Christian economics places inflation blame where it belongs, on government

 

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2020 Democrat presidential candidate, Sen. Elizabeth Warren of Massachusetts at CNN town hall in Jackson, Mississippi on March 18, 2019. | Screenshot: CNN

Consumers have always complained about prices. The classic Christmas movie, It’s a Wonderful Life, portrays Potter the banker as greedy because he wants the Bailey Savings and Loan to operate like a business and charge market rates for mortgages. Recently, the financial adviser Dave Ramsey was crucified on Twitter for suggesting that landlords should charge market rates for rent.

Consumer prices rose recently 7% over last year and with inflation setting records, President Biden joined the choir singing against the greed of businesses:

“Prices have climbed 16% at the meat counter in the last year, and so President Biden is rounding up the usual scapegoats: Big meat producers.

’While their profits go up, the prices you see at the grocery stores go up commensurate and the prices farmers receive for the products they are bringing to market go down,’ Mr. Biden said Monday. ‘This reflects the market being distorted by a lack of competition,’ adding that ‘capitalism without competition isn’t capitalism; it’s exploitation.’”

And Elizabeth Warren carries a lifetime membership card to the choir:

“’Prices at the pump have gone up,’ she told an MSNBC interviewer last month. ‘Why? Because giant oil companies like Chevron and ExxonMobil enjoy doubling their profits. This isn’t about inflation. This is about price gouging.’

Warren had the same explanation for why turkey has become so expensive: ‘plain old corporate greed.’ She demanded a Justice Department investigation, accusing poultry companies on Nov. 23 of ‘abusing their market power’ by ‘giving CEOs raises & earning huge profits.’”

Consumers have always thought the price of everything was too high. Farmers have always thought they were too low and convinced the federal government through most of the 20th century to prop up farm prices through subsidies or price controls. If only we knew what the right price for everything was. 

For most of Christian history, theologians had embraced the economics of Aristotle and Cicero and viewed commerce as beneath contempt and more immoral than prostitution because merchants didn’t charge a just price. Theologians told merchants their profession would send them to hell. Merchants asked how they could avoid hell. Theologians told them to charge a just price. Merchants asked, what is a just price? Theologians said, we’ll get back to you. 

Aristotle had written that values in a market exchange must be equal. But that wasn’t much help, because how do merchants and consumers determine value? For much of church history theologians arranged products in hierarchies of nobility. Wheat is more noble than mice because people eat wheat and mice destroy it, so wheat should cost more than mice. That satisfied few people. Meanwhile, successful merchants used part of their profits to buy titles of nobility so they could protect their earnings from others in the nobility and gave part to the Church to buy their way into heaven. 

1,500 years later, theologians got back to the merchants with an answer after a lot of debate. The answer will shock some and anger others but consider that the debate over just prices was one of the major issues for theologians for over a millennium. How many readers have put even five minutes into thinking about what constitutes a just price? 

Theologians during the Reformation realized that defining a just price is so complex that only God knows what it is. It requires understanding the scarcity of supply, the amount of demand, the supply chain, quality and many other factors. So, the best humans could do is to rely on the common price arrived at in a free market, that is, one in which neither party can compel the other to meet his terms. 

Today, prices rise for the most part because the Fed pumped up the money supply by almost 40% in 2020 and 2021 compared to the year before by one measure. The money supply had grown around an average of 10% in the previous decades. The Fed goosed the money supply so much to counter the COVID recession of 2020 because when it does, people have more cash than they want to save and spend the excess on cars and washing machines, which boosts the economy for a short while. Eventually, the artificial boom busts and people lose their jobs. 

Higher prices merely reflect greater demand for a limited supply. When more people bid on the same goods, prices naturally rise because some consumers value those goods more than others. Still, markets in the U.S. for consumer goods such as food and gasoline are relatively free. So according to the theologians who debated a just price for over a thousand years, the higher prices are moral and not a sign of greed. Few theologians today know enough about markets to discuss prices. 

Biden and Warren should blame record setting inflation today on the Fed’s monetary policies and supply chain disruptions from COVID. The Fed’s policies are immoral, but the prices in the market place are just prices.

