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Trickle Down Economics is Misunderstood and Straw-Manned

I was going to post something similar to Canard DuJour but he beat me to it, so I just clicked Like instead.

OP is just standard boiler-plate for why "trickle-down" MIGHT work. Those arguments are all obvious. As Mr. DuJour points out, it's actual EVIDENCE that is relevant.


I just read that Elon Musk is worth 250 Big Ones. That's a Quarter-Trillion Dollars. With a T. Wasn't it just 2 or 3 years ago that the first individual joined the $100+ Billion club?
But that isn't actually real money. It's just a number on a computer. His company Tesla is valued at 1.2 trillion. It's just a number on a computer. If the company disappeared tomorrow, the 1.2 trillion number would become 0. Elon doesn't actually have 250 billion dollars. A number on a computer says he's worth 250 billion. It could become 0 tomorrow.

A man could have a painting worth 1 million in his basement. But it is worthless just sitting there. He doesn't actually have 1 million dollars.
Sorry, but no.

He DOES actually have that money.

That it could disappear overnight is a characteristic of fiat money, and is equally true of all wealth; Wealth is a dimension, and is unit of measure is the dollar. It's not a commodity that sits around waiting to be counted or spent, it's a potential - the potential to command the resources of our society.

In every important way, Musk does have that money.

That you falsely imagine money to be sufficiently commodity-like as to render his wealth void because it is intangible is not a reason to deny that fact. It's just an error in your understanding of what wealth is.

If I have a painting in my basement worth a million dollars, then I can sell it for a million dollars. If I can't, then I don't have a painting worth a million dollars.

The argument that it's not worth anything is self refuting; We started by declaring its value.

If he has a painting worth $0, then he doesn't have a painting worth a million - which isn't an argument for anything other than that paintings don't all have the same value.
He is worth 250 billion, but he doesn't have that money unless he decides to sell his shares and leave the company.
Yes, he does.

He commands that amount of the productivity of society
Tesla (like the painting) is valued at 1.2 trillion. This doesn't mean they have 1.2 trillion in cash.
No shit.

Why do you imagine that they would need to have it in cash?

Cash is just a token. It's not in any important way different from the other assets he has, other than in being the most liquid - it's (slightly) easier to convert into goods and services quickly
Also keep in mind that the top 1% pays 40% of federal taxes. The bottom 20% only pays 1% of federal taxes. We can conclude that if you are poor, you pay very little taxes. Trickle down.
OK, let's leave your abject failure to understand what taxes are and why they matter for another time; We still have a long way to go in explaining to you what money is.

Money isn't cash. Cash is a token that represents money in a high liquidity format.

Money is debt.

Debt is money.

When you say "Elon Musk has 250 Billion dollars", what you are saying is shorthand for "Our society currently agrees that it owes Elon Musk 250 Billion Dollars worth of its productivity".

That's it. That's all it means. Money is debt; Debt is money.
 
Of course lowering taxes creates jobs.
Of course handing a business millions or hundreds of millions in free money is gonna grow that business, and eventually they'll have to break down and hire some minimum wage workers to produce something! It's just common sense!
 
Of course lowering taxes creates jobs.
Of course handing a business millions or hundreds of millions in free money is gonna grow that business, and eventually they'll have to break down and hire some minimum wage workers to produce something! It's just common sense!
I look at the owners of companies like a music band. Without the people setting up their microphones and doing various jobs at their shows and people mass producing their albums so people can buy them, the band wouldn't be able to sell records or perform shows. Does this mean all the workers involved with the band deserve to be richer than the band itself? No, because the band is writing the music, just like the business owner has the idea and puts it into action and he gets the bulk of the money, just like the musicians do, despite the fact both the band and the owner need workers to make them rich.

Nobody would invent anything if there was no profit motive.
 
I was going to post something similar to Canard DuJour but he beat me to it, so I just clicked Like instead.

OP is just standard boiler-plate for why "trickle-down" MIGHT work. Those arguments are all obvious. As Mr. DuJour points out, it's actual EVIDENCE that is relevant.


I just read that Elon Musk is worth 250 Big Ones. That's a Quarter-Trillion Dollars. With a T. Wasn't it just 2 or 3 years ago that the first individual joined the $100+ Billion club?
In nominal terms, possibly, but it depends on how you do your accounting.

The Rockefeller fortune was worth US$400b in adjusted terms, for example.
 
