The evidence from the last thirty years is clear. Keynesian policies leave a massive trail of debt, weaker growth and falling real wages. Furthermore, once we look at each so-called stimulus plan, reality shows that the so-called multiplier effect of government spending is virtually inexistent and has long-term negative implications for the health of the economy. Stimulus plans have bloated government size, which in turn requires more dollars from the real economy to finance its activity.

As Daniel J. Mitchell points out, there is evidence of a displacement cost, as rising government spending displaces private-sector activity and means higher taxes or rising inflation in the future, or both. Higher government spending simply cannot be financed with much larger economic growth because the nature of current spending is precisely to deliver no real economic return. Government is not investing; it is financing mandatory spending with resources of the productive sector. Every dollar that the government spends means one less dollar in the productive sector of the economy and creates a negative multiplier cost.

More than ninety central banks worldwide are increasing interest rates. Bloomberg predicts that by mid-2023, the global policy rate, calculated as the average of major central banks’ reference rates weighted by GDP, will reach 5.5%. Next year, the federal funds rate is projected to reach 5.15 percent.

Raising interest rates is a necessary but insufficient measure to combat inflation. To reduce inflation to 2%, central banks must significantly reduce their balance sheets, which has not yet occurred in local currency, and governments must reduce spending, which is highly unlikely.

The most challenging obstacle is also the accumulation of debt.

The headline gross domestic product (GDP) figure for the third quarter seemed to signal a return to growth and a significant improvement from the previous readings. Real gross domestic product (GDP) increased at an annual rate of 2.6 percent in the third quarter of 2022, in contrast to a decrease of 0.6 percent in the second quarter, according to the Bureau of Labor Statistics. However, the reality of the United States economy is that stagnation persists.

The headline gross domestic product (GDP) figure for the third quarter seemed to signal a return to growth and a significant improvement from the previous readings. Real gross domestic product (GDP) increased at an annual rate of 2.6 percent in the third quarter of 2022, in contrast to a decrease of 0.6 percent in the second quarter, according to the Bureau of Labor Statistics. However, the reality of the United States economy is that stagnation persists.

The narrative to attack any tax cut and defend any increase in government size is reaching feverish levels. However, we must continue to remind citizens that constantly bloating government spending and increasing the size of monetary interventions are some of the causes of the widespread impoverishment of the middle class. Constantly increasing taxes and diminishing the purchasing power of the currency is wiping out the middle class in most developed nations.

Currency printing is not neutral, and it never is. It disproportionately benefits government and massively hurts real salaries and deposit savings. It is a massive transfer of wealth from savers to the indebted.