Posted by: johnhourihan | October 14, 2012

Why trickle-down economics hasn’t worked


I was having a coffee on the porch this morning (man it is getting cold out there) and I was asking myself (and the birds) why trickle down economics, such as what the Republican ticket is espousing,  don‘t work? Why has it never worked?
It came to me that there is a simple explanation.
Now, I know there is a lot of economics I don’t understand, but I have taken a few courses and I believe this is the case.
The contradicting idea are:
Democrats – give breaks to the middle class, those who make $100,000 and down.
Republicans – give more money to the upper class. It will trickle down.

The Republicans say that the money given to the upper class will in turn create jobs and the American pubic will go back to work.
The Democrats say that if you strengthen the middle class and help the poor, the economy will grow.

My idea: If you give $500 to each person in the middle class, most of whom make about $36,000 to $50,0000 they will go out and spend the money and the economy will grow. They spend it because they are going without right now and an extra $500 will go overnight into the country’s economy to buy heaters, fans, food whatever a family has been waiting to buy “when we get a few extra bucks.”

If you give $200,000 to each millionaire in the country by cutting their taxes, they will keep it because they don’t need it. They have a million dollars a year. They don’t need extra money. The problem on the trickle down economy theory comes here. The Republican party says these people will use the $200,000 to expand their business or start a new business and that would mean more jobs for the working class Americans. It makes sense.

The only problem is, as many of the 23 million people out of work already know, once the rich who own or run corporations who could actually add jobs with the extra money get the windfall they do one thing. They keep it. They lay people off and tell the ones left, “be happy you’ve a job” and then proceed to add more work to each person they didn’t let go. When we give rich people money today they have proven as recently as yesterday that they keep it.

Trickle down economy, the mainstay of the Republican party, doesn’t work because the top one percent didn’t get where they are by helping others.
They got where they are by helping themselves.

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Responses

  1. Trickle-down policies were fine for the stagflation of the early 80’s – when stock and bond markets were weak and consumer demand outstripped supply leading to price inflation.

    Back then, we had a strong middle class and a weak investor class. It made sense to give tax cuts to the investor class (aka the rich) so the economy would strengthen and the benefits would trickle-down to everyone else.

    But we continued those policies for too long. Now we have the opposite problems – a strong investor class and a weak middle class. If we implement more trickle-down policies now it will only make things worse.


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