Here come the financial police

WSJ: As Washington’s infamous budget battles and government shutdowns show, resolving the U.S. debt overhang by cutting federal spending and raising taxes is a colossal political task. That’s why, according to Harvard University economist Carmen Reinhart, U.S. officials are resorting to financial regulation and monetary policy as an effective way to pare down the country’s public obligations. “The relatively ‘stealthier’ financial repression tax may be a more politically-palatable alternative,” Mrs. Reinhart said a 2011 paper on how rich countries liquidate their arrears.

Arnold Kling warned that this is the next step.