholesale price. So it's no wonder people are misinformed when they get misleading economic information.
Not only that but a lot of businesses built inventories before the tariffs took place and we're seeing that gone now, from now on we'll likely see more increases as everything that is showing up has a tariff applied.
> The producer price index, which measures final demand goods and services prices, jumped 0.9% on the month, compared with the Dow Jones estimate for a 0.2% gain.
The markets knew about the tariffs when they came up with that estimate.
You mean that in the sense "is it too soon to say we'll have a 10% inflation year?". Certainly, and I don't mean that. I just want to counter the general "annualized inflation figure numbness". But this is not noise. Prices are a real signal.
The Trump tariffs / massive billionaire deficit tax cut / chaos start to hit home.
The amazing thing to me is that markets aren't tanking on this news. Are they just pricing in that prices will go up, so revenue with go up, and if margin maintains, profit will go up by a similar amount?
It's always been incredible to me that inflation is treated as though it emerges organically, "aww shucks, I sure wish my money didn't keep losing value randomly!"
This is the result of policy decisions with well-understood outcomes. 0% interest rates for years, printing unprecedented amounts of money during COVID, historically high tariffs, etc.
Now we'll all be 3%-10% poorer, in a single year, yet I see no accountability. In fact, I see people pressuring the Fed to lower (!) rates, the tariffs don't seem to be going anywhere, and government spending and debt are at all-time highs.
I genuinely cannot understand this. If your actions will predictably make everyone poorer, and then the predictions come true, how can this not result in widespread loss of trust in governance?
I don't think the administration is taking positive steps combat inflation they basically received an economy at 3% and stayed at 3% inflation. Which is above the Fed target of 2%.
Now you might ask why the Fed targets 2% and not 0% and that's because a world where inflation is 0% is brutal for debtors which is basically everyone. The fact that inflations occurs basically guarantees that people who don't over leverage won't be stuck in perpetual debt. That means people can take out loans, start companies and buy equipment to grow the economy. If we had 0% inflation all of that activity becomes much harder.
Another way to see it is:
If you have mortgage inflation comes of the liability of that debt since inflation is not just inflating all the bad parts but all the parts of the economy. And de-risks investment mostly because debt is in nominal terms. Now you cannot have rabid inflation but its not just as though anything above 0% inflation is bad.
0% is also way too close to deflation, which the Fed wants to avoid more than anything else. With deflation, you stop consuming because tomorrow the prices will be lower. The economy can easily sink into a death spiral.
> That means people can take out loans, start companies and buy equipment to grow the economy. If we had 0% inflation all of that activity becomes much harder.
Then why did firms love to take out loans and grow during 0% rates and start shedding workers as soon as the rates went up?
> Now you might ask why the Fed targets 2%
Because this is the amount that that the population will tolerate without revolting (see how we’re reacting to higher currently). Permanent inflation is permanent devaluation of labor, and permanent growth for capital holders. Coins have ridges on them for a reason.
The root problem is a debt based economy. It is not needed, and serves only to increase the wealth gap and shrink the middle class. The capital class has put much money towards financing “experts” who say inflation is needed. Other systems exist - monetary policy should serve the people, not enslave them [1].
Take homes for example - if we simply worked towards making homes cheaper, nobody would need mortgages. People owned homes before the 30 year fixed existed. The problem is if we make homes cheaper there’s less left for the capital class to own.
[1] https://en.m.wikipedia.org/wiki/Social_credit
> Coins have ridges on them for a reason.
The historical reasons aren't relevant. Coins are made of low-value metals nowadays and even if you could collect a large amount of coin shavings, exchanging them for their intrinsic value is not feasible without smelting, which is costly and impractical for almost everyone.
Excessive inflation is destructive but it requires a better explanation than that.
In a vacuum, if we all have 3-10% more money and things are 3-10% more expensive, we're not poorer unless there are secondary effects that make us poorer. It's the secondary effects that inflation has on investment, markets, and transfer of wealth that are negative. The effects of debt collapse during economic crisis is a considerably more expensive effect, and not one that's good for the poor, or the rich, or the middle class or anyone.
If you "genuinely cannot understand this", consider that the traditional perspective is that the point of an economy is to produce useful goods and services, not to produce an aesthetically pleasing inflation number. Recall that, in early 2020, markets were facing the greatest panic since the 1929 crash. The debt collapse and deflation that followed then precipitated an enormous amount of misery. I'm personally pretty happy we didn't get another Great Depression; Covid was bad enough without that happening.
