Trickle Down Economics is Misunderstood and Straw-Manned

[DBT]

Also, FWIW, trickle down economics was, and remains, a scam. Pure evil foisted off on an ignorant public by the shamefully well-heeled.
But you knew that (if you’re not G55).

And a Scam is a form of theft.

 

[Canard DuJour]

A minor nitpick: It is my impression that most people consider the Golden Age of Capitalism came to a close with the 1973 recession in the US; and after a quick check, a couple years prior for the UK. So I'm not sure why 1980 is in that GIF...

Yeah, it's a bit of a grey area after Bretton Woods ended until the supply-side reforms of Thatcher and Reagan. The before and after 1980 growth comparison actually favours neoliberalism since it puts the 'stagflation' and oil shocks of the 1970s on the other watch - but neoliberalism still loses.

 

[Generation55]

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

Government imposes way too many taxes. This country would be light years ahead of where we are now if the government would just stop meddling. They can't even run the DMV.

 

[Jason Harvestdancer]

I don't think anyone disputes that corporations produce stuff and employ people. The 'trickle-down' argument was that tax cuts etc would motivate them to produce more stuff and employ more people.

The empirical evidence, which was in dispute for a long time, is now clear-cut. Decades of such policies in places like the US or UK have, unsurprisingly, made the rich much richer. Contrary to the predictions of trickle down theory, the result has been to reduce, rather than increase, the productivity and dynamism of the economy. The combination of slower growth and increased inequality implies, as a matter of arithmetic, that most people are worse off than they'd otherwise have been.

But don't let the fact that the hypothesis does not see the mechanism of it's action bear out into actual theory stop you from believing it. That's not a problem with the hypothesis, NO, it's just uh... LIBERTY!

*Throws smoke bomb*

*Coughs a bit, obscured lightly by a thin powder*

I totally vanished like a ninja you all saw me, just pretend like you didn't see that

</Libertarian>

You do realize that ...

Uh, no you don't. I'll start over.

Trickle Down is a Conservative position. Trickle Down isn't a Libertarian position.

Trickle Down uses the power of the government to benefit certain economic actors at the expense of others. That is anathema to the free market position of libertarianism. It is obvious to anyone who pauses to think about it, but it isn't obvious to many.

There's a difference between pro-business and pro-market.

 

[Elixir]

You think the DMV is bad? Jus wait until there are no roads. You won’t need the DMV. But your taxes will be near zero, along with your food supply.

We (people) put down a pretty heavy footprint even in our efforts to "manage pristine areas" (an oxymoron of course).
But here we are... The very act of building a house where we did when we did, has hugely effected the immediate area around the house. It has created microclimates on each side of the structure, further effected by cutting brush, feeding birds, watering low plants that wouldn't otherwise thrive where they are, rodent control measures ... over 25 years it really adds up.

This was wilderness when we invaded (built), and now it’s wall to wall mountain palaces on two sides, river on one side and one side open to BLM (the bureau, not the movement). I’m about ready to cut and run.

 

[funinspace]

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

Government imposes way too many taxes. This country would be light years ahead of where we are now if the government would just stop meddling. They can't even run the DMV.

So instead of acknowledging that your post distorted the federal tax revenue equation relative to income, you go off on a pony ride babbling about the DMV....says a lot about your argument.

 

[Elixir]

Also keep in mind that the top 1% pays 40% of federal taxes.

While you're keeping that in mind, realize that the top 1% OWNS 43% of all wealth. So they are under-paying.
The top 0.1% (zero point one) percent owns about the same amount of total wealth as the bottom 90%, but pays only 19.5% of 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'd have to be incredibly stupid to conclude that, if you knew that they own only a small fraction of 1% of the wealth.
They are paying a far greater percentage of their income than are the very wealthy, and they can't afford it.
Trickle down scam.

 

[bilby]

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

Government imposes way too many taxes.

No, it doesn't.

This country would be light years ahead of where we are now if the government would just stop meddling.

No, it wouldn't.

They can't even run the DMV.

Which one?

"The government" doesn't run the DMV. Governments (plural) of the various states run the DMV (and its equivalent), and clearly they can do so. The degree of efficiency varies, but even if we were to accept ad argumentum that every US government entity that runs a DMV or equivalent is incompetent to do so, that would say little about the possibility of any other entity being more competent, or about the likely competence of government in other arenas.

