The natural progress of things is for liberty to yield and government to gain ground. —THOMAS JEFFERSON, 1788

Overdue bills increase in response to rising prices and stagnant wages

Overdue bills increase in response to rising prices and stagnant wages

“More Americans are falling behind on their car loan and credit card payments than at any time in more than a decade, a troubling signal of consumer stress as higher prices and rising borrowing costs are squeezing household budgets,” reports The Washington Post. “The pain is most acute for lower-income earners.” Moreover,

there are signs the hardship for millions of consumers will get worse before it improves. The average credit card interest rate — already at a record high 20.6 percent, according to — appears likely to keep climbing, as the Federal Reserve indicated it could continue raising interest rates to get inflation under control….And banks and other lenders have been clamping down on credit for months, a process that accelerated after the spring banking crisis sent shock waves through the industry.

Lower-income borrowers caught in the pinch are resorting to some desperate measures. Some are leaning on credit cards to hold their finances together. There are 70 million more credit card accounts open now than there were in 2019, and Americans’ total credit card debt just topped $1 trillion for the first time….Another red flag: Shoppers are turning to buy now, pay later services to cover necessities such as groceries. Usage surged 40 percent in the first two months of 2023…Major retailers are starting to take note, reporting in their second-quarter results this month that delinquency rates on private-label credit cards are on the rise….Adrian Mitchell, Macy’s chief operating and financial officer, told investors last week that while the company expected delinquencies to climb in the second quarter, the rate of increase “was faster than planned.” The retailer’s revenue declined $84 million year-over-year to $120 million….

Delinquencies on auto loan payments, which have already hit rates last seen during the financial crisis of the late 2000s, are also likely to keep climbing, credit experts said….consumers have to take on more debt to buy a car than they did a few years ago because prices surged during the pandemic and have remained elevated. The average price of a new vehicle in July was about $48,300, up from $37,700 four years ago, according to Cox Automotive. The average used car listed for $27,000, up from $19,400 four years ago.

President Biden’s policies have caused inflation, according to even Democratic economists like Harvard’s Larry Summers — who was Treasury Secretary under President Clinton — and Obama advisor Steven Rattner. As Rattner noted in the New York Times, Biden has spent “an unprecedented amount” of taxpayer money, which resulted in “too much money chasing too few goods.”

Meanwhile, Americans’ real hourly earnings fell starting in March 2021, and continued falling in 2022.

Biden promised not to raise taxes on anyone making less than $400,000 per year. But effectively, he raised taxes on many people making less than that, through his inflation — people like my mother. My mother doesn’t make anything close to $400,000 per year. Her savings account has shrunk after adjusting for inflation during the Biden administration, yet she has paid increased taxes on the interest on her savings account, because the nominal interest rate has risen. She is poorer due to Biden’s policies, yet pays more taxes than she did before thanks to his inflationary policies.

In periods of high inflation, you pay taxes when you sell stock or other assets, even when their real value falls after adjusting for inflation.

Investors can be forced to pay capital gains taxes even during huge slumps in the stock market, when inflation masks the slump. Capital “gains” are not indexed for inflation; the seller pays tax not only on the real gain in purchasing power, but also on the illusory gain due to inflation. So if you sold a stock in late 2022, whose value only kept pace with the 8.3% inflation that occurred over the prior year, you would have to pay a chunk of that 8% inflation in taxes to the federal government.

Back in the 1970s, inflation rose massively due partly to liberal policies. As a result, people ended up paying lots of capital gains tax when they sold their homes, even when their homes didn’t really rise in value, just because their home’s value kept pace with inflation.  And they ended up paying capital gains when they sold stock, even when the stock fell somewhat in real value during the decade they held it.

The progressive economist Alan Blinder conceded in 1980 that “most capital gains were not gains of real purchasing power at all, but simply represented the maintenance of principal in an inflationary world.”

Between 1970 and 1980, U.S. stock prices fell by half after being adjusted for inflation. But if you sold stock in 1980, after a decade of getting poorer and poorer you would have had to pay capital gains tax, since inflation made stock prices rise in nominal terms.

Hans Bader

Hans Bader

Hans Bader practices law in Washington, D.C. After studying economics and history at the University of Virginia and law at Harvard, he practiced civil-rights, international-trade, and constitutional law. He also once worked in the Education Department. Hans writes for and has appeared on C-SPAN’s “Washington Journal.” Contact him at


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