Unwavering Fealty to a Failed Theory

[SimpleDon]

The Republican presidential candidates still cling to trickle-down economics.

With their first debate (last night)... , Republican candidates have been trying mightily to claim they can help address the economic problems most Americans face. But their mouths, their policies and especially their backward views of the economy keep getting in the way. ...

Looking beyond the rhetoric and individual policies, however, lies the Republican Party's major problem: unwavering fealty to trickle-down economics. Virtually all Republicans since Ronald Reagan was elected president have run on a platform of supply-side policies, and the 2016 election will be no different. But it should be, because there is now a growing recognition that trickle-down economics has failed due to the fact that it rests on a fundamentally flawed premise.

Trickle-down economics, the misguided theory that has controlled economic policymaking for more than three decades, is built on the idea that high levels of economic inequality are good. Tax cuts for the rich and less regulation of business supposedly provide incentives for the wealthy to invest and work more. Enabling "job creators" to get richer helps us all, the theory goes. So the fact that the top 1 percent now take home a greater share of the nation's income than they ever have, while incomes for the typical household are lower than they were in 1989, is not a problem in this way of thinking. In the trickle-down mindset, these facts are seen as good for the economy. ...

The proposals thus far from the many Republicans who have already thrown their hat in the ring show no signs that the party plans to deviate from trickle-down anytime soon. If anything, they are doubling down on its fundamentals, with proposals to cut taxes for the wealthy by far more than President George W. Bush ever did. Rubio, for example, proposes to eliminate taxes on capital gains and dividends – which would almost exclusively benefit the wealthy – while George W. Bush merely cut them by a few percentage points. Similarly, Sen. Rand Paul's flat tax proposal goes well beyond a mere reduction of top rates and would instead eliminate progressive income taxation. ...

For several decades, academic economists helped provide cover for trickle-down economics and the obvious harm it was doing because the theory fit with their ideas about inequality and incentives. But especially since the Great Recession, economists have been thinking about inequality in a new way. Increasingly, they are realizing that a strong middle class is not merely the result of a strong economy, as was previously thought, but rather a source of America's economic growth. Rebuilding the middle class would provide the stable base of consumer demand necessary to increase business investment and job creation. It would also enable the country to fully develop the potential of its people, increase the social trust that makes it possible for people to do business with one another, and help to balance political power so that we have a government that works for the whole country, not just those at the top. (Campaign finance reform will be a necessary part of that endeavor as well.)

Because we are currently doing a substandard job in building the middle class, Standard & Poor's reduced its projections for future U.S. growth, noting in a recent report that it views "extreme income inequality as a drag on long-run economic growth." Similarly, the director of the International Monetary Fund summed up current research, stating: "Severely skewed income distribution harms the pace and sustainability of growth over the longer term. It leads to an economy of exclusion, and a wasteland of discarded potential."

The ground has shifted from under the feet of the Republican candidates, but they have yet to realize it. As this research continues to make its way into the public debate, trickle-down will look further and further divorced from reality.

We have many supporters of so-called trickle down economics or supply side economics here. But this support seems to manifest itself as support for its fundamentals, the means to achieve supply side economics; weakening the unions, shifting the tax burden from the rich to the poor and the middle class, eliminating or weakening the minimum wage, greater globalization, weakening Social Security and the rest of the social safety net, etc. We haven't had a discussion about whether the overall policy is still a desirable one.

Has it supply side economics met its goals? Are we better off for it?

Is it desirable to double down on it as all of the Republicans seem to want to do? Would the nation benefit from even more income inequality?

Is the article author of the option piece correct in saving that a strong middle class is not the result of growth in the economy but rather is the source of strong growth?

Is S&P correct when they said that income inequality is a drag on growth rather than a long term benefit to it? Should we be reducing income inequality rather than increasing it?

 

[ksen]

But did they specifically mention Kansas?

 

[untermensche]

So-called supply-side economics has been a success for a very few and a disaster for most.

Corporations have been making record profits. The rich are getting richer.

If there were any truth to supply-side economics we would have full employment and a vibrant economy.

Instead we have stagnant employment and lower wages and lost benefits.

But really that is the whole idea.

And that is why many politicians will not stop trying to sell it. Their paymasters like the current system. It is a system set up purposely to serve the rich at the expense of most.

 

[SimpleDon]

So-called supply-side economics has been a success for a very few and a disaster for most.

Corporations have been making record profits. The rich are getting richer.

If there were any truth to supply-side economics we would have full employment and a vibrant economy.