Biden’s Build Back Better boondoggle advertises the evils of the love of money

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Johnson & Johnson CEO Alex Gorsky looks on as President Joe Biden delivers remarks on COVID-19 vaccine production Wednesday, March 10, 2021, in the South Court Auditorium in the Eisenhower Executive Office Building at the White House. | White House/Adam Schultz

President Biden’s Build Back Better boondoggle is on life support in the Senate and should die, but it’s still worth considering one thing it reveals about its supporters - their love of money. Paul wrote this in I Timothy 6:9,10: 

“Those who want to be rich, however, fall into temptation and become ensnared by many foolish and harmful desires that plunge them into ruin and destruction. For the love of money is the root of all kinds of evil. By craving it, some have wandered away from the faith and pierced themselves with many sorrows (NIV).”

It’s natural for people to want money for the things it can buy, such as food, clothing, politicians, etc. Honest people provide a service that others value in exchange for money. Evil ones commit a crime or immoral act to get it. Some people love money so much they are willing to counterfeit it. In Biblical days, only the government could counterfeit money. They did so by melting down gold and silver coins, adding copper and making new coins stamped with a false weight of the precious metal. I have written before that the practice is the sin of false measures mentioned in the Bible. 

Debasing coins in that way didn’t fool merchants, who merely raised prices to account for the smaller amount of precious metal in the money. But the people blamed the merchants for rising prices and not the dishonesty of the government. Politicians responded by setting prices for most goods and punishing merchants who raised prices above the limit. That caused merchants to quit selling their goods at a loss and led to shortages of food and clothing. 

Why would governments resort to such destructive behavior? Because they had taxed the people into poverty and could squeeze no more money out of them. But to stay in power, the governments needed to continue their reckless spending on the military and free food to the poor. So they destroyed their coins. 

Eventually, debasing coins became ineffective, but then governments discovered the convenience of printing paper money as a substitute for gold and silver money. They were supposed to limit the amount of paper money in circulation to the value of the gold on deposit in banks, but as usual they succumbed to the love of money and printed far more paper money than the value of gold deposits to pay their armies. Again, prices soared. 

Today, governments have sophisticated methods of counterfeiting that few people know about or can understand. Most economists refer to them as “printing” money because they have the same effect, price increases. Central banks, like the Federal Reserve, can increase the supply of money by reducing the interest rate they charge banks to borrow money. Banks borrow more and lend it at lower rates, thereby increasing the supply of money. 

Central banks can also “buy” bonds from banks. Banks invest excess reserves in government bonds and can’t loan that money to customers. When the Fed buys those bonds, the banks have extra cash to lend and increase the supply of money. But the Fed has no money of its own to use to buy the bonds. It creates the money out of thin air. 

What does money creation have to do with Biden’s boondoggle? The President knows that raising taxes to pay the $2 trillion cost will be unpopular, won’t bring in enough revenue, and will euthanize an already ailing economy. So he will rely on the Fed to “print” more money for him. The result will be the same as in Biblical days, rising prices, or at best, prices that remain the same when they should have fallen. 

Politicians persist with the dishonesty of printing money because they know most people don’t understand what’s happening to them and gullible politicians like Elizabeth Warren will blame greedy businessmen. 

What the Bible teaches about national debt and our children

 

President Joe Biden sits in the Oval Office as he signs a series of executive orders at the White House in Washington, D.C., after being sworn in at the U.S. Capitol on January 20, 2021. | JIM WATSON/AFP via Getty Images

Congress passed President Trump’s $900 billion COVID relief package last year and recently added President Biden’s $1.9 trillion bill with the approval of 63% of Americans. Why shouldn’t people be happy about getting money they didn’t have to work for? It’s like winning a small lottery.

Biden has proposed spending more than $2 trillion on improving the country’s infrastructure to boost the economy and improve the competitiveness of the U.S. internationally. Many have argued the U.S. needs such improvements to keep up with China’s growing dominance in international trade. Modern Monetary Theory assures us that nothing can possibly go wrong. If the spending splurge sparks inflation, the government can tax it away, so don’t worry. Only a few cranky politicians, such as Rand Paul, oppose it.

What should be the attitude of Christians toward such massive spending by the federal government? Does the Bible provide any guidance? Does it matter?

The government will finance most of the spending through debt because politicians fear raising taxes. Only a generation ago, all conservatives, not just Christians, considered it immoral to pile up debt to solve current problems and leave it to our grandchildren to pay. We used to take pride in paying our own way. Now we have no problem sponging off anyone, including our grandchildren.

Paying our own way would mean accepting the losses in wealth caused by the pandemic-induced recession today or raising taxes to pay for the spending. But raising taxes is unpopular, would damage the economy, and defeat the purpose of the relief. Instead, we borrow money that future generations will pay back through higher taxes, higher inflation, or default by Washington.

Some will argue that rescuing the economy today will leave future generations wealthier and better able to afford the costs of mountains of debt. That might be a sound argument if bureaucrats spent the money wisely, but every surge in spending by the federal government in the past has been plagued by waste, corruption, and theft. That has been true since the founding of the nation. Read How Capitalism Saved America by Thomas DiLorenzo or his recent article “Central Banking as an Engine of Corruption.” Much of the “infrastructure” spending will go to “bridges to nowhere.”

Only 10% of the COVID bill went to those hurt by the pandemic. Republicans estimate that less than 6% of the bill will improve infrastructure, while other studies show that, at best, half the money might hit the intended target. Biden loves to talk about high-speed trains and super sonic jet travel, but neither are part of the plan. 

According to DiLorenzo, many state constitutions prohibit their state governments from borrowing for similar spending because in the middle of the 19th century many states went bankrupt because of it. So don’t fool yourself into thinking the massive federal spending will be wisely invested and benefit future generations. Most of it will be wasted and become a heavy burden for our grandchildren. We know better. 

Concern for our grandchildren was a driving force in making America great according to economist Joseph Schumpeter in Capitalism, Socialism and Democracy. Capitalism improved our standards of living because businesspeople saved and invested in order to leave a legacy for their children. Concern for their children gave them a long-term perspective. Schumpeter worried that the decline of the family would lead to the demise of capitalism because, without that future orientation, people would let property rights erode and spend their wealth on themselves rather than invest for the future. 

The most influential economist of the 20th century, J. M. Keynes, promoted our present disregard of the future with the philosophy that in the long run, we’re all dead. So why worry about it? But what does the Bible say about the long run? 

“If the dead are not raised, ‘Let us eat and drink, for tomorrow we die.’"

I Corinthians 15:2

“Go to the ant, O sluggard; consider her ways, and be wise. Without having any chief, officer, or ruler, she prepares her bread in summer and gathers her food in harvest.”

Proverbs 6:6-8

“The prudent sees danger and hides himself, but the simple go on and suffer for it."

Proverbs 22:3

“A good man leaves an inheritance to his children’s children.” 

Proverbs 13:22

“But if anyone does not provide for his relatives, and especially for members of his household, he has denied the faith and is worse than an unbeliever.”

1 Timothy 5:8

Of course, we do provide for our children. We abstain from pleasures to provide them with food, clothes, and a good house to live in. We pay for them to join sports clubs, have cell phones, and take music and dance lessons. Some of us pay for them to attend private schools and save for their college education. Then we crush them with government debt. 

Young people have a hard time financially after they leave home because we spend so much on ourselves as old people. The Social Security, Medicare, and Medicaid taxes they pay for us reduce their incomes. Healthcare insurance costs about $15,000 per year for a family, even if young people don’t know it because their employer pays most of it. Premiums are so high largely because the law requires young people to subsidize the premiums of older people who use it the most. 

Now we have added the burden of the national debt. The United States owes $68,400 per citizen or $183,000 per taxpayer. People who know little about economics say the debt is no problem; we owe it to ourselves. But our grandchildren will have to pay for it one way or another. The preferred method since World War II has been to erode the value of the debt through price inflation. Workers demand higher wages, attempting to keep up with rising prices, and the higher income boosts tax revenues. But higher wages push workers into higher tax brackets and rarely keep up with price increases, so people grow poorer. High inflation was the main cause of the erosion of real wages throughout the decade of the 1970s.

Don’t be fooled by socialists or silly monetary theories. Massive federal spending eats our grandchildren’s future.

Biden's tax plan violates several biblical principles

 

President Joe Biden delivers remarks at the 2021 National Prayer Breakfast, Feb. 4, 2021. | YouTube/NewsNation Now

Not all Democrats have guzzled the modern monetary mania that the national debt, currently at $68,400 per citizen or $183,000 per taxpayer, doesn’t matter. To pacify them, President Biden proposes raising taxes to pay for some of his binge spending. 

He wants to raise the top marginal income tax rate to 39.6% from 37% and nearly double taxes on capital gains to 39.6% for people earning more than $1 million. President Trump had reduced corporate tax rate from 35% to 21% and Biden wants to raise it to 28%. Finally, Biden wants to raise gasoline taxes, the most regressive of all taxes. 

Corporations rarely pay for such tax increases because they pass the costs on to consumers as higher prices, but talk of sticking it to large corporations is beautiful music to the ears of socialist Democrats, who avoid learning economics at all costs. In the real world where the rest of us must live, individuals pay most taxes. 

Biden’s tax increases will impoverish average Americans, but Democrats hope the spending binge will compensate. They will hurt the working poor the most because the government has created many tax shelters for the wealthy to hide their riches from Uncle Sam’s grasping claw. And they will hurt small businesses more than the large corporations that Americans love to hate, and thereby boost the power of cartels in every industry. 

President Trump reduced corporate taxes because the U.S. rate was higher than the rates in other industrialized countries, and that made U.S. manufacturers unable to compete in many markets. Biden’s increase will shove more jobs overseas to avoid high tax rates in the U.S. Overall, higher corporate taxes will mean less investment in U.S. businesses, slower job growth, and lower wage increases. That’s introductory economics. 

The economics of binge spending and tax increase is too complex for most Americans to grasp, since most never take an introductory economics class or read an economics book. So let’s look at the moral aspect of taxation as the Godly theologians of the University of Salamanca, Spain, did during the Reformation. Before they examined taxation, they had to determine the purpose of government. Today, people answer that by saying the government is supposed to do whatever is for the common good. But the Salamancan theologians didn’t see it that way. 

Theologians see the beginning of human government in the Bible when God told Noah in Genesis 9:6, “Whoever sheds human blood, by man his blood shall be shed, for in the image of God He made mankind.” The next statement in the Bible on government comes when God created the nation of Israel and gave it no human king or legislature, leaving it only courts for government institutions. God performed the role of king by giving Israel its laws, 613, most of which dealt with temple ceremonies. 

The courts decided only the civil laws, most of which dealt with property, indentured servitude, and violence. Given the absolute monarchies that existed at the time, the government of Israel was radically limited to just punishing evil doers. God was very angry with Israel for demanding a human king and warned them of the tyranny that human kings would inflict upon them. Read I Samuel 8. God allowed a human king as punishment for Israel’s rebellion. 

In the New Testament, the Apostle Paul told Roman Christians in chapter 13 that the role of government authorities is to punish evil doers: “They are God’s servants, agents of wrath to bring punishment on the wrongdoer…This is also why you pay taxes…” The authors of the U.S. Constitution created a federal government that they intended to be limited to punishing evil doers and national defense. 

After discerning that the role of government is to punish evil doers who violate the rights to life, liberty and property of others, the theologians of Salamanca determined that the state has the authority to collect taxes for that purpose and for no other. If the state collected more than it needed for that limited role, it was committing theft and violating the commandment, “Thou shalt not steal.” 

Most of what the federal government does with tax revenue is transfer money from the wealthy to the middle class and working poor, clearly not in the Biblical mandate of punishing evil doers or legal under the Constitution. What does infrastructure spending have to do with punishing evil doers? 

Also, theologians for centuries have insisted that the government must treat all citizens the same since authorities are agents of God who treats all people the same. So, until the 20th century, most Americans considered “progressive” taxation, or taxing the rich more than others, to be immoral. Then socialism became popular and Americans forgot about morality. 

By worshipping their idol social justice, or socialism, Americans have created a very unjust government in the way it taxes people. Biden’s spending binge is not only an economic disaster, it’s immoral as well because it violates the state’s requirement to treat citizens equally and it adds to the theft from citizens that the government has committed for over a century.