Politics: Does 'Trickle Down Economics' Work for The United States Of America?
This seems to be a common belief among 'Hard Working Republicans' compared to 'Those Damn Libs',
'Trickle Down Economics' is exactly what it sounds like, Tax Breaks to the Rich Billionaires will cause influx to dribble down to the middle class. Padding along those 'Stairs' not withstanding, so; Does 'Trickle Down Economics' Work for The Good Ol' US Of A?
- Kiron KangLv 76 years agoFavorite Answer
"The Pitchforks Are Coming… For Us Plutocrats
By Nick Hanauer
Memo: From Nick Hanauer
To: My Fellow Zillionaires
June 28, 2014 "ICH" - "Politico" - - You probably don’t know me, but like you I am one of those .01%ers, a proud and unapologetic capitalist.
The model for us rich guys here should be Henry Ford, who realized that all his autoworkers in Michigan weren’t only cheap labor to be exploited; they were consumers, too. Ford figured that if he raised their wages, to a then-exorbitant $5 a day, they’d be able to afford his Model Ts.
What a great idea. My suggestion to you is: Let’s do it all over again. We’ve got to try something. These idiotic trickle-down policies are destroying my customer base. And yours too.
It’s when I realized this that I decided I had to leave my insulated world of the super-rich and get involved in politics. Not directly, by running for office or becoming one of the big-money billionaires who back candidates in an election. Instead, I wanted to try to change the conversation with ideas—by advancing what my co-author, Eric Liu, and I call “middle-out” economics. It’s the long-overdue rebuttal to the trickle-down economics worldview that has become economic orthodoxy across party lines—and has so screwed the American middle class and our economy generally. Middle-out economics rejects the old misconception that an economy is a perfectly efficient, mechanistic system and embraces the much more accurate idea of an economy as a complex ecosystem made up of real people who are dependent on one another.
Which is why the fundamental law of capitalism must be: If workers have more money, businesses have more customers. Which makes middle-class consumers, not rich businesspeople like us, the true job creators. Which means a thriving middle class is the source of American prosperity, not a consequence of it. The middle class creates us rich people, not the other way around.
The standard response in the minimum-wage debate, made by Republicans and their business backers and plenty of Democrats as well, is that raising the minimum wage costs jobs. Businesses will have to lay off workers. This argument reflects the orthodox economics that most people had in college. If you took Econ 101, then you literally were taught that if wages go up, employment must go down. The law of supply and demand and all that. That’s why you’ve got John Boehner and other Republicans in Congress insisting that if you price employment higher, you get less of it. Really?
Because here’s an odd thing. During the past three decades, compensation for CEOs grew 127 times faster than it did for workers. Since 1950, the CEO-to-worker pay ratio has increased 1,000 percent, and that is not a typo. CEOs used to earn 30 times the median wage; now they rake in 500 times. Yet no company I know of has eliminated its senior managers, or outsourced them to China or automated their jobs. Instead, we now have more CEOs and senior executives than ever before. So, too, for financial services workers and technology workers. These folks earn multiples of the median wage, yet we somehow have more and more of them.
The thing about us businesspeople is that we love our customers rich and our employees poor. So for as long as there has been capitalism, capitalists have said the same thing about any effort to raise wages. We’ve had 75 years of complaints from big business—when the minimum wage was instituted, when women had to be paid equitable amounts, when child labor laws were created. Every time the capitalists said exactly the same thing in the same way: We’re all going to go bankrupt. I’ll have to close. I’ll have to lay everyone off. It hasn’t happened. In fact, the data show that when workers are better treated, business gets better. The naysayers are just wrong.
The two cities in the nation with the highest rate of job growth by small businesses are San Francisco and Seattle. Guess which cities have the highest minimum wage? San Francisco and Seattle. The fastest-growing big city in America? Seattle. Fifteen dollars isn’t a risky untried policy for us. It’s doubling down on the strategy that’s already allowing our city to kick your city’s ***.
We rich people have been falsely persuaded by our schooling and the affirmation of society, and have convinced ourselves, that we are the main job creators. It’s simply not true. There can never be enough super-rich Americans to power a great economy. I earn about 1,000 times the median American annually, but I don’t buy thousands of times more stuff. My family purchased three cars over the past few years, not 3,000. I buy a few pairs of pants and a few shirts a year, just like most American men. I bought two pairs of the fancy wool pants I am wearing as I write, what my partner Mike calls my “manager pants.” I guess I could have bought 1,000 pairs. But why would I? Instead, I sock my extra money away in savings, where it doesn’t do the country much good.
So forget all that rhetoric about how America is great because of people like you and me and Steve Jobs. You know the truth even if you won’t admit it: If any of us had been born in Somalia or the Congo, all we’d be is some guy standing barefoot next to a dirt road selling fruit. It’s not that Somalia and Congo don’t have good entrepreneurs. It’s just that the best ones are selling their wares off crates by the side of the road because that’s all their customers can afford.
The only way to slash government for real is to go back to basic economic principles: You have to reduce the demand for government. If people are getting $15 an hour or more, they don’t need food stamps. They don’t need rent assistance. They don’t need you and me to pay for their medical care. If the consumer middle class is back, buying and shopping, then it stands to reason you won’t need as large a welfare state. And at the same time, revenues from payroll and sales taxes would rise, reducing the deficit.
But just because the two parties in Washington haven’t figured it out yet doesn’t mean we rich folks can just keep going. The conversation is already changing, even if the billionaires aren’t onto it. I know what you think: You think that Occupy Wall Street and all the other capitalism-is-the-problem protesters disappeared without a trace. But that’s not true. Of course, it’s hard to get people to sleep in a park in the cause of social justice. But the protests we had in the wake of the 2008 financial crisis really did help to change the debate in this country from death panels and debt ceilings to inequality.
It’s just that so many of you plutocrats didn’t get the message.
Dear 1%ers, many of our fellow citizens are starting to believe that capitalism itself is the problem. I disagree, and I’m sure you do too. Capitalism, when well managed, is the greatest social technology ever invented to create prosperity in human societies. But capitalism left unchecked tends toward concentration and collapse. It can be managed either to benefit the few in the near term or the many in the long term. The work of democracies is to bend it to the latter. That is why investments in the middle class work. And tax breaks for rich people like us don’t.
My family, the Hanauers, started in Germany selling feathers and pillows. They got chased out of Germany by Hitler and ended up in Seattle owning another pillow company. Three generations later, I benefited from that. Then I got as lucky as a person could possibly get in the Internet age by having a buddy in Seattle named Bezos. I look at the average Joe on the street, and I say, “There but for the grace of Jeff go I.” Even the best of us, in the worst of circumstances, are barefoot, standing by a dirt road, selling fruit. We should never forget that, or forget that the United States of America and its middle class made us, rather than the other way around."
- Liberal FascistLv 76 years ago
With the taxes paid by the citizens of those countries they would need to make much more to break even. Minimum wage laws don't really apply to trickle down economics which is a misnomer anyway. The best way to help low wage workers is to cut the taxes paid from the bottom up relieving the burden of government from those least able to pay for expensive liberal policies. All of the tax saved by lower wage workers would be spent thus a real trickle down event.
The hypochrisy of liberal tax policy is not that they want the rich to pay more but never ever propose that income taxes be cut for the working class and the threshold for payment of taxes raised. Again this is what real trickle down did under Reagan and Bush when millions of Americans effectively no longer pay any incomes taxes or pay a smaller marginal rate because of the cuts at the lower wage end. It's amazing how liberals seem to have missed all that.
- MabeLv 76 years ago
No. They basically tell it like it is though. If you have this way, then there is a heirarchy that has it all, in this country, at the top..and they want to keep it the most, always, and use it for their own purpose in thinking this will keep them comfortably wealthy when retired, but that retirement isn't secure this way if you let go of the reins to retire, so you don't..you keep on working hard to appease the majority and hold onto the ropes, and no one is happy about it.
It should be a moderate flow economy, which is equal within the workforce, everyone has a job, supporting it equally, by being paid this way for all. Then juniors can be taught, and seniors can retire comfortably. No stress factors.
The opposite goes in giving the bottom all the money at an high speed, and try to get them up, it won't because it's bottom heavy pulling it down.
- Larry PhischmanLv 76 years ago
Look at Kansas. Governor Brownback turned the state into a Reagan-Rand Paradise, and it's been a complete and total failure. It's been so bad that most of the state's REPUBLICANS are backing the democratic candidate this year. Cutting taxes on the rich does not, and has never, created jobs or benefited the poor and middle class in any way.
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- Anonymous6 years ago
The alternative would be a command economy. Contrary to progressive belief, income belongs to the people who earn it, and not to the government. While trickle down clearly doesn't work as well as progressives wish, the fact is that all the misdirection in the world will not change the fact that massive government spending merely kicks the can down the road. FDR prolonged the depression by at least six years, and only WWII saved him from having even his most ardent supporters realize it (and many of them did).
- bmovies60Lv 76 years ago
"This seems to be a common belief among 'Hard Working Republicans' "
No. Its what the democrats have you believing about what a republican believes.
There is no such thing as trickle down economics. The phrase, trickle down economics was invented by humorist will rogers in the 1930s. The democrats resurrected the made up term in the 80s as a way of denouncing what republicans wanted to do or were trying to do.
- SarahLv 76 years ago
Republicans continue to insist that 40 years isn't enough time to show that their trickle down economic policy will one day work. Sam Brownback destroyed his own state's economy in just a few short years with trickle down economics, and...no surprise....he's been whining for weeks that his constituents aren't giving his failed policies enough time to work.
And, since they haven't worked and will never work, the frequent refrain from republicans has now become that it's not their economic policies that are to blame for 40 years of failure......it's the fault of the American people, American workers are 'too lazy' to deserve a living wage, American workers 'aren't productive enough' to deserve income equality. Of course, American workers are the most productive workers in the industrialized world, and work more hours than any other industrialized nation's workers. Corporations continue to reap in increasing record profits every single year, yet it never trickles down to their workers.
- 6 years ago
look its simple. Today I went to Publix and 4 sticks of butter cost me $4.15. In 2007 the same purchase ost me $1.99. That is over 200% increase in just 7 years. Obama's policies cause massive inflation, which is why the left must push for minimum wage increases. The wage is not the problem, wasteful spending and the federal reserve is. Why can't you get it?
- Rickhead PerryLv 66 years ago
No. I'm tired of being trickled on. Only a moron could think that it is a valid economic theory.
- SocratesLv 76 years ago
Trickle down economic has worked EVERY TIME it's been employed for the last 100 years!
Warren Harding and Calvin Coolidge cut the highest income tax rate from 70% to 29% and cut government spending 50%. The result: the Roaring 20's and unemployment of less than 2%. JFK's posthumously passed income tax cuts (90% to 50%) also had a good effect on the economy, creating the revenues for LBJ's Great Society spending.
Reagan cut the highest income tax rate from 70% (again) to 28%, plus 15% across-the-board tax cuts. He also had the courage to tough out reigning in the money supply that was causing the crippling stagflation. Both of these policies created a new, a solid foundation for the country that supported a 17 year booming economy. Revenues during this time also doubled from $500 billion to $1 trillion. Unemployment dropped from 10.4% to 5%. Inflation dropped from double digits to about 2%.
Clinton cut the Capital Gains Tax. The already good economy went into overdrive. After implementation of the Tax Relief and Reconciliation Act of 2003 (part 2 of the Bush Tax cuts), unemployment dropped from 6.3% and kept on dropping into the 1st quarter of 2007 to a low of 4.4%. This increased revenue to the government. Each of his 2nd term yearly deficits step down significantly, starting with $600 billion, to a low of less than $200 billion in 2007, on track with the projection of a balanced budget in 2010. This, when Bush spending did not decrease. The economy grew at a rate of 3%. All of Bush's gains were blown out of the water by the mortgage meltdown, unrelated to the tax cuts.
Internationally, Margaret Thatcher lowered the highest tax rate from a stifling 95% to mid-thirties, creating an economic boom similar to Reagan’s economy. Post Soviet Russia’s economy was a shambles for years until Putin lowered the corporate tax to 13%. That is when it started to grow into a powerhouse. China flat out eliminated its capital gains tax to spur investment. Now, everyone wants to invest there and there is capital for all sorts of business. The economy was growing at 7.6% (it’s been as high as 13%).
Supply-side (trickle-down) economics, in the form of spending, even worked as FDR found out. When he came into office, he started out with some very business-oriented policies, namely with the banks. Banks are the backbone of the economy. Because of that, the Great Depression then ended in 1933. Yes, in 1933. Then, he proceeded on a Progressive socioeconomic spending/restructuring (fundamental change) campaign. He distrusted big business, thinking they should be more like “partners” with government and outlets for government policy. All this kept the effects of the depression lingering on for seven more long years. Then, despite himself in 1940, he was forced to buy planes, tanks, ships, bombs, bullets and beans. This was trickle-down economics aimed straight AT business. A sharp recovery, which should have started in 1933, now took place and lifted the economy back to prosperity within a year. His first seven years of economic policy of prime-the-pump social spending might have been good for a welfare state, but did address nor fix the problems of the economy. His supply-side spending of his 8th year is what did that.
Supply side (trickle-down) economics provides positive, beneficial effects for the operation of a business. This can come in the form of tax cuts (the usual form), demand for it’s goods or services, reduced regulatory red-tape and it’s cost or other business-friendly policies. When implemented on a broad scope of the business environment and the economic problems that caused an economic downturn have been cleared enough out of the system, this translates into B2B spending, job creation due to expansion and other general trickle-down spending in the community. All this results in sustainable jobs not paid for by taxpayers. Revenues also increase to government coffers. Business friendly supply-side also makes it easier for start-ups to flourish, adding additional revenue.
Besides, what does your image of minimum wages have ANYTHING to do with trickle-down economics? Trickle-down is about what the private sector does, not what government forces it to do. In addition, your image leave out how 90% or more of American businesses pay more than minimum wage. Business pays employees for the skill sets they bring to the business. Businesses don't exist to be some sort of social benefits center.
- Anonymous6 years ago
min wage has nothing to do with trickle down. under trickle down the companies raise their wages not the government. that is why the median wage in N. Dakota now is around 20$ an hour thanks to its oil industry..........now what party opposes the oil industry?
oh and the US (obama) has raised taxes on EVERYONE since he took office.