Expanding IRS Tyranny to Reduce Inflation

by
Jacob G. Hornberger
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One of the interesting aspects of President Biden’s Inflation Reduction Act was the allocation of $80 billion in increased funding for the Internal Revenue Service, one of the most powerful and tyrannical agencies in U.S. history. The money is intended to be used for enhanced tax enforcement, especially through the potential hiring of 87,000 new IRS agents who, to borrow a phrase from the Declaration of Independence, will be further eating out the substance of the American people.

Using soaring prices of gasoline, food, cars, and most everything else as a way to seize more money from the American people should not surprise anyone. Government officials know that most people have been schooled in public (i.e., government) schools and, therefore, have no idea that those rising prices are a direct consequence of monetary debasement at the hands of the Federal Reserve. Given such, they are willing to fall for any trick that the government pulls on them to extract a larger share of their income.

There is one — and only one — cause of monetary debasement. That’s the Federal Reserve. It debases the value of money by printing ever-increasing amounts of it. Increasing the amount of paper money lowers the overall value of it. The only way that lower value can be reflected is through higher prices for the things that money buys.

Of course, the general public has no idea how this process works. Neither do the commentators in the mainstream press. They blame “inflation” on the people whose prices are rising. They have no idea that it’s the federal government itself — operating through the Federal Reserve — that is the only culprit in this process. 

That’s one reason why monetary debasement is so insidious and also why public officials have resorted to it for centuries. They know that most people will not figure out that it’s the government itself that is responsible for the rising prices as a result of its monetary debasement.

So, why does the government do this? The reason is that federal spending far exceeds federal tax revenues. The government can handle that in four possible ways: (1) slash spending so that expenditures equal tax revenue; (2) raise taxes so that expenditures equal tax revenues; (3) borrow the excess; or (4) print the money to cover the excess.

The government is not about to slash spending–welfare-warfare recipients would never tolerate it. If the government raises taxes, that makes people upset, which could manifest itself at election time. So, the federal government does not do (1) and (2). Instead, it does (3) and (4). That’s why the federal debt now exceeds $31 trillion. It’s also why prices are soaring through the roof.

So, what does all this have to do with expanding the tyrannical power of the IRS? What is happening is that Biden and his Republican-Democratic cohorts are trying to extract more money from people without formally raising taxes. That way, they can make it look like the additional money the IRS is extracting from the private sector is from tax cheats and rich people who are just trying to evade their proper share of taxes to fund the welfare-warfare state. It’s a vicious, indirect way to engage in option (2) above.

But the fact is that those IRS agents, some of whom will be armed, will be targeting regular middle-class people with increased tax enforcement. That’s because they know that the middle class cannot afford to hire the lawyers necessary to defeat an IRS order to pay additional taxes.

Meanwhile, federal spending continues to soar, which they are financing with additional debt. The Federal Reserve is making a big show out of raising interest rates as a way to show that it’s reversing the “easy money” policy that it has been following for more than a decade and that has resulted in the monetary debasement that is reflected in soaring prices. 

But at some point there is going to be a collision. Federal spending is increasing exponentially. The additional taxes brought in with expanded IRS enforcement will not even begin to cover the deficit between government spending and government debt.

The whole reason that the Federal Reserve was set up in the first place was to have an entity that could print up the money to pay off these excess expenses and debt. Will the Federal Reserve be able to withstand the pressure and continue its “tight-money” policy? My hunch is that with the first major financial crisis — perhaps even one adversely affecting the banking industry — the Fed will buckle and resume its inflationary bandwagon.