Republicans say we should slash spending in order to reduce deficits in order to fight inflation because, as everyone knows, inflation hurts the poor the most. Whenever I hear someone like Ron Paul say "the inflation tax, while largely ignored, hurts middle-class and low-income Americans the most", my BS detector gets all twitchy.
Is it true? Do the poor suffer more than the rich from inflation? I asked myself what I would consider compelling evidence that inflation hurts the poor the most. A statistically significant correlation over a sufficiently long period of time between CPI (or some other measure of inflation) and the relative shares of income and, especially, wealth, of the poor and the rich; that would do the trick. If anyone has such data, or knows where it can be found, I would appreciate them letting me know. I'm prepared to be persuaded.
But it seems counter-intuitive to me, or at least dubious and unproven. First I'll review a little bit of literature, then I'll explain why I'm skeptical, then there's the surprise ending . . .
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