Instead we have stagnant employment and lower wages and lost benefits.

But really that is the whole idea.

And that is why many politicians will not stop trying to sell it. Their paymasters like the current system. It is a system set up purposely to serve the rich at the expense of most.

I have said in the past that supply side economics seems to be a case of the means justifying the ends. That the purpose of the policy is to increase the incomes of the rich and to accept whatever changes to the economy that results. That the Republicans have been more than a little disingenuous with us about the purpose of the policies.

I am afraid that this thread is going to be another "can conservatives give us examples of a job killing federal regulation" where they have been struggling for about six months to come up with an example of a single one.

 

[SimpleDon]

Mr. Trump, you talk a lot about how you are the person on this stage to grow the economy. I want to ask you about your business record. Trump corporations — Trump corporations, casinos and hotels, have declared bankruptcy four times over the last quarter-century.

In 2011, you told Forbes Magazine this: “I’ve used the laws of the country to my advantage.” But at the same time, financial experts involved in those bankruptcies say that lenders to your companies lost billions of dollars.

Question sir, with that record, why should we trust you to run the nation’s business?

Because I have used the laws of this country just like the greatest people that you read about every day in business have used the laws of this country, the chapter laws, to do a great job for my company, for myself, for my employees, for my family, et cetera. ...

Excuse me, what am I saying? Out of hundreds of deals that I’ve done, hundreds, on four occasions I’ve taken advantage of the laws of this country, like other people. I’m not going to name their names because I’m not going to embarrass, but virtually every person that you read about on the front page of the business sections, they’ve used the law.

The difference is, when somebody else uses those laws, nobody writes about it. When I use it, they say, “Trump, Trump, Trump.” The fact is, I built a net worth of more than $10 billion. I have a great, great company. I employ thousands of people. And I’m very proud of the job I did.

Again Chris, hundreds and hundreds of deals. Four times, I’ve taken advantage of the laws. And frankly, so has everybody else in my position.

We periodically get lectures from our conservative brothers and sisters here about the superior morality of paying off your debts. You can see it in the threads about Greece, student loans and the national debt. And yet here is the leading Republican presidential candidate who has made ducking his own debts by taking advantage of the country's bankruptcy laws a cornerstone of his business model.

What does this mean for those that want to run the government like a business? Is this why the Republicans in Congress wanted to drive the country unnecessarily into bankruptcy by not raising the debt limit? Is this Trumponomics?

 

[Canard DuJour]

Had supply-side economics been intended as a description of reality, it would have quietly gone away by now. It wasn't, isn't and ain't going anywhere.

There are always cushy careers to be had, telling the rich what they want to hear and getting others to believe it.

 

[Cerberus]

Because I have used the laws of this country just like the greatest people that you read about every day in business have used the laws of this country, the chapter laws, to do a great job for my company, for myself, for my employees, for my family, et cetera. ...

Excuse me, what am I saying? Out of hundreds of deals that I’ve done, hundreds, on four occasions I’ve taken advantage of the laws of this country, like other people. I’m not going to name their names because I’m not going to embarrass, but virtually every person that you read about on the front page of the business sections, they’ve used the law.

The difference is, when somebody else uses those laws, nobody writes about it. When I use it, they say, “Trump, Trump, Trump.” The fact is, I built a net worth of more than $10 billion. I have a great, great company. I employ thousands of people. And I’m very proud of the job I did.

Again Chris, hundreds and hundreds of deals. Four times, I’ve taken advantage of the laws. And frankly, so has everybody else in my position.

We periodically get lectures from our conservative brothers and sisters here about the superior morality of paying off your debts. You can see it in the threads about Greece, student loans and the national debt. And yet here is the leading Republican presidential candidate who has made ducking his own debts by taking advantage of the country's bankruptcy laws a cornerstone of his business model.

What does this mean for those that want to run the government like a business? Is this why the Republicans in Congress wanted to drive the country unnecessarily into bankruptcy by not raising the debt limit? Is this Trumponomics?

Senior politicians are merely the public face of big business, the banks, and the NWO, and must do as they're told; so it scarcely matters who becomes your next president or our next PM.

 

[Draconis]

The only thing that really seems to trickle down are taxes. We pay taxes on behalf of those higher up.

 

[Valjean]

The only thing that really seems to trickle down are taxes. We pay taxes on behalf of those higher up.

In the US tax rates have decreased considerably, as have the social services they used to buy. However, the costs of education, healthcare, &c have risen.

