Increasing government benefits to the wealthy uniquely causes inflation---they have a lower marginal propensity to consume.

Americans continue to suffer from rampant price inflation. Since the spring of 2021, inflation has barreled along at a clip of roughly 8% per year as measured by the most accurate inflation index, the Chained Consumer Price Index for All Urban Consumers. While the Federal Reserve Board has turned its attention to bringing down inflation with a series of interest rate hikes, elected officials are unfortunately treating inflation as a political problem to be spun rather than as a substantive challenge to be met. Federal lawmakers are making the Fed’s task more difficult by running pointlessly large federal deficits, policies that might be defensible in a deflationary environment but are inexcusable in an inflationary one. If lawmakers wish to help fight inflation, they should cut federal spending and reduce deficits. A good place to start would be by ratcheting back government benefits for the richest Americans.

Runaway price inflation often presents lawmakers with difficult policy challenges. On the one hand, the right policy response is to engage in less deficit spending, because such spending fuels consumption and puts upward pressure on prices. On the other hand, Americans who are suffering from price inflation can ill afford a simultaneous reduction in their government-provided benefits. One way to balance these conflicting considerations is by reducing federal payments to the well-off. Upper-income people spend proportionally less of their money on necessary expenses than other Americans. They are therefore proportionally less affected by inflation, and they can better afford to part with some federal largesse. Meanwhile, to the extent that less spending on upper-income people reduces deficits and inflationary pressures, it relieves Americans’ general economic hardship.