When a government decides to spend money, there are essentially three ways it can get the money it spends.
First it can tax people. This is the fairest and most honest way to generate revenue for the government because the cost of all its programs are directly accounted for and paid by people who understand how much it costs. However, when the government grows too big, and has too much of a cost, people are likely to rebel against having such a large portion of their wealth taken from them. They'll start throwing tea parties and such. Furthermore, if you subscribe to the idea of The Laffer Curve, charging an exorbitantly high tax rate beyond a point will actually decrease the revenue the government takes in.
The second way is to borrow money. This is slightly less honest than taxation because it implies to the taxpayers that they will have to pay higher taxes in the future in order to fund an engourgement of spending in the present. In order to give out the money being lent, A creditor is likely to demand interest on the money the government is borrowing which means that the cost of spending by the government actually increases beyond the value of the things it originally spent money on. However this option of funding government spending also has its limits. Once creditors begin to realize that the government they are lending to is probably unable to pay them back, they will eventually be no longer willing to lend the government money as they will view it as flushing their money down a toilet.
Once a government has exhausted its first two options for generating revenue but continues to insist on spending money, it inevitably resorts to the most dishonest and underhanded source of funding, Printing Money.
Printing money causes prices to increase and this is called inflation. Inflation is best defined as an increase in the money supply, NOT an increase in consumer prices as some economists would have you believe. Many argue that inflation is an inevitable and acceptable outcome in an economy because prices rise for everything so everyone is effected equally. This is a lie.
Inflation is not inevitable. Rising consumer prices are a direct consequence of an increase in the money supply, and if the money supply remained constant, there would be a gradual decrease in consumer prices as technology and productive capacity improve. This means goods and services become cheaper relative to the factors of production, land, labor, and capitol. The fact that goods and services become cheaper relative to labor is an important concept because it means standard of living goes up as people can afford to buy more with the hard earned money they have earned. It's true that in an economic system where money is kept constant, wages slowly decline in nominal dollar terms. This is because workers continually specialize and do jobs of less skill and employers demand cheaper labor. However, In real terms, a worker's standard of living increases even as his nominal wages decrease because improvements in efficiency mean more and more goods and services can be produced with less and less labor, and workers can afford to enjoy more consumption for their labor and they don't have to work as hard. This is why the purpose of an economy is to destroy jobs rather than create them. Nobody likes to work. Back when humans lived on subsistance farming, there were plenty of jobs to be had but the technology was so poor that people had to slave away for 16 hours a day just to feed themselves. When labor costs and consumer prices decrease as a result of increased efficiency, consumer prices almost always decrease at a much faster rate than worker wages. This is why Deflation is good for the economy.
Inflation is also not acceptable. Printing money is dishonest and underhanded because as new money is spent into circulation, it effectively reduces the value of the money that people have saved. Meanwhile, those who have spent beyond their means and gotten into debt effectively see their debt reduced in real terms as more money enters into circulation where they can pay off their debts easier. Over the long run, a consequence of printing money is that the incentive to save and produce is destroyed while the incentive to borrow and consume is increased. This is destructive because if everyone is consuming and nobody is producing then all of the consumable goods and services in an economy will run out.
The most immoral aspect of printing money is that it inevitably transfers wealth from the poor and middle class to the rich and politically connected. When the government prints money and spends it into circulation, the people who recieve the money first are usually those who are well-connected politically. People like the military-industrial complex, the banking cartels, the medical industry, Big Oil, and other recipients of government largess can take their government handouts and spend it before prices have risen as a result of the inflation. Those who argue that welfare for the poor can remedy the situation of wealth disparity seem to forget one thing. Poor people are ususlly too poor to be politically connected. Those who are politically connected and receive government money enjoy a windfall. Meanwhile the money trickles through the economy causing prices to rise in all sorts of essential goods like food, energy, and health care. By the time the money has circulated in the economy enough to cause an increase in the wages of workers, They have already had to deal with paying higher prices for everything. The value of their savings has been eroded away and their incomes have been reduced in real terms. When their incomes increase as a result of inflation, it almost never increases at the rate of inflation because they are the last ones to receive the devalued money the government spent into circulation. This is what economic populists actually mean when they say wages aren't keeping up with inflation. However, few of them actually understand why. As a result of inflation, poor people have essentially paid a tax by paying higher prices for goods and services because the government printed money to pay for its expenditures. This tax is called the Inflation Tax, and it is the most regressive tax of all. It affects the poor and middle class and hits them the hardest because they aren't nearly as well connected politically as the rich and they can't get money from the government before it's been devalued the way the rich can.
The biggest problem with the Bush tax cuts is that they weren't followed by corresponding spending cuts. Instead, Bush increased spending to pay for things like two wars (that we know about), Homeland Security bureaucracies, No Child Left Behind, a prescription drug benefit. and lots more. By cutting taxes on the rich and persuing a policy of inflation, Bush didn't cut taxes, he raised them. The true cost of government is not how much it taxes but how much it spends, so by following a policy of cutting taxes and increasing spending, Bush effectively transferred the tax burden from the rich to the poor by levying a massive Inflation Tax. This is why the wealth disparity between rich and poor exploded under Bush.
Right now Obama is following the same policy as Bush, his stimulus package included nearly half a million in tax cuts and half a million in spending increases.(give or take) Obama supports the banker bailouts and continues to increase the military budget. The ones who will pay for that will be poor people living on fixed incomes who will pay an Inflation Tax. This policy is massive looting of the poor on an enormous scale. No self respecting progressive, who calls themselves an advocate of the poor should ever get behind a policy of printing money. People here who want a progressive tax structure ought to be furious at Obama because he is levying a massive Inflation Tax, and Inflation is the most regressive Tax of all.
Today I will be at a Tea party to protest the Inflation Tax.