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Author Topic:   Trickle Down Economics - Does It Work?
Straggler
Member
Posts: 10333
From: London England
Joined: 09-30-2006


(2)
Message 121 of 404 (659747)
04-18-2012 12:22 PM
Reply to: Message 119 by Percy
04-18-2012 11:05 AM


Real Current Example - UK Economic Policy
I still don't think you understand what the rest of us are talking about when we refer to 'trickle down economics' and whether it works or not. So let me try and provide a simplified real life current example.
In response to the economic problems being experienced here in the UK (high budget deficit, low growth, high unemployment) the UK conservative led government has opened the metaphorical trickle-down-policy-text-book and done the following:
1) Raised sales taxes that everyone pays (VAT as we call it) from 17.5% to 20%
2) Implemented historically unprecedented cuts in public spending
3) Lowered the top rate of tax (paid on income over 150,000) from 50% to 45%
Then they have proclaimed that with regard to these austere economic times "We are all in this together".
If trickle down economics works these are arguably the correct policies to pursue in order to spur growth, jobs and increased economic prosperity for all.
If trickle down economics doesn't work these measures will be a poor method of achieving the desired effect of improving the situation for everyone and will in fact do little more than make the rich even richer and even more politically influential than they already are.
Percy writes:
It isn't a question of whether trickle down works or not. Of course it works.
If policies such as the above don't work then trickle down economics doesn't work.
Question: Are these the sort of policies you would advocate in response to the UK's current economic woes?
My position is that these are the wrong policies to pursue because history tells us that trickle down economic policies such as these do not work. Instead I would advocate a more Keynesian (i.e. demand led) approach to resolving the current mess.

This message is a reply to:
 Message 119 by Percy, posted 04-18-2012 11:05 AM Percy has replied

Replies to this message:
 Message 144 by Percy, posted 04-18-2012 7:44 PM Straggler has replied

  
RAZD
Member (Idle past 1405 days)
Posts: 20714
From: the other end of the sidewalk
Joined: 03-14-2004


Message 122 of 404 (659752)
04-18-2012 12:48 PM
Reply to: Message 101 by Straggler
04-17-2012 9:48 AM


Re: The Question Posed In This Thread
Hi Straggler,
If nothing else Percy's flawed advocacy of trickle down economics has united you and I in common cause.
Well, that doesn't really surprise me, in that I believe our views are very similar on most topics, and that there is only one gray area where we will just have to agree to disagree. I can't say that I am right and you are wrong, rather that there is insufficient evidence to say one way or the other.
I agree.
As I agree with you on this thread as well. Kudos for starting it.
Enjoy.

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This message is a reply to:
 Message 101 by Straggler, posted 04-17-2012 9:48 AM Straggler has not replied

  
PaulK
Member
Posts: 17822
Joined: 01-10-2003
Member Rating: 2.2


(1)
Message 123 of 404 (659753)
04-18-2012 1:11 PM
Reply to: Message 117 by Percy
04-18-2012 9:43 AM


Re: Not sure what you're seeing
One thing I see in the graph which I don't think you've addressed is the change in about 1981.
From 1971-1981 the top 5% income tracks the median income quite well. From 1981 on, the top 5% income grows at a faster rate than the median income - which seems to grow at much the same rate as before. If trickle-down actually worked to increase median income, shouldn't we at least see median income growing at a noticably faster rate than before ?
Per-capita GDP doesn't seem to see much benefit either. So trickle-down doesn't seem to help that. Do you have any evidence that trickle-down economics actually works?

This message is a reply to:
 Message 117 by Percy, posted 04-18-2012 9:43 AM Percy has replied

Replies to this message:
 Message 145 by Percy, posted 04-18-2012 7:53 PM PaulK has not replied

  
New Cat's Eye
Inactive Member


Message 124 of 404 (659763)
04-18-2012 2:31 PM
Reply to: Message 118 by crashfrog
04-18-2012 9:51 AM


Re: Not sure what you're seeing
What would you expect that graph to look like if Trickle Down Economics did work?