 

[SimpleDon]

We periodically get lectures from our conservative brothers and sisters here about the superior morality of paying off your debts. You can see it in the threads about Greece, student loans and the national debt. And yet here is the leading Republican presidential candidate who has made ducking his own debts by taking advantage of the country's bankruptcy laws a cornerstone of his business model.

What does this mean for those that want to run the government like a business? Is this why the Republicans in Congress wanted to drive the country unnecessarily into bankruptcy by not raising the debt limit? Is this Trumponomics?

Senior politicians are merely the public face of big business, the banks, and the NWO, and must do as they're told; so it scarcely matters who becomes your next president or our next PM.

I disagree. I think that it matters a great deal. The conservative party in the US, the Republicans, are indeed firmly in the pockets of the rich and the large corporations. Conservatives in general apparently believe in the effectiveness of supply side economics, they are willing to pay more in taxes and to have their wages suppressed in order to increase the incomes of the very rich. This in spite of lower growth and lower business investment since supply side, neoclassical economics have become the dominant economic policies. In spite of the near destruction of the economy by one of the major tenets of neoclassical economics, deregulation, in 2008.

The Democrats certainly are also beholden to the rich also. But not to the degree that the conservatives and the Republicans are. The business interests and the rich will always support a Republican before they will a Democrat. This means that if we the voters are ever going to break the influence of the rich it is going to have to be done by electing Democrats.

 

[Cerberus]

Alright then I'll rephrase it - they're all in thrall to big business, the banks, and the NWO to a greater or lesser degree.

 

[SimpleDon]

The only thing that really seems to trickle down are taxes. We pay taxes on behalf of those higher up.

In the US tax rates have decreased considerably, as have the social services they used to buy. However, the costs of education, healthcare, &c have risen.

Ironically the rich pay about as much in taxes as they did under the pre-Reaganomics tax rates. But it isn't because supply side economics succeeded in increasing investment and boosting the economy, it is because in real terms, that is considering inflation, the incomes of the rich have doubled and tripled. The problem and the reason that we have a big budget deficit is because this increase in the incomes of the rich didn't come from increased growth but because it came from the decreased incomes of the poor and the middle class. It came from the redistribution of incomes upward.

Also one of the ways that the incomes of the poor and the middle class were suppressed to increase profits and the income of the rich was by moving many of the jobs of the poor and the middle class offshore. This increased the trade deficit. The trade deficit is a matter of sending dollars offshore. One of the ways to compensate for these dollars that are effectively leaving our economy is by running a federal government budget deficit. The other way is to increase private debt, which has its limits.

 

[Harry Bosch]

In the US tax rates have decreased considerably, as have the social services they used to buy. However, the costs of education, healthcare, &c have risen.

Ironically the rich pay about as much in taxes as they did under the pre-Reaganomics tax rates. But it isn't because supply side economics succeeded in increasing investment and boosting the economy, it is because in real terms, that is considering inflation, the incomes of the rich have doubled and tripled. The problem and the reason that we have a big budget deficit is because this increase in the incomes of the rich didn't come from increased growth but because it came from the decreased incomes of the poor and the middle class. It came from the redistribution of incomes upward.

Also one of the ways that the incomes of the poor and the middle class were suppressed to increase profits and the income of the rich was by moving many of the jobs of the poor and the middle class offshore. This increased the trade deficit. The trade deficit is a matter of sending dollars offshore. One of the ways to compensate for these dollars that are effectively leaving our economy is by running a federal government budget deficit. The other way is to increase private debt, which has its limits.

We do run a very large federal deficit. I agree that offshoring is a problem and a drag on the economy. I favor policies that would help US company better compete and incent them to "inshore". We could increase the capacity of XM bank to help companies export, increase infrastructure that reduces our power and transportation costs, increase education, develop more trade schools, increase incentives for RnD, lower taxes to incent more employment, and etc.

 

[Jason Harvestdancer]

Supply side economics is derived from Keynesian economics, the idea that you can stimulate the economy through stimulating supply through targeted tax cuts and subsidies to the suppliers.

Like everything Keynesian, it doesn't work.

 

[bigfield]

Supply side economics is derived from Keynesian economics, the idea that you can stimulate the economy through stimulating supply through targeted tax cuts and subsidies to the suppliers.

Like everything Keynesian, it doesn't work.

Worked pretty well for Australia during the Global Financial Crisis.

 

[fromderinside]

Like everything Keynesian, it doesn't work.

Nope. One just can't fit an elephant through a Keynes hole.

From; "Comparing Keynesian Economics and Supply Side Economic Theories" http://www.123helpme.com/view.asp?id=23850

As far as stressing extremes, Keynesian economics pushed for a
“happy medium” where output and prices are constant, and there is no
surplus in supply, but also no deficit. Supply Side economics
emphasized the supply of goods and services. Supply Side economics
supports higher taxes and less government spending to help economy.
Unfortunately, the Supply Side theory was applied in excess during
a period in which it was not completely necessary.

Want to try another way to make whatever point you were trying to make?

 

[SimpleDon]

Supply side economics is derived from Keynesian economics, the idea that you can stimulate the economy through stimulating supply through targeted tax cuts and subsidies to the suppliers.

Like everything Keynesian, it doesn't work.

And you developed this insight how?

What I your mind is the greatest failing of Keynes?

And who in your option should we be looking to for better guidance for macroeconomics?

 

[SimpleDon]

Nope. One just can't fit an elephant through a Keynes hole.

From; "Comparing Keynesian Economics and Supply Side Economic Theories" http://www.123helpme.com/view.asp?id=23850

As far as stressing extremes, Keynesian economics pushed for a
“happy medium” where output and prices are constant, and there is no
surplus in supply, but also no deficit. Supply Side economics
emphasized the supply of goods and services. Supply Side economics
supports higher taxes and less government spending to help economy.
Unfortunately, the Supply Side theory was applied in excess during
a period in which it was not completely necessary.

Want to try another way to make whatever point you were trying to make?

Yes, Keynes could be described as the economist who killed Say's law. He empathized that the economy is no longer supply lead as it had been in the times before the 20th century, when it was an agrarian economy and supply, capital, was land that could be used for agricultural use. That the modern, industrial economy was becoming increasingly demand lead. So that both supply and demand had to be accounted for, that a balance is required. Supply side economics begins with the assumption that Keynes was wrong, that Say's law still holds, that the economy is still supply lead. This is why supply side economics has failed. It boosted supply by diminishing demand, which is made up of primarily wages. Exactly and completely wrong.

Keynesian economics is not a choice that we can make or not make. Keynes explained why our modern, industrial economy is the way that it is. It is not an option whether or not to follow Keynesian economics. It is a question of following Keynes and the economists that came after or failing.

The rich don't like Keynesian economics. They don't like hearing that they are no longer the most important force in the economy. They don't like to hear that they are becoming progressively less important all of the time. But they are. Capital is no longer land. It is now only money. And money is not a limited resource. In fact, modern fiat money is pretty much an unlimited resource. We can make as much of it as the economy needs.

There isn't any reason to kowtow to the rich individual investors. Investment decisions are now made by the professional managers in corporations. They don't depend on raising capital by selling stock in the open stock markets. They retain earnings to use or they borrow the needed financial capital for investments. They have sophisticated tools to use to determine if an investment should be made. And the number one thing that they are telling us now is that there isn't enough demand in the economy to justify new investment. Exactly the same thing that Keynesian economics tells us right now.

 

[dx713]

We periodically get lectures from our conservative brothers and sisters here about the superior morality of paying off your debts. You can see it in the threads about Greece, student loans and the national debt. And yet here is the leading Republican presidential candidate who has made ducking his own debts by taking advantage of the country's bankruptcy laws a cornerstone of his business model.

What does this mean for those that want to run the government like a business? Is this why the Republicans in Congress wanted to drive the country unnecessarily into bankruptcy by not raising the debt limit? Is this Trumponomics?

What irks me most about this 'running a country like a business" theory is the thought of lay-offs.
Can you lay-off citizens? What does it mean? Green Soylent?

 

[untermensche]

Supply side economics is derived from Keynesian economics, the idea that you can stimulate the economy through stimulating supply through targeted tax cuts and subsidies to the suppliers.

Like everything Keynesian, it doesn't work.

It doesn't have a thing to do with Keynesian economics.

But I'm not surprised you don't have the slightest clue what Keynesian economics is.

There is a correlation.

Those most opposed to Keynesian economics generally know the least about it. They are generally religious adherents to some dogma and as such display a lot of cognitive dissonance.

When one actually learns about Keynesian economics then attitudes change.

But the US does use Keynesian economics to a degree. A lot of defense spending is Keynesian spending. It is government spending that puts people to work and ends up in the economy.

The problem is people are working on things that when used are destroyed and destroy.

It would be much better to use Keynesian economics to build productively. But the US government has other priorities.