Dear folkses,

I want you all to know that I know just enough about the subject of economics to know how much I don't know. *wing-shrugs* I mean, like, last time I was reading on it, New Keynesianism was still kind of popular, but I really don't know the mathematics behind that very well. I tend to go around barefoot in case I have to count higher than 10.

Truth be told, my favorite historical economist is Knut Wicksell, but that's mostly because he gave a speech where he made fun of the "virgin birth," and he was imprisoned on charges of blasphemy. I keep thinking, that speech must have been fucking hilarious. I also like Knut because he was a great synthesizer of ideas. He united three different schools of economics. In my humble opinion, he was also kind of cute.

wicksell.jpg


He was smart and funny, and he was a feminist, too!

In my opinion, though, if you want the richest people in the country to pay a higher tax, then I suggest getting the majority of those people on your side as allies. Control over wealth is at least partly political. If the richest people in the country cannot be convinced that their government will make responsible, agreeable use of their resources, then they are going to find a way to avoid putting the government in control of any of those resources. The idea that you can truly force the hands of the most resourceful people on the entire planet is actually kind of hilarious.

If you want the rich to pay higher taxes, then stop being mean to them.

My advice on making friends with rich people is consider saying something nice about their horses. Most of them that own horses respect the opinions of their horses substantially more than they respect the opinions of any number of economists. Dog people and cat people are about the same way, in principle. This would get you a lot farther than intellectual browbeating.

We will have equality when the people that want equality develop a better attitude.


With deepest affection,
Sigma
 
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I just read that Elon Musk is worth 250 Big Ones. That's a Quarter-Trillion Dollars. With a T. Wasn't it just 2 or 3 years ago that the first individual joined the $100+ Billion club?
But only on the short scale. He is not worth anything close to a real quarter-trillion dollars (that would be a 250,000 of the short trillions).

Seriously though, the billions he made with Paypal enabled Musk to start Tesla and SpaceX. Tesla has done a lot to push other carmakers into developing their own EVs, and by doing that has done more for climate than all the pontificating by politicians in places like Rio or Kyoto or Copenhagen or Glasgow has done in the last 30 years.

Tesla and SpaceX employ 1000s of people and contribute to the dynamism of US economy.
Cool. But space should not be monetized and that's exactly what Musk, Bezos and Branson have in mind.
Give them time to prove themselves in the final frontier. My first impression is Bezos and Branson want only to monetize space by sending bored wealthy people on space junkets while Musk is trying to “get humanity to Mars to preserve the light of consciousness” so he says. :rolleyes:
While I do believe in the corrupting power of money, not all billionaires are necessarily bad billionaires.
Musk has tackled problems no one else would with Tesla, SpaceX, and Starlink and is arguably changing the world for the better.
Maybe he’s a good billionaire. Maybe he’ll just take his friends to Mars and they’ll watch us all perish like some reality TV show. I don’t know. But no one else seems to be doing duck all aside from having endless meetings about what needs to be done.
 
If people didn't open companies, where would people work? Not every person has capital to just open up a business. People depend on corporations for their livelihoods.
People had jobs and businesses before companies existed.
People depend on corporations for their livelihoods.
Which is how corporations want it, so we have no choice but to accept whatever work conditions and compensation they dictate. Thankfully there are ways to fight back against this.
They get money, health benefits, and retirement from the corporations.
In the US, yes. In just about every other modern country people get healthcare from the government, and possibly retirement in some countries.
Also, how many times have we seen a company declaring bankruptcy and use it as an excuse to not pay pensions, while still giving multi-million dollar 'golden parachutes' to the executives that caused it?
If a corporation closes up, people get angry that they are out of a job.
And if a corporation decides to move manufacturing overseas so it doesn't have to pay people as much, the people here are angry that they are out of a job, while the corporation sees its profits increase.
It is logical that we need the corporations to exist in order to make money and have a career.
No it isn't
People like to say "the rich are pissing all over us," but how?
By paying employees starvation wages, where people have to work 2 or 3 jobs just to get by, while the owners throw multi-million dollar birthday parties for themselves. By bribing politicians to make sure they don't see an increase in their taxes that would amount to a rounding error in their wealth, while leaving the people who struggle to pick up the tax bills. By bribing politicians to make sure they don't have to pay employees a wage they can live on. For a real world example, Walmart owners are billionaires, yet we see a Walmart store doing a food drive to help their own employees.
Anyone can go to Walmart and see poor people stocking multiple carts full of stuff that they need for their lives. How does this not help them?
When they have to work multiple jobs to pay for that stuff, and it still might not cover everything they actually need, when the food is low quality making obesity a common problem, when these people are poor because companies won't pay them what they are worth, or ship their jobs overseas.