To piggy-back, the economy runs on the re-circulation of money and the reluctant to spend/lend money in 1929 contributed to why it was so bad (This is what Bernake got a nobel prize for showing [1]).
So you really want the government to synthetically make the money supply larger so that the lower velocity of money ends up being the "correct" velocity. Its like ordering 2 sides of fries at a restaurant so when somebody takes one of your sides you still end up with the desired amount.
However, since the government doesn't turn off the money printing when the shock is over there really is strong argument that they shouldn't turn it on during the shock because it just makes the next shock even worse.
[1]: https://en.wikipedia.org/wiki/Ben_Bernanke#Nobel_Prize
> if we all have 3-10% more money and things are 3-10% more expensive
Who has 3-10% more money, exactly?
Not the people with savings account
If only we could find some way to raise taxes for people who make so much money that they wouldn't be impacted by those taxes.....
When life becomes more expensive due to taxation (inflation is effectively a tax), I'm very skeptical that the solution is more taxation.
I'm no economist, but it feels like just adjusting the taxation the further up the marginal brackets (even creating more marginal brackets at different increments to make the resolution finer) is what would benefit the majority more.
Whether that has negative effects elsewhere, I have no idea and thank goodness I'm not in charge of that.
Inflation looks a lot like taxation, yes. But assets, the markets for equities, etc rise with inflation. The upper class has most of their net worth in assets/equities, whereas the poorer people are living paycheck to paycheck just buying the essentials each month, and each month those essentials become more expensive. Only one of these groups feels any real impact.
So yes it's a tax but it's a tax on a very specific segment of the population.
You’re arguing that because inflation (which is not a tax) is kinda sorta like a tax, therefore taxation in general isn’t a solution?
Inflation is effectively taxation.
Here's the University of Toronto's economics lesson on the subject:
https://www.economics.utoronto.ca/jfloyd/modules/inft.html
That is a discussion that inflation resembles a tax. And in any case, how does that refute the idea that taxation in general is not a solution? That’s like saying soda taxes are bad so we shouldn’t have income taxes either.
It's less about raising taxes on people making less than 250,000 a year and more on getting people who make over 1,000,000 pay taxes at all. Sure there's plenty of people who aren't rich that commit tax fraud but the IRS is pretty good at getting them. Getting the millionaires who can throw lawyers at them to waste time makes it not worth it. The rich get richer and the poor get poorer
I don't know how this is even a talking point.
The top 5% of taxpayers in the USA pay 61% of the taxes.
The top 1% pay 30-40% of all the taxes and have done so for decades.
https://usafacts.org/articles/who-pays-the-most-income-tax/
https://taxfoundation.org/data/all/federal/latest-federal-in...
When the top 5% makes 3x more than the bottom 50%? The top 5% makes 38% of the total, while the top 1% alone makes 22%, per the same sources you just quoted. Yes, the ones who make the most can afford to pay the most in taxes.
You didn't even cover GP's main point about getting the top to even pay taxes; the top 1%, per your own source, only pays 26%, while the top 50% pays 16%.
Top x% tax bracket should at least be 32%, per current brackets. So one could argue they aren't even paying what they 'should'. https://www.irs.gov/filing/federal-income-tax-rates-and-brac...
Argue for higher tax rates and more enforcement all you want, but the fact is that the current setup results in a situation where the bulk of actual taxes collected come from the rich.
This situation has persisted for as many decades as I've been able to find data for.
Here's a quote from my source: "The top 1 percent earned 22.4 percent of total AGI and paid 40.4 percent of all federal income taxes.
In all, the top 1 percent of taxpayers accounted for more income taxes paid than the bottom 90 percent combined."
And we haven't even talked about the avalanche of payroll and sales taxes generated by the businesses they run.
> The top 5% of taxpayers in the USA pay 61% of the taxes.
Only if you ignore the payroll tax.
For the median US worker, they pay ~15% in payroll tax, and significantly less in income tax. The median US worker makes $40k year, paying like $6k in payroll tax and like $2.8k in federal income tax.
So yes, if you ignore the majority of tax that the average worker pays, then the top 5% pay the majority of tax.
> The top 1% pay 30-40% of all the taxes and have done so for decades.
That's kinda the problem. We've been running a deficit for decades because the top tax rate has been cut.
I think looking at the top 5% of wealth, not just taxpayers, may open up the conversation on both sides
The useful statistic is not "what percentage of the taxes do each quintile/decile/etc pay?"