The government of my state runs a very efficient and effective vehicle licensing and registration system; I have a lot of business with them as a heavy vehicle driver, and am always impressed with their competence and efficiency. If that's not your experience, then what you are likely seeing is the consequences of underfunding, due largely to idiotic complaints about taxation.

Obviously the government can't run the DMV if it's not permitted to spend enough money to hire sufficient staff to do what needs to be done. That's not on them, it's on you.

It's like you complaining about the low quality of food at McDonalds. If you want cordon bleu quality and service, you have to pay cordon bleu prices.

Demanding high quality and great service, while simultaneously complaining that you don't want to pay, is childish and petulant; It's not a sound political position even though it's very popular.

 

[Patooka]

Government imposes way too many taxes. This country would be light years ahead of where we are now if the government would just stop meddling. They can't even run the DMV.

This makes about as much sense as, "Keep your Government hands off my Medicare!"

 

[Loren Pechtel]

They tax you to give the currency value; Not so that they have currency to spend. If they didn't collect taxes in dollars, why would anyone want dollars? In the absence of taxation, your dollars would be worthless. It's better for you to have fewer dollars that have value, than it would be for you to have lots of completely worthless dollars.

You actually can have government without taxes. It's just that to do that without causing inflationary problems you need to keep government spending low enough that the needed increase in the money supply with economic growth is enough to fund it.

 

[Loren Pechtel]

I am a dragon.

I do like my job. Being a dragon is extremely entertaining.

Why do you like sitting around on treasure rather than putting your wealth to productive uses and growing it?

Treasure hoarding has always struck me as something dragons should be intelligent enough to see isn't a good plan.

 

[Loren Pechtel]

^https://www.econstor.eu/bitstream/10419/114736/1/833477102.pdf

Read and understand at least the abstract, and do not speak to me again until you have done so.

Why should I read it? From what you're quoting it utterly does not address my point. Showing that inequality is a problem says nothing about the cause of inequality.

Wealth inequality is caused by the same two things that bring wealth:
(a) Inheritance
(b) High earnings
Note that parents' wealth or inherited wealth can provide the education or other opportunities that lead to high earnings.

Despite the rags-to-riches^* stories of Bill Gates, Steve Jobs, Elon Musk etc. it is Inheritance that has been and remains the driver behind increasing wealth inequality. Paul Krugman once said he was surprised to learn this, but he could not argue with the data in Piketty's work that demonstrates it. (* - Gates et al aren't really "rags-to-riches" exceptions; they're more like Levi's-to-Versace.)

And of course part of the growing inequality in the U.S. is simply due to tax policies deliberately designed to make the rich richer.

I'd be a hypocrite to recommend the interesting Gründler-Scheuermeyer paper. I've got it in a tab and have been skimming it, but it's rather dense and my to-do list is long and ever-growing.

I listened to 4 chapters of Piketty's work and gave up--he consistently couldn't see that as things changed he wasn't dealing with the same group of people. He treated those at the top as the descendents of the earlier generations even when there were major shifts in society that toppled the old leaders. It's new players in new areas that keep rising to the top, the old players slowly fall down as the wealth dissipates. That's why the Germans had the law of primogeniture--they recognized that wealth inherently dissipates if you have multiple heirs per generation.

Incidentally, I have run into a far better example of what I was talking about about corruption: I suggest the book The Undercover Economist. Lots in there about kleptocracies and the results thereof.

 

[Loren Pechtel]

Of course there was higher growth in the post-war period. You had several years of pent-up technological growth to exploit and there were also years where we could export the bad jobs. Neither of these factors has anything to do with the economic policies of the era.

 

[SigmatheZeta]

I am a dragon.

I do like my job. Being a dragon is extremely entertaining.

Why do you like sitting around on treasure rather than putting your wealth to productive uses and growing it?

Treasure hoarding has always struck me as something dragons should be intelligent enough to see isn't a good plan.

I only hoard books, and I actually read them all, dang it! Yes, I really do need all of these books. Yes, I do read all of them.

*snorts a puff of smoke and sticks out her tongue*

Anyhow, unified growth theory is starting to gain traction. It is really the first set of ideas in a while that actually made a solid impression on me for having reproducible results based on empirical data, which really means a lot more to me than ideology.

It's going to become policy, eventually.

 

[Loren Pechtel]

I think it would thereby be justification to focus redistribution on the parts of the United states, for example, that have had the slowest economic development. One solution that I have proposed has been the idea of using a progressive property tax combined with a budget for rural education reforms that are commensurate with the estimated impact of the tax. I have not gone far in exploring the feasibility of the idea, but it has personal appeal to me.