So all the worship of corporations aside, as everyone else has noted, reducing the taxes corporations pay has never amounted to any significant increase in either pay or jobs offered.

Honestly, I believe there is a reverse effect. When the top marginal tax rate was 70%+ there was a large middle class. The company owners would see that every dollar over a certain point (around 3 million I think) would be taxed at a high rate they had a choice. Either pay the taxes, which would hopefully be put to good use helping people by the government, or stay under that profit level by reinvesting in the company, like giving people better pay, hiring more people, which would be the actual 'trickle down'. But when Reagan cut the top taxes, then they could put those profits into their own pockets, and had no need to limit the profits. And the easiest way to increase profits? Decrease labor costs! Do the same job with fewer people, pay them as little as possible, move those jobs overseas where they can pay even less and don't have to worry about pesky labor laws.
 
Also keep in mind that the top 1% pays 40% of federal taxes. The bottom 20% only pays 1% of federal taxes. We can conclude that if you are poor, you pay very little taxes. Trickle down.
You are referring to only Federal Income taxes. Add in the FICA taxes, duty taxes, and energy taxes, and you find quite a different number.

Added graph:
who-pays-taxes-chart-2.jpg
 
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I was going to post something similar to Canard DuJour but he beat me to it, so I just clicked Like instead.

OP is just standard boiler-plate for why "trickle-down" MIGHT work. Those arguments are all obvious. As Mr. DuJour points out, it's actual EVIDENCE that is relevant.


I just read that Elon Musk is worth 250 Big Ones. That's a Quarter-Trillion Dollars. With a T. Wasn't it just 2 or 3 years ago that the first individual joined the $100+ Billion club?
But that isn't actually real money. It's just a number on a computer. His company Tesla is valued at 1.2 trillion. It's just a number on a computer. If the company disappeared tomorrow, the 1.2 trillion number would become 0. Elon doesn't actually have 250 billion dollars. A number on a computer says he's worth 250 billion. It could become 0 tomorrow.

A man could have a painting worth 1 million in his basement. But it is worthless just sitting there. He doesn't actually have 1 million dollars.
Sorry, but no.

He DOES actually have that money.

That it could disappear overnight is a characteristic of fiat money, and is equally true of all wealth; Wealth is a dimension, and is unit of measure is the dollar. It's not a commodity that sits around waiting to be counted or spent, it's a potential - the potential to command the resources of our society.

In every important way, Musk does have that money.

That you falsely imagine money to be sufficiently commodity-like as to render his wealth void because it is intangible is not a reason to deny that fact. It's just an error in your understanding of what wealth is.

If I have a painting in my basement worth a million dollars, then I can sell it for a million dollars. If I can't, then I don't have a painting worth a million dollars.

The argument that it's not worth anything is self refuting; We started by declaring its value.

If he has a painting worth $0, then he doesn't have a painting worth a million - which isn't an argument for anything other than that paintings don't all have the same value.
He is worth 250 billion, but he doesn't have that money unless he decides to sell his shares and leave the company. Tesla (like the painting) is valued at 1.2 trillion. This doesn't mean they have 1.2 trillion in cash.

Also keep in mind that the top 1% pays 40% of federal taxes. The bottom 20% only pays 1% of federal taxes. We can conclude that if you are poor, you pay very little taxes. Trickle down.
The top 1% pay 40% of federal income taxes because they make something like 25 to 30% of all the income!
 
I just read that Elon Musk is worth 250 Big Ones. That's a Quarter-Trillion Dollars. With a T. Wasn't it just 2 or 3 years ago that the first individual joined the $100+ Billion club?
But only on the short scale. He is not worth anything close to a real quarter-trillion dollars (that would be a 250,000 of the short trillions).

Seriously though, the billions he made with Paypal enabled Musk to start Tesla and SpaceX. Tesla has done a lot to push other carmakers into developing their own EVs, and by doing that has done more for climate than all the pontificating by politicians in places like Rio or Kyoto or Copenhagen or Glasgow has done in the last 30 years.

Tesla and SpaceX employ 1000s of people and contribute to the dynamism of US economy.
That's not an excuse for him to not pay taxes.
 
I was going to post something similar to Canard DuJour but he beat me to it, so I just clicked Like instead.

OP is just standard boiler-plate for why "trickle-down" MIGHT work. Those arguments are all obvious. As Mr. DuJour points out, it's actual EVIDENCE that is relevant.


I just read that Elon Musk is worth 250 Big Ones. That's a Quarter-Trillion Dollars. With a T. Wasn't it just 2 or 3 years ago that the first individual joined the $100+ Billion club?
But that isn't actually real money. It's just a number on a computer. His company Tesla is valued at 1.2 trillion. It's just a number on a computer. If the company disappeared tomorrow, the 1.2 trillion number would become 0. Elon doesn't actually have 250 billion dollars. A number on a computer says he's worth 250 billion. It could become 0 tomorrow.

A man could have a painting worth 1 million in his basement. But it is worthless just sitting there. He doesn't actually have 1 million dollars.
Banks would disagree with you because they would lend that person money based on the value of that painting.
 
Also keep in mind that the top 1% pays 40% of federal taxes. The bottom 20% only pays 1% of federal taxes. We can conclude that if you are poor, you pay very little taxes. Trickle down.
You are referring to only Federal Income taxes. Add in the FICA taxes, duty taxes, and energy taxes, and you find quite a different number.

Added graph:
View attachment 36168
There's also a ton of other taxes, state and local.
My state, Indiana, responded to the Bush tax cuts (and resulting federal budget policies) by raising sales tax 40%. Local governments raised their income taxes. Property taxes were cranked up. One particularly regressive aspect of property tax "reform" was change residential rentals to commercial rates. So renters had their property taxes tripled. Then there's gas taxes, "sin" taxes, fees for public facilities like parks and pools. Residential trash pickup suddenly became a $10-14/ mo. fee, even if you barely used it.

Oh yeah, federal income taxes were cut hugely (for the wealthy) under Bush. But the overall tax burden on us regular people went up a great deal.

Tom
 
One of the achievements of which I am proud is earning an A grade in Economics 1001, so I can speak with authority on the subject of trickle down economics.

It's a great idea which really appeals to those who hold wealth and to others who see the accumulation of wealth as a sign of God's blessing. In practice, it has never delivered the promised results. It turns out, the incentive to invest surplus wealth created by tax cuts is not great enough, when economic conditions are not favorable. When times are good, Mr. Moneybags will build a factory and hire people. When times are bad, no tax cut will entice him to do that.

What we have hear is not an economic argument, it's a sales pitch. It's the "If only you would" sales pitch.

I once was married to a person who made good use of the IOYW pitch. It was always about how happy she would be if only I would do something, or stop doing something. I did give it a game try when it was possible. The results were always another IOYW.

The problem with trickle down economics is there is no reciprocity. We the people relax the tax burden on an individual, with the expectation he will scatter the money among us, but there's nothing we can do when once he's got the money, he looks around and says, "Maybe not."
 
I consider this a goalpost type argument.

Of course lowering taxes creates jobs. The important factor is what the ratio is.

The promise of trickle-down is that the job creation will grow the economy enough to cover the costs of the tax breaks. The reality is that we get nothing like that much economic growth, trickle-down policies end up either cutting government services or moving the tax bite down the income range. It's been an abject failure every time it's been tried.

One of the standard definitions of insanity is doing the same thing again and expecting a different result. That's where trickle-down economics is by now. (Of course, they're not actually insane, but rather it's a cover for what they really want--lower taxes with no regard for the consequences.)
Lowering corporate taxes has created billionaires who are looking to stake out their territory in space and develop their monopoly even further there.

You are looking at it backwards. Pretty soon, civilians will be able to go to space for a reasonable fee. It will become very common in a decade or two. Wouldn't have happened without rich people having the capital to start it. Trickle down.
I’m not looking at it ‘backwards.’ I strongly suspect that you and I have tremendously different views about ‘reasonable’ cost and whether or not those do or should include the cost to the environment.

I’d be much more impressed if there were similar efforts to improve the environment, tackle income disparities, health care and education disparities as well as other social justice issues—make life better for people here rather than fir the select few to indulge a fantasy (and one, btw, that I share!)

That’s not even my biggest concern. I’m concerned that these multimillionaire ( soon to be trillionaires!) are setting up fiefdoms and will control space abs all of us without ever bothering to ….run for office.
 
I just read that Elon Musk is worth 250 Big Ones. That's a Quarter-Trillion Dollars. With a T. Wasn't it just 2 or 3 years ago that the first individual joined the $100+ Billion club?
But only on the short scale. He is not worth anything close to a real quarter-trillion dollars (that would be a 250,000 of the short trillions).

Seriously though, the billions he made with Paypal enabled Musk to start Tesla and SpaceX. Tesla has done a lot to push other carmakers into developing their own EVs, and by doing that has done more for climate than all the pontificating by politicians in places like Rio or Kyoto or Copenhagen or Glasgow has done in the last 30 years.

Tesla and SpaceX employ 1000s of people and contribute to the dynamism of US economy.
Cool. But space should not be monetized and that's exactly what Musk, Bezos and Branson have in mind.
Give them time to prove themselves in the final frontier. My first impression is Bezos and Branson want only to monetize space by sending bored wealthy people on space junkets while Musk is trying to “get humanity to Mars to preserve the light of consciousness” so he says. :rolleyes:
While I do believe in the corrupting power of money, not all billionaires are necessarily bad billionaires.
Musk has tackled problems no one else would with Tesla, SpaceX, and Starlink and is arguably changing the world for the better.
Maybe he’s a good billionaire. Maybe he’ll just take his friends to Mars and they’ll watch us all perish like some reality TV show. I don’t know. But no one else seems to be doing duck all aside from having endless meetings about what needs to be done.
Give them time? I fear we are past the point if no return already.

As far as doing nothing to improve things—yeah, that would be something I’d respect and get behind. Like maybe…paying living wages to employees, abs minding their own carbon footprint here on earth.
 
It's not a coincidence that proponents of trickle down economics can only provide skewed hypotheticals and anecdotes to back up their assertions. It's because there has never been any proof that it works and a lot of empirical data that suggests it hurts prosperity.



Also keep in mind that the top 1% pays 40% of federal taxes. The bottom 20% only pays 1% of federal taxes. We can conclude that if you are poor, you pay very little taxes. Trickle down.
A lot of the French aristocracy believed that in 1789 as well. Your attitude can be quite problematic when you play it out to its logical conclusion.
Also, you are looking at it extremely wrong. Funninspace hit the nail on its head with their response but I would add how much of the tax burden you provide is nowhere near as important as how much of your disposable income is going to the government. And going by your answer here, I'm pretty certain you understand that.

Incidentally, the greatest period of economic growth and prosperity for most Americans was during the 50s and 60s. Take a wild guess what the tax brackets for the richest 5% was like during those times. I'll give you a hint; they were counter intuitive to your fantasy of piss down economics.
 
Billionaires do not really benefit from the most disadvantages Americans continuously failing to fully get their shit together. It is not a win/lose scenario to fight back against inequality. If a large percent of people are living on meager wages, it is probable that they are not really making the most efficient use of either their time or their energy or their talents. Even the wealthiest Americans do not gain by such waste. The question is only a matter of what investments could most efficiently stimulate growth among those that remain economically disadvantaged.
 
I consider this a goalpost type argument.

Of course lowering taxes creates jobs. The important factor is what the ratio is.

The promise of trickle-down is that the job creation will grow the economy enough to cover the costs of the tax breaks. The reality is that we get nothing like that much economic growth, trickle-down policies end up either cutting government services or moving the tax bite down the income range. It's been an abject failure every time it's been tried.

One of the standard definitions of insanity is doing the same thing again and expecting a different result. That's where trickle-down economics is by now. (Of course, they're not actually insane, but rather it's a cover for what they really want--lower taxes with no regard for the consequences.)
Lowering corporate taxes has created billionaires who are looking to stake out their territory in space and develop their monopoly even further there.

You are looking at it backwards. Pretty soon, civilians will be able to go to space for a reasonable fee. It will become very common in a decade or two. Wouldn't have happened without rich people having the capital to start it. Trickle down.
Wouldn't have happened without Sputnik and NASA - both publicly funded ventures.
 
Generation55 said:
(Musk) is worth 250 billion, but he doesn't have that money unless he decides to sell his shares and leave the company.

Also wrong:

 
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