It's "What percentage of their disposable income (ie, net of housing, food, health care, and other necessary expenses) do each quintile/decile/etc pay in taxes?"
And the answer is going to be that the middle and working classes pay a huge percentage—close to 100% for many—while for the wealthy it's effectively nothing.
Why?
The important thing is funding the state, not making a personal sacrifice. The economy is based on value, not pain.
....Right. Which is why what I described would ensure that the people who feel the least pain from funding the state are asked to pay the greatest share.
People making one million dollars a year are people like doctors and lawyers and are most certainly paying taxes. One million dollars today was ~$680k in 2008.
Completely unrelated but thanks for bringing the always forever true left agenda... the solution to our problems is to "tax the very wealthiest people" because that will solve the woes of society. As well it feels very unfair so lets do it.
Ill throw that one right in the category of let's solve our housing crisis by a rent freeze.
Neither try to solve the problem but are great tag lines for the uninformed if your a politician seeking power!
Your comment amounts to "no it won't"
Why. We used to have much higher tax rates on the super wealthy. That was when America was doing stuff rather than floundering.
I'd even argue it's in their own interest to have higher taxes. There is no guarantee the current structure of society will continue indefinitely. Without a more reasonable distribution of wealth, we may end up repeating the "let them eat cake" episode.
> Why.
Because there literally aren't enough of these ultra-wealthy people for them to have enough total wealth to confiscate to solve the problem.
There are any number of mathematical analyses of this out there.
It reduces wealth inequality.
Such that one person doesn't have the power to buy, legally, a presidential election, multiple regional elections, or half the politicians via lobbying/corruption.
Again not solving the actual problem.
The problem you are describing is revoking Citizen's United. What your trying to do is a patch job to another problem which is going to cause all sorts of unintended consequences.
First principles people, not these lazy slap dash approaches.
Very astute. Of course my comment is saying no it won't - its called mathematics. Its all posturing without any meaningful effort but people lap it up because it doesn't require anyone else to anything different.
Inflation only makes people that don't own assets poorer. People that own assets (houses and stocks) are inflation resistant.
many aspects of business and financial planning are adversely impacted by excessive inflation. Sure, you can theoretically bake inflation hedges into any financial instrument, but a very small percentage of business and financial planning is done that way -- and the hedges also impose a cost.
Inflation is effectively a tax on savings. There is absolutely no upside, it is considered a tolerable side-effect of the Fed's employment mandate.
I think this only works to a point. For example the house you own will be in a weird situation if the government debt is so big it is paying all the tax revenue to pay debt. The area will likely become less desirable as people leave to go to less debt ridden places.
I own a house and stocks. And cars and other assets. Inflation still makes me poorer.
I have a family of five. No matter how much my home value increases or how well the market does, I still need to pay to live.
People who have so much in assets that they can live (and support their family) with the interest they earn on those assets, and by a huge margin, not just comfortably retired people. Those are the people who get richer, at the expense of your kids. Inflationary housing expenses are a drop in the bucket when someone's assets are in the billions.
This is true almost everywhere else but California because of prop 13. Your assessed value can only rise by at most 2% a year.
Untrue -- inflation hurts people at the bottom the most most certainly - but it wreaks havoc on everyone. There are other factors at plays as well -- level of inflation, current prices of assets, how people own the assets (mortgages etc).
And the companies that those stocks are a value representation of, sell their products to who?
"Inflation’s Impact on Stock Returns" - https://www.investopedia.com/articles/investing/052913/infla...
"...Since the 1930s, the research suggests that almost every country suffered its worst real returns during high inflation periods..."
> This is the result of policy decisions with well-understood outcomes. 0% interest rates for years, printing unprecedented amounts of money during COVID, historically high tariffs, etc.
This seems like a bit of an odd take, because the topic is wholesale prices in July 2025, whereas you conflate historically high tariffs, which indeed have begun recently, with other factors from years ago. As you yourself noted, interest rates are now high enough that there's a demand (by Trump) to lower them.
Speaking of the pandemic, you didn't mention supply chain disruptions, panic purchases, and hoarding, which resulted in product shortages and price gouging.
Moreover, a lot of the money from the government during the pandemic went directly to businesses, often wealthy businesses, rather than to consumers. But the poor consumers always get the blame for just wanting to be able to pay their bills in the face of massive job losses and other difficulties outside their control. Business bailouts and subsidies are somehow never considered "printing money". To me, the printing money complaint, which almost always is directed toward the government checks to individuals, has a very "let them eat cake" feel.
