Stanford University economics professor and former Treasury Undersecretary John B. Taylor has shown how the proposed additional U.S. government debt could cause 100 percent inflation over the next few years, which means most people will see their real standard of living fall as prices double. Long-term interest rates on U.S. government debt have jumped a colossal 81 percent (annualized) in just the last five months and seem slated to go higher as markets see the increased risk of future inflation.
To ameliorate some of the inflation, immature political minds (and even a few immature economists) argue for a massive tax increase to pay for all of the new debt. Mr. Taylor estimates the tax increase would have to be about 60 percent, which, of course, would kill incentives to work, save and invest and would result in a stagnant economy, or worse, massive unemployment.
For centuries in the United States, and even before under English common law, bond holders were secure in the knowledge that in a business failure they would be first in line to collect from the sale of the assets. Suddenly, the immature actors in the Obama administration have overturned well-established bankruptcy law and put a politically favored union ahead of the bond holders in the case of Chrysler and General Motors Corp.
Immaturity In Economic Power – Richard Rahn, Washington Times
