In a “Letter to the Editor” in today’s Wall Street Journal, Michael Bird comments on the Fed’s 2% inflation target and on the long term effects on the purchasing power of American’s income. Mr. Bird is correct in his observations. Adding two more points to those observations, however, I submitted the following to the Journal as a follow up letter. I would also recommend that the reader see my longer piece on the Fed’s “Inflation Tax” here.

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To letter-writer Michael Bird’s observations about the Fed’s Orwellian definition of stable prices as 2% inflation and its long term effects on the purchasing power of the dollar, I would add two points. (“Fed’s Sole Policy Should Be a Stable Dollar,” 3/18/2017)  First, there is nothing in economic theory that generates the 2% inflation number as opposed to, say, 0% or 1% or 3%.  It is purely an arbitrary choice based on the idea that it is good to have an inflation rate above zero to incentivize spending and discourage saving, a policy goal of  questionable merit.  Second, designed inflation operates as a tax on wealth as well as a revenue generator for the government insofar as pushes people into higher tax brackets and permits the repayment of bonds with debased dollars.  Yet, Article 1, Section 7 of the Constitution assigns the taxing power solely to Congress and further requires that all revenue bills originate in the House of Representatives, the chamber most accountable to the people.  Even if not legally cognizable as a revenue bill, an inflation tax imposed by unelected central bankers plainly violates the spirit of the Framers’ constitutional framework.