> Now we'll all be 3%-10% poorer
We won't all, because we can invest savings instead of holding them in cash.
A positive inflation rate, around 2% per year, is deliberately targeted as a long-term average. This is because having a constant expectation of declining value pressures consumers to consume, which keeps money moving through the economy. (We aren't all entrepreneurs, so we can't all be motivated by the opportunity cost of not starting a business.)
> In fact, I see people pressuring the Fed to lower (!) rates
There have been such calls because the inflation problem that prompted spiking the interest rates appeared to have been mostly resolved, because interest rates at the current level are expected to continue exerting downward pressure on inflation, and mostly because high rates have other negative effects.
Boom-bust cycles are not inherently bad. In the long run, history shows that the booms more than outweigh the busts, and suggests (at least to me) that the net result is better than it would be with slower constant growth (which is hard to manage, since you never know when the next big technological innovation will come).
> the tariffs don't seem to be going anywhere
While high in historical perspective, the tariffs are not effectively as high as the headlines make them sound, and there is a lot more to the economy than foreign trade.
> government spending and debt are at all-time highs.
The system is largely designed to work this way — in all developed nations, not just the US.
While high in historical perspective, the tariffs are not effectively as high as the headlines make them sound, and there is a lot more to the economy than foreign trade.
Agree. the service sector is a huge part of the economy. Imported durable goods, which are most affected by the tariffs, are only a small part of US consumer spending.
Now we'll all be 3%-10% poorer, in a single year, yet I see no accountability. In fact, I see people pressuring the Fed to lower (!) rates, the tariffs don't seem to be going anywhere, and government spending and debt are at all-time highs.
This would only be true if you kept your money under a mattress. Stocks and real estate have posted strong real returns. Even risk-free interest exceeds 3%. Same for increased wages.
Stocks and home ownership are time-tested, effective hedges against loss of purchasing power.
the tariffs don't seem to be going anywhere, and government spending and debt are at all-time highs.
I agree the tariffs were a mistake, but the national debt at all time highs does not mean Americans become poorer. The fallacy of composition is to assume that the national debt is like a household debt. The national debt does not affect the ability of Americans to accumulate significant real-levels of wealth with investments and income.
I mean, that's a bit of a simplistic take. I'm all for accountability for politicians, but a lot of inflation does kind of happen on it's own.
The biggest inflation shock of recent era was Russian invasion of Ukraine. And, fine, that didn't "just" happen, but hard to blame Western politicians for it. Western governments had to make a choice between inflation and security. You might disagree with the choice, but it's a balance.
Further, inflation and growth are largely affected by a single lever, central bank rates, and making growth better makes inflation worse, in general. Central banks (mostly) diligently try to walk the right path. Of course I'm not referring to cases where politicians just say, hey you there Independent Central Bank Head, lower rates or else. But that case is an exception.
Then, salaries may or may not keep up with inflation. Inflation is generally bad, as businesses have a hard time lowering notional salaries - but they can more easily not increase them with inflation. But as a strict matter they can do it anyway and labour force can get screwed if they don't hold enough bargaining power.
So I would say that largely, yes, inflation does just happen, and it can be exacerbated by some degree (none to massively) by bad politics. But I think to say it's always just bad government is not right.
"well-understood outcomes" -- Not well understood by everyone. I think we all know some people that don't understand. (maybe a lot of people).
> This is the result of policy decisions with well-understood outcomes.
All the things you mentioned, certainly, but there's a more direct, more obvious route for policy to control inflation. It is (at least in Australia) one of several artificial measures generated based on the weighted changes in pricing of a "basket of goods" selected by the Australian Bureau of Statistics, the specifics of which is altered unilaterally, somewhat regularly and relatively opaquely (the info is public but you have to go digging and general discussions tend to ignore it and just say "inflation" or "the CPI".
So inflation is literally defined by these decisions. And while I'm sure the majority are well-meaning, there are still so many very plausible, very easily defendable ways to influence the outcome. eg. iirc around 2021 they decided to count capital gains on housing against the CPI "because families' net worth was increasing" despite the fact that a whole bunch of people were struggling to buy groceries. Such an accountant-ish thing to do.
Go back and listen to the first 10 minutes of the debate again.
Kamala tried to warn us about this. It's also quite clear that Kamala lost the first 10 minutes of the debate. It's only later on when Trump went full-Trump that Kamala was able to turn the debate around.
You can blame it on Kamala, Trump, the media or the American public, but this sort of stuff is very hard to communicate effectively.
Tariffs are taxes and are inflationary. "China is going to pay" is a lie. People tried to communicate this, but weren't believed, so gave up.
https://youtu.be/4dOgWZsDB6Q?t=574
It’s not “people” pressuring the Fed to lower rates, it’s one person in particular. All the other intelligent people around know that lowering interest rates when you just added a boatload of inflationary pressure is idiotic, but that doesn’t count for anything anymore.
I hear you, he's the most vocal at the moment, but low interest rates have been popular among many policymakers and intellectuals throughout the history of monetary policy.
_The Price of Time: The Real Story of Interest_ by Edward Chancellor goes in depth on this, a really interesting read.
Markets this morning seem to have noticed.
But the way "the markets" have behaved so far, I expect a full turnaround and record S&P500 numbers by close today.
They have just done a full turnaround. But speaking of "the markets" is a bit problematic at the moment since the mag7 now constitute a third of the SP500 market cap and they have been affected little by tariffs. Instead the great AI story keeps chugging along pretty nicely while the rest of the market - the SP493 - goes basically nowhere.
losses recovered, indexes near record highs again. No one seems to care. Multinationals making record profits still. This does not change the propensity of consumers to keep spending, or of large companies to keep generating cash. People may complain about high prices but will not modify their spending habits much.
Have they? Major indexes are down a few tenths of a percent as of 10am EST...
You're right — but all week when I've checked after some new bad numbers, the markets were up. But, sure, they'll be back in the black soon enough today.
after big gains earlier in the week
vibe economy doesn't operate on facts
More discussion here: https://news.ycombinator.com/item?id=44899685
You can read the actual BLS PPI release here: https://www.bls.gov/news.release/pdf/ppi.pdf
Another thing to watch for is the BLS import prices which show prices excluding tariffs. If these remain flat for July as they did for June, it would be another data point suggesting tariffs induced inflation.
You wont see more reports.
"Trump's pick to lead economic data agency floats ending monthly jobs report" - https://www.bbc.com/news/articles/czerwl2xee4o
https://archive.ph/JmMFk
Angry people shaking fist at the sky "BIIIIDEEEEN"
News outlets have been feeding us with annualized rates, which is making this 0.9 figure sound pale, but it's pretty big because it's for July only. Times 12, it means inflation over 10%. The 3.3% annualized figure in the article is because they've been averaging the past 12 months.
Something in July made the prices jack up in a really serious way.
Just to be pedantic, but the 10% number is the one that is annualized (that is, if an entire year had that monthly rate, what would its inflation be?). It's also not times 12, inflation composes, so it totals to ~11.3%.
The 3.3% figure is annual, normally called "last 12 months" to avoid confusion with a fixed year.
I think that what they're saying is because inflation numbers are typically presented as an annual number (3.3%), when you hear a number like 0.9% it sounds lower to somebody who is not economically literate.
"Prices increased 0.9% in July, which would translate to an annual inflation rate of 11.3%" is one way to say it with more clarity.
Also, Trump has a habit of picking numbers out of context when they suit his personal narrative. For example, not long ago he said something like "The price of gas is down to $1.98 per gallon" when in fact that that number was something along of the lines of the wholesale price. So it's no wonder people are misinformed when they get misleading economic information.
Yes. I was just pointing that the names are the other way around. The OP's argument is correct.
Isn't that when the tariffs really took effect?
Not only that but a lot of businesses built inventories before the tariffs took place and we're seeing that gone now, from now on we'll likely see more increases as everything that is showing up has a tariff applied.
> The producer price index, which measures final demand goods and services prices, jumped 0.9% on the month, compared with the Dow Jones estimate for a 0.2% gain.
The markets knew about the tariffs when they came up with that estimate.
Is one month really enough data to distinguish signal from noise?
You mean that in the sense "is it too soon to say we'll have a 10% inflation year?". Certainly, and I don't mean that. I just want to counter the general "annualized inflation figure numbness". But this is not noise. Prices are a real signal.
Baffling.
Clearly a rogue agent in the BLS deep state is adulterating the reported data!
The Trump tariffs / massive billionaire deficit tax cut / chaos start to hit home.
The amazing thing to me is that markets aren't tanking on this news. Are they just pricing in that prices will go up, so revenue with go up, and if margin maintains, profit will go up by a similar amount?