Peter Schiff: Who’s Going to Pay for the Green New Deal? Because You Can’t Print Wealth
In his most recent podcast, Peter Schiff dug into the politics behind the Green New Deal and specifically asked a key question: who is going to pay for all this?
Peter said there is a political tornado on the horizon.
I think stocks will be lower when voters go to potentially reelect Trump. The markets will be lower than where they were when he was initially elected and since Trump has hung his presidency on the fortunes of the stock market, if those fortunes are no longer there, it will be hard to sell the electorate on four more years. What is going to be a lot more appealing to a lot of people is going to be socialism.”
As you probably know, last week, Democrats led by Alexandria Ocasio-Cortez released their “Green New Deal.” As Peter pointed out in a previous podcast, it should really be called the Red New Deal because “it blows all that smoke away, and it really lays bare the socialist agenda of environmentalists.”
The question nobody seems to want to really wrestle with is how a US government that is $22 trillion in debt could pay for such a massive program.
Of course, it’s popular to simply say we’ll soak the rich and that plays well among the Democratic Party base. But as Peter pointed out, there is no way the rich can foot the bill for the Green New Deal.
Even the bartender admits that there’s not enough money there — that this is such a big, ambitious plan — that there is no way to pay for it simply by taxing the rich. And of course, when people ask her how we are going to pay for it, her standard response is, ‘Well, how do we pay for anything? How did we pay for the New Deal? How did we pay for World War II?'”
So, how did we pay for those things?
Through massive tax hikes on the middle class and on the working poor.
The bottom tax rate went from 1.5% in 1929 to 24% in 1944. That was a 1,433% increase in the tax rate on the lowest bracket.
The rates on the bottom moved up much, much faster than the rates on the top. So, that’s who really had to foot the bill for the increased cost of government as a result of the New Deal programs and fighting a war. It was middle-class taxpayers. It was lower income taxpayers who had to shoulder a disproportionate share of the tax burden because that’s where the money is. I mean, there’s not that many rich people.”
As Willie Sutton famously said when asked why he robbed banks, “Well, that’s where the money is.” And the money in America is in the middle class.
You can demagogue taxing the rich all you want, but ultimately there is only so much water you can get out of that well, and if you really want bigger government and you want these big programs then the only way to pay for it is by asking the middle class to cough up.”
But we all know that telling the middle class you’re going to jack up their taxes is politically untenable. So, the only other option is to crank up the monetary printing presses.
Of course, the bartender seems to think that’s fine. She keeps talking about, hey, you know, we’re going to get the Federal Reserve to finance this.”
But the Fed doesn’t finance things. It creates money out of thin air. She wants the Fed to monetize this massive government outlay. We’re talking about massive inflation.
This may sound crazy, but there is actually an economic theory that is growing in popularity holding that if governments can borrow money in their own currency, they can inflate the money supply with virtually no limits and without any consequences. After all, you’ll never run out of dollars if you can print them. It’s called Modern Monetary Theory or MMT. Peter called it a “bizarre theory.” He explains it in depth in this latest podcast.
Simply put, there is an old economic adage: there’s no such thing as a free lunch.
That expression doesn’t come with an asterisk next to it that says, of course, unless you have a printing press and you can print money. Printing money doesn’t give you a free lunch. You cannot print wealth.”
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