This message is a reply to:
 Message 118 by crashfrog, posted 04-18-2012 9:51 AM crashfrog has not replied

Replies to this message:
 Message 125 by Rahvin, posted 04-18-2012 2:36 PM New Cat's Eye has replied
 Message 126 by Straggler, posted 04-18-2012 2:44 PM New Cat's Eye has replied

  
Rahvin
Member
Posts: 4032
Joined: 07-01-2005
Member Rating: 9.2


(1)
Message 125 of 404 (659764)
04-18-2012 2:36 PM
Reply to: Message 124 by New Cat's Eye
04-18-2012 2:31 PM


Re: Not sure what you're seeing
What would you expect that graph to look like if Trickle Down Economics did work?
I'd expect to see GDP increase at around the same rate as the top 5%, and the median and bottom 5% also increase around the same, but delayed, as they receive the improved wages and lower unemployment from the trickled-down investments of the wealthy. It should essentially look like the wealthy are pulling everyone else up after them.
But that's not what we see. We see the wealthy leaving everyone else, especially the bottom 5%, completely behind as they receive vastly disproportional benefits that never actually get passed down to anyone else.

The human understanding when it has once adopted an opinion (either as being the received opinion or as being agreeable to itself) draws all things else to support and agree with it.
- Francis Bacon
"There are two novels that can change a bookish fourteen-year old's life: The Lord of the Rings and Atlas Shrugged. One is a childish fantasy that often engenders a lifelong obsession with its unbelievable heroes, leading to an emotionally stunted, socially crippled adulthood, unable to deal with the real world. The other, of course, involves orcs." - John Rogers
A world that can be explained even with bad reasons is a familiar world. But, on the other hand, in a universe suddenly divested of illusions and lights, man feels an alien, a stranger. His exile is without remedy since he is deprived of the memory of a lost home or the hope of a promised land. This divorce between man and his life, the actor and his setting, is properly the feeling of absurdity. — Albert Camus

This message is a reply to:
 Message 124 by New Cat's Eye, posted 04-18-2012 2:31 PM New Cat's Eye has replied

Replies to this message:
 Message 127 by New Cat's Eye, posted 04-18-2012 2:46 PM Rahvin has replied

  
Straggler
Member
Posts: 10333
From: London England
Joined: 09-30-2006


Message 126 of 404 (659766)
04-18-2012 2:44 PM
Reply to: Message 124 by New Cat's Eye
04-18-2012 2:31 PM


Re: Not sure what you're seeing
Incomes for everyone, from the bottom to the top, rising significantly as a result of increased national productivity.
What do you think the key prediction of trickle down economics is? The one by which is success or failure should be measured?
Of every 100 rise in Britain’s national income since 1977, the bottom 50% of the population received 12. Meanwhile, the top 0.1% wealthiest received a 14 share.
Is this what we would expect if trickle down economics works?

This message is a reply to:
 Message 124 by New Cat's Eye, posted 04-18-2012 2:31 PM New Cat's Eye has replied

Replies to this message:
 Message 128 by New Cat's Eye, posted 04-18-2012 2:50 PM Straggler has replied

  
New Cat's Eye
Inactive Member


Message 127 of 404 (659767)
04-18-2012 2:46 PM
Reply to: Message 125 by Rahvin
04-18-2012 2:36 PM


Re: Not sure what you're seeing
I'm reposting the graph so I don't have to go to the previous page to see it again:
But that's not what we see. We see the wealthy leaving everyone else, especially the bottom 5%, completely behind as they receive vastly disproportional benefits that never actually get passed down to anyone else.
The purple line is just the minimum wage. That's simply determined through legislation. We couldn't expect that to rise from Trickle Down Economics. I don't even know why its in there. And its never been decreased so what is the percent loss really telling us? That inflation has out paced the rise in minimum wage? Meanwhile the other earners are continuing to increase?
I'd expect to see GDP increase at around the same rate as the top 5%, and the median and bottom 5% also increase around the same, but delayed, as they receive the improved wages and lower unemployment from the trickled-down investments of the wealthy. It should essentially look like the wealthy are pulling everyone else up after them.
Discounting the minimum wage, isn't that what we see going on with the median?

This message is a reply to:
 Message 125 by Rahvin, posted 04-18-2012 2:36 PM Rahvin has replied

Replies to this message:
 Message 129 by Rahvin, posted 04-18-2012 3:11 PM New Cat's Eye has replied

  
New Cat's Eye
Inactive Member


Message 128 of 404 (659769)
04-18-2012 2:50 PM
Reply to: Message 126 by Straggler
04-18-2012 2:44 PM


Re: Not sure what you're seeing
Incomes for everyone, from the bottom to the top, rising significantly as a result of increased national productivity.
As I just typed to Rhavin, the Minimum Wage doesn't ride along with the economy, its simply legislated to be what it is.
What do you think the key prediction of trickle down economics is?
I honestly don't know. I'm out of my league here. I never even took one single Econ class.
The one by which is success or failure should be measured?
The fact that the median income has increased along with the top 5% tells me that the wealth *IS* trickling down.
Of every 100 rise in Britain’s national income since 1977, the bottom 50% of the population received 12. Meanwhile, the top 0.1% wealthiest received a 14 share.
It takes money to makes money. Or, you gotta spend money to make money.
It a lot easier to make more money, the more money you already have. I would think that the top percentages *would* outpace everyone else.

This message is a reply to:
 Message 126 by Straggler, posted 04-18-2012 2:44 PM Straggler has replied

Replies to this message:
 Message 130 by Straggler, posted 04-18-2012 3:18 PM New Cat's Eye has replied
 Message 133 by crashfrog, posted 04-18-2012 4:26 PM New Cat's Eye has replied

  
Rahvin
Member
Posts: 4032
Joined: 07-01-2005
Member Rating: 9.2


(1)
Message 129 of 404 (659771)
04-18-2012 3:11 PM
Reply to: Message 127 by New Cat's Eye
04-18-2012 2:46 PM


Re: Not sure what you're seeing
You're right about minimum wage, except that I would expect the minimum wage to be raised over time if the poor are actually to feel the benefits of trickling down. If the minimum wage remains stagnant and the minimum earners actually become worse off through inflation (as actually happens), then clearly trickle-down economics is not helping them one bit.
Discounting the minimum wage, isn't that what we see going on with the median?
With the GDP-per-capita, it's fairly close, yes.
But not the median. Both GDP and the top 5% outpaced the middle class by far.
Remember that we're looking at %change here. The median line should trail the top 5%, but the median point should merely be a year or five behind, not a 100%vs20% difference as seen in 2005. If trickle-down worked, we'd see (as an example) the wealthy hitting the 20% difference mark, and then 1-5 years later the median should also hit the 20% difference mark. Both classes would be prospering at the same relative amount, separated only by time for the policies to affect different income levels.
Instead we see the wealthy hit the 40% change mark in 1990...and the middle class never reached that much of an income increase (as a percentage, remember; the guy making 10,000,000 is now making 14,000,000 in adjusted inflation dollars, so the guy making 50,000 should have been making 70,000 just a few years later if trickle-down was working).
The rich got richer, a LOT richer. The middle class got a little richer and then plateaued (until 2008, when it started to fall again...). The poor got fucked, as usual.
If this is trickle-down working, then it's clear that the real goal of the policy is not in fact to increase the prosperity of everyone as stated, but rather to simply make the rich richer and fuck everybody else.

The human understanding when it has once adopted an opinion (either as being the received opinion or as being agreeable to itself) draws all things else to support and agree with it.
- Francis Bacon
"There are two novels that can change a bookish fourteen-year old's life: The Lord of the Rings and Atlas Shrugged. One is a childish fantasy that often engenders a lifelong obsession with its unbelievable heroes, leading to an emotionally stunted, socially crippled adulthood, unable to deal with the real world. The other, of course, involves orcs." - John Rogers
A world that can be explained even with bad reasons is a familiar world. But, on the other hand, in a universe suddenly divested of illusions and lights, man feels an alien, a stranger. His exile is without remedy since he is deprived of the memory of a lost home or the hope of a promised land. This divorce between man and his life, the actor and his setting, is properly the feeling of absurdity. — Albert Camus

This message is a reply to:
 Message 127 by New Cat's Eye, posted 04-18-2012 2:46 PM New Cat's Eye has replied

Replies to this message:
 Message 131 by New Cat's Eye, posted 04-18-2012 3:29 PM Rahvin has not replied

  
Straggler
Member
Posts: 10333
From: London England
Joined: 09-30-2006


(4)
Message 130 of 404 (659773)
04-18-2012 3:18 PM
Reply to: Message 128 by New Cat's Eye
04-18-2012 2:50 PM


Re: Not sure what you're seeing
CS writes:
As I just typed to Rhavin, the Minimum Wage doesn't ride along with the economy, its simply legislated to be what it is.
The graph shows that the minimum wage has fallen in real terms since 1970. How many people are on minimum wage? However you look at it trickle down has not worked for these people has it?
CS writes:
The fact that the median income has increased along with the top 5% tells me that the wealth *IS* trickling down.
Each person in the US economy has increased their production level by 100% but the median income has risen less than 20% whilst the incomes of the richest have risen almost entirely in line with GDP.
This blatantly tells you that the fruits of increased productivity over the last 30 years or so have almost exclusively gone to the richest.
This blatantly contradicts trickle down theory.
Of every 100 rise in Britain’s national income since 1977, the bottom 50% of the population received 12. Meanwhile, the top 0.1% wealthiest received a 14 share.
Is this consistent with the results we would expect if trickle down economics works?
CS writes:
It a lot easier to make more money, the more money you already have.
The rich get richer without moving the poor significantly in the same direction. Thus we can conclude that trickle down economics doesn't work.

This message is a reply to:
 Message 128 by New Cat's Eye, posted 04-18-2012 2:50 PM New Cat's Eye has replied

Replies to this message:
 Message 132 by New Cat's Eye, posted 04-18-2012 3:36 PM Straggler has replied

  
New Cat's Eye
Inactive Member


Message 131 of 404 (659774)
04-18-2012 3:29 PM
Reply to: Message 129 by Rahvin
04-18-2012 3:11 PM


Re: Not sure what you're seeing
Both classes would be prospering at the same relative amount, separated only by time for the policies to affect different income levels.
Wait, why? Is that even a prediciton of Trickle Down Economics?
It seems to me: the more money you got, the more money you can make.
The rich got richer, a LOT richer. The middle class got a little richer
That is exactly what I would expect from Trickle Down Economics.
and then plateaued (until 2008, when it started to fall again...).
And the same happened to the top 5%, as expected.
The poor got fucked, as usual.
The graph is just showing the Minimum Wage. That's not necessarily "the poor". This graph doesn't represent "the poor" at all. If anything, they should be reflected within the median income. As I said, I don't even see why minimum wage is in there.
If this is trickle-down working, then it's clear that the real goal of the policy is not in fact to increase the prosperity of everyone as stated, but rather to simply make the rich richer and fuck everybody else.
You can't get that from the graph.

This message is a reply to:
 Message 129 by Rahvin, posted 04-18-2012 3:11 PM Rahvin has not replied

  
New Cat's Eye
Inactive Member


Message 132 of 404 (659776)
04-18-2012 3:36 PM
Reply to: Message 130 by Straggler
04-18-2012 3:18 PM


Re: Not sure what you're seeing
The graph shows that the minimum wage has fallen in real terms since 1970.
The minimum wage has never been decreased.
How many people are on minimum wage? However you look at it trickle down has not worked for these people has it?
The minimum wage is determined by legislation. It cannot be raised from Trickle Down Economics.
Each person in the US economy has increased their production level by 100%
What does that mean? What does that mean on an individual basis?
but the median income has risen less than 20% whilst the incomes of the richest have risen almost entirely in line with GDP.
This blatantly tells you that the fruits of increased productivity over the last 30 years or so have almost exclusively gone to the richest.
This blatantly contradicts trickle down theory.
I'm not so sure... Everything has gotten better for everybody (except for minimum wage which is determined by legislation). That is the prediction of Trickle Down Economics, isn't it?
Of every 100 rise in Britain’s national income since 1977, the bottom 50% of the population received 12. Meanwhile, the top 0.1% wealthiest received a 14 share.
Is this consistent with the results we would expect if trickle down economics works?
I dunno, I suppose.
The rich get richer without moving the poor significantly in the same direction. Thus we can conclude that trickle down economics doesn't work.
Not from that graph. It doesn't represent "the poor".
"Minimum Wage" "The Poor"
If anything, "The Poor" should be counted along with the median. Which rises with the top 5% as predicted by Trickle Down Economics.

This message is a reply to:
 Message 130 by Straggler, posted 04-18-2012 3:18 PM Straggler has replied

Replies to this message:
 Message 155 by Straggler, posted 04-19-2012 7:25 AM New Cat's Eye