There's another major factor at work here: Rural areas have been subject to decades of their best and brightest leaving for jobs in the cities. Any area that has suffered this is going to end up being shit. Redistribution can't fix that.

 

[SigmatheZeta]

I think it would thereby be justification to focus redistribution on the parts of the United states, for example, that have had the slowest economic development. One solution that I have proposed has been the idea of using a progressive property tax combined with a budget for rural education reforms that are commensurate with the estimated impact of the tax. I have not gone far in exploring the feasibility of the idea, but it has personal appeal to me.

There's another major factor at work here: Rural areas have been subject to decades of their best and brightest leaving for jobs in the cities. Any area that has suffered this is going to end up being shit. Redistribution can't fix that.

I think there is an alternative to letting the largest metro areas continue getting overcrowded. We really do not need to let those economies fail. We can probably save many of them with targeted education reforms. I had to leave the area where I grew up because the failure of that economy caused me such serious devastation, but by the time I got loose from that situation, my life and my mental health were already in tatters. Personally, I am of the opinion that it's cruel to abandon people in those areas that might not always be to blame for their issues.

Not all dragons set fire to local economies. It is an undeserved stereotype. I happen to be a very dependable worker, and I never take part in break room gossip. I am respectful toward my coworkers, even ones that are not always respectful toward me because I know that life happens and people get frustrated. I never really deserved for my life and my sanity to get torn apart.

The area where I came from was in the midst of a total social collapse, and it was awful. We were having driveby shootings in a town that had barely over one thousand people. I don't know what went wrong. It made me very sad.

 

[ZiprHead]

^https://www.econstor.eu/bitstream/10419/114736/1/833477102.pdf

Read and understand at least the abstract, and do not speak to me again until you have done so.

Why should I read it? From what you're quoting it utterly does not address my point. Showing that inequality is a problem says nothing about the cause of inequality.

Wealth inequality is caused by the same two things that bring wealth:
(a) Inheritance
(b) High earnings
Note that parents' wealth or inherited wealth can provide the education or other opportunities that lead to high earnings.

Despite the rags-to-riches^* stories of Bill Gates, Steve Jobs, Elon Musk etc. it is Inheritance that has been and remains the driver behind increasing wealth inequality. Paul Krugman once said he was surprised to learn this, but he could not argue with the data in Piketty's work that demonstrates it. (* - Gates et al aren't really "rags-to-riches" exceptions; they're more like Levi's-to-Versace.)

And of course part of the growing inequality in the U.S. is simply due to tax policies deliberately designed to make the rich richer.

I'd be a hypocrite to recommend the interesting Gründler-Scheuermeyer paper. I've got it in a tab and have been skimming it, but it's rather dense and my to-do list is long and ever-growing.

I listened to 4 chapters of Piketty's work and gave up--he consistently couldn't see that as things changed he wasn't dealing with the same group of people. He treated those at the top as the descendents of the earlier generations even when there were major shifts in society that toppled the old leaders. It's new players in new areas that keep rising to the top, the old players slowly fall down as the wealth dissipates. That's why the Germans had the law of primogeniture--they recognized that wealth inherently dissipates if you have multiple heirs per generation.

Wow, Loren cracked the case. An obscure programmer from Las Vegas cracked a highly respected Doctor of Economics life's work. Impressive.

 

[SigmatheZeta]

One of my tovarishes wanted to host our annual meeting in Las Vegas, and I was like, "Do you realize how hard it is to do air travel if you have cats?" And he was like, "Can't your husband care for your cats?" and I was like, "I need the cats to take care of me." We settled on Austin. I can drive that far.

 

[Canard DuJour]

Of course there was higher growth in the post-war period. You had several years of pent-up technological growth to exploit and there were also years where we could export the bad jobs. Neither of these factors has anything to do with the economic policies of the era.

Nope. Most OECD economies pursued said policies and were bigger by the 1950s or 60s than they'd have been under pre-war growth rates.

And who's "we"?

 

[laughing dog]

Of course there was higher growth in the post-war period. You had several years of pent-up technological growth to exploit and there were also years where we could export the bad jobs. Neither of these factors has anything to do with the economic policies of the era.

WTF? For the years after WWII, the US was one of the few industrialized countries that did not have to rebuild its infrastructure. So, the US could and did dominate export markets for a couple of decades simply based on the fact that it could produce goods and services that were needed to rebuild.