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The Wealth Gap Is Real, And Washington Created It

A warning to my fellow Republicans: Offer Americans the hard truth, or socialists will sell them the easy lie.

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My grandparents fled two collapses. They escaped Spain as civil war tore it apart, rebuilt their lives in Cuba, and then watched Fidel Castro confiscate everything they had rebuilt. When they finally reached America, they carried little besides a warning I have never forgotten: When the middle class dies, the men selling simple answers arrive.

I have spent 17 years in Republican politics, and I owe my party a hard truth: The desperation those men feed on is arriving here. The gap between the wealthy and the middle class is real, it is growing, and it is unsustainable. Federal Reserve data now shows the top 1 percent of households holding nearly 32 percent of the nation’s wealth — more than the entire American middle class, the 50th through 90th percentiles, combined. The bottom half of the country holds 2.5 percent. Seven months ago, New York City, the capital of American capitalism, inaugurated a democratic socialist mayor. Voters are not imagining the disease. They are being sold the wrong diagnosis — and a cure my family has already survived twice.

Here is what actually happened. For decades, Washington spent money it did not have; the national debt has now crossed $40 trillion, and the government spends $1.33 for every dollar it collects. To keep that borrowing painless, the Federal Reserve turned to quantitative easing, creating trillions of new dollars to buy government bonds. The flood shows up in a statistic called M2, the total money in the economy: cash, checking, and savings. After 2020, M2 exploded by roughly 40 percent in two years, growth rates the St. Louis Fed notes exceeded even the inflationary 1970s.

When money multiplies that much........

© The Federalist