A new op-ed published by The Federalist argues that the growing gap between America’s wealthiest households and its middle class was not produced by free markets, but by decades of federal borrowing and Federal Reserve money creation. The piece, written by a self-described 17-year veteran of Republican politics whose grandparents fled the Spanish Civil War and later Castro’s Cuba, warns that voters are being sold a false diagnosis of economic inequality — and with it, a socialist cure the author says her family has already survived twice.
The author cites Federal Reserve data showing the top 1 percent of households now hold nearly 32 percent of national wealth, more than the entire middle class — defined as the 50th through 90th percentiles — combined. The bottom half of the country, by contrast, holds just 2.5 percent of wealth. The piece points to New York City’s election seven months ago of a democratic socialist mayor as evidence that voters are reacting to real economic pain, even if they are being pointed toward the wrong cause.
Debt, Money Printing, and the Cantillon Effect
The op-ed traces the gap to two Washington-driven forces. First, federal debt has crossed $40 trillion, with the government spending $1.33 for every dollar it collects. To finance that borrowing without triggering immediate pain, the Federal Reserve turned to quantitative easing — buying government bonds with newly created money. The result shows up in M2, the broad measure of money in the economy, which the author says grew roughly 40 percent in the two years after 2020, a pace the St. Louis Fed has noted exceeded even the inflationary 1970s.
The author invokes what economists call the Cantillon effect, a concept dating to the 1700s and central to Austrian economic theory: newly created money reaches asset markets — stocks, bonds, real estate — before it reaches paychecks. Those holding assets benefit; those holding only wages and savings fall behind. “The wealth gap was not built by free markets. It was built by a government printing press, the largest quiet transfer of wealth from the middle class to the asset-holding class in American history,” the piece argues.
Student Debt and Tuition
The second driver, according to the op-ed, is federal student lending. Once loans became effectively unlimited, universities raised tuition in response. The author cites a Federal Reserve Bank of New York study finding that roughly 60 cents of every additional dollar of subsidized federal lending flows directly into higher tuition. Inflation-adjusted tuition has more than quadrupled since the early 1960s, and Americans now carry $1.65 trillion in student debt.
The piece also frames the debt burden as a national security issue, quoting Adm. Michael Mullen, who as chairman of the Joint Chiefs of Staff said in 2010: “The most significant threat to our national security is our debt.” Washington now spends nearly $1 trillion a year on interest payments alone, more than the entire defense budget, the author notes, drawing a parallel to 1930s Spain, where she argues collapsing middle-class confidence — not radicalism — preceded the country’s unraveling.
A Proposed “Contract for America”
The op-ed calls for Republicans to revive the spirit of the 1994 Contract with America with a new four-point plan:
- Balance the federal budget on a fixed timeline and reduce debt held by the public — currently roughly 100 percent of GDP — toward 60 percent, the ceiling set by European treaties and below the roughly 77 percent threshold at which World Bank researchers find debt begins to drag on growth.
- Allow the Federal Reserve to continue shrinking its balance sheet so money supply growth tracks the economy rather than political timing.
- Deregulate housing construction, citing homebuilders’ 2026 data that government rules add about $132,000 to the price of a new home — roughly a quarter of its cost.
- End open-ended federal support for tuition by requiring colleges to share losses on loans tied to degrees that don’t generate sufficient repayment.
The author acknowledges the plan carries costs — a leaner federal government and slower near-term growth — but points to historical precedent: postwar America brought debt above 100 percent of GDP down to roughly a quarter of GDP by the mid-1970s, years the piece credits with building the modern middle class. It also cites West Germany’s 1948 currency and price-control reforms under Ludwig Erhard, and Canada’s mid-1990s spending cuts, which balanced its budget within three years and preceded a decade of strong growth among G7 nations.
The piece closes by quoting Nobel laureate economist F.A. Hayek: “History is largely a history of inflation, usually inflations engineered by governments for the gain of governments.” The author argues that socialist critiques of inequality succeed by default when no one offers a competing explanation rooted in monetary and fiscal policy.
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