Meaning of Ronald Reagan Money Quote: saying when any person or business spends more than they earn, it means bankruptcy. However, government does it and collects taxes to cover it. Inflation results.. Ronald Reagan said:
“When a business or an individual spends more than it makes, it goes bankrupt. When government does it, it sends you the bill. And when government does it for 40 years, the bill comes in two ways: higher taxes and inflation. Make no mistake about it, inflation is a tax and not by accident” — Ronald Reagan
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In this quote, Ronald Reagan is drawing a comparison between how businesses and individuals operate financially versus how the government does. He states that when a business or person spends more than they earn, they go bankrupt. However, when the government does this by overspending for many years, it results in higher taxes and inflation rather than bankruptcy.
Reagan argues that inflation essentially functions as a hidden tax, since the rising prices that come with inflation reduce citizens’ purchasing power and standard of living over time. His point is that by continually overspending for decades without addressing the deficit, the government has to make up for it through tax increases on citizens or fueling inflation, both of which negatively impact the average taxpayer.
So in summary, the quote is criticizing long-term government overspending by asserting that unlike businesses or individuals, the government can avoid bankruptcy by instead passing on the costs to citizens through mechanisms like higher taxes and the inflation tax, which Reagan says is not accidental but rather a deliberate outcome of persistent fiscal irresponsibility.