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.
"Trump's pick to lead economic data agency floats ending monthly jobs report" - https://www.bbc.com/news/articles/czerwl2xee4o
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?
_The Price of Time: The Real Story of Interest_ by Edward Chancellor goes in depth on this, a really interesting read.
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.
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...
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...
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.
As they should, because the rich are paid multiples or orders of magnitude more than the middle/working class and poor. That's possible because they make money by:
- Owning capital and taking a share of the resulting productivity passively (the wealthiest of the wealthy)
- Working at a level of abstraction in the hierarchy where their skills allow them to scale their income via technology or by directing the labor of lower skilled workers.
- Working in elite supply-limited professions (i.e highly specialized doctors and lawyers, r&d in high speculation industries like AI).
It takes significant financial, social, or education capital to be able to participate in the economy in either of those modes.
As the income and wealth inequality trends have become more extreme, it makes sense that the wealthy should be paying an ever increasing portion of the tax burden, not a lower portion. Otherwise you end up with feudalism.
And this isn't even considering the wealth distribution disparity, which is even greater than the income distribution disparity. A lot of that is held in the form physical assets (property) and government debt.
Financially, the wealthy own the government. In a way, a lot of the taxes they pay go back to them in the form of interest paid on government debt.
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.
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.
The important thing is funding the state, not making a personal sacrifice. The economy is based on value, not pain.
The top marginal tax rates during the right's supposed "golden age" after WWII were much, much higher than they are now.
But regardless, "if you try to make the rich actually participate in and contribute to society, don't be surprised if they try to destroy society instead" is exactly the kind of threat that supports the idea that we should, instead, make it impossible to be rich enough to carry that threat out.
Having a functioning and mutually beneficial society is much, much more important than letting outlandishly rich selfish people stay rich.
That's kinda the problem. We've been running a deficit for decades because the top tax rate has been cut.
If you tax rich people even more than now, you risk simply slowing down the economy long-term and making the whole situation much worse.
We were running surpluses at numerous times across the past 100 years. Each of those surpluses ends with a reduction in the top tax rate.
If we as a society agree that some sort of progressive tax system is good (based on the fact that the mere act of survival comes with fixed costs, that naturally impact low-wealth holders over high-wealth holders) then we presumably expect higher wealth people to shoulder a larger burden of the cost of maintaining society, relative to that wealth.
The top 1% hold >30% of all wealth in the US, which, by the logic I described above, makes your 40% figure sound not just not exorbitant, but possibly too low.
https://www.federalreserve.gov/releases/z1/dataviz/dfa/distr...
Whether that has negative effects elsewhere, I have no idea and thank goodness I'm not in charge of that.
Here's the University of Toronto's economics lesson on the subject:
That's splitting hairs. Inflation is a choice, just like taxes, and, importantly, it's a regressive tax, which helps us understand why the elites love it so much. Inflation shouldn't be mentioned without pointing out that it's a regressive tax.
> And in any case, how does that refute the idea that taxation in general is not a solution?
It doesn't. Nobody claimed that either.
Taxation by itself isn't a solution, but I doubt there is a solution that doesn't involve taxation.
> 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?
I can't find anybody claiming anything of the sort.
> That’s like saying soda taxes are bad so we shouldn’t have income taxes either.
Another strawman.
So yes it's a tax but it's a tax on a very specific segment of the population.
"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..."
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.
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.
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.
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.
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?
The federal reserve rate is essentially how much the US pay's their debtors. Bank's use this as a benchmark for how much they lend to their own borrowers.
The inflation rate is a calculation done based on a basket of goods. if the price of that basket of goods goes up, inflation is up. if it goes down, inflation is down.
When the federal reserve lowers their rates, it makes it easier to get money, and therefore the price of the basket of goods goes up.
When they make their rates higher, money is harder to get, and the price of the basket of goods goes down. The only problem with this is that there is also less money for labor, which means that unemployment goes up. The Feds job is to balance these two things.
A better negative example is though in the US a large issue in the 1970s we had Regan Stagflation was austerity weakened demand and the feds levers simply couldn't deal with that type of inflation. The fed cannot directly influence solving supply issues only direct investment does that
The whole idea being that if we have low interest rates we can lower the barrier to growth as much as possible without actually causing inflation but if the economy becomes constrained and the extra money is just chasing fewer things the fed has to increase interest rates to decrease free money so inflation doesn't spike. They honestly did a really good job too getting from 9%->3% is impressive and staying there despite the massive instability in pricy that Tariffs cause is a testament to that philosophy.
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.
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.
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.
Who has 3-10% more money, exactly?
Also anyone with a wage since wages rise with inflation too (not always and not always immediately, but generally correlated).
The parent reply hand-waves away a point about bad policy by making an abstract point about inflation from money-printing, as if citizens of the United States are molecules in a thought experiment about the laws of physics, as opposed to individual people affected in specific (differing) ways by policies.
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.
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.
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.
> Services inflation provided much of the push higher, rising 1.1% in July for the largest gain also since March 2022. Trade services margins climbed 2%, coming amid ongoing developments in President Donald Trump's tariff implementations.
Figuring out and applying the rules seems to be having more of an effect than the rules themselves. Which is a good reason not to expect a 0.9% monthly shock to translate into an 11.4% annualized inflation (even setting aside that core CPI is a much different measure from base PPI): they won't have to keep figuring out the rules.
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.
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.
Conventional wisdom may not be wise enough when times get too unconventional though :)
And who knows how much is too much?
There is always overwhelming unexpressed pressure before the dam breaks unexpectedly and you are worse off having stock than cash.
It's critical that there be no consensus about an impending downturn, otherwise there may not be enough leverage imposed on the unexpected element of surprise for those in position to be able to weather a storm which wrecks all boats.
You rail against people not acknowledging empirical economics yet you throw in this empirically false factoid. Inflation was historically low during about a decade of ZIRP.
But the way "the markets" have behaved so far, I expect a full turnaround and record S&P500 numbers by close today.
Oh well, they'll be up again tomorrow.
“U.S. Estimates show that it accounted for approximately 40% of all U.S. stock trades in 2017 compared with roughly 16% in 2010.”
https://www.investopedia.com/articles/markets/050614/introdu...
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?
vdupras•5mo ago
Something in July made the prices jack up in a really serious way.
jjgreen•5mo ago
treetalker•5mo ago
PaulHoule•5mo ago
mlinhares•5mo ago
zahlman•5mo ago
The markets knew about the tariffs when they came up with that estimate.
marcosdumay•5mo ago
In a consumer-based economy, they shouldn't even have any. Society would just react to tariffs with some deflation elsewhere. But since the US economy is now investment-based (a WTF for some other post), there should be some, but I would still expect not much of it.
IMO, that's almost all due to the tax policy.
isbwkisbakadqv•5mo ago
vdupras•5mo ago
marcosdumay•5mo ago
The 3.3% figure is annual, normally called "last 12 months" to avoid confusion with a fixed year.
LargeWu•5mo ago
"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.
marcosdumay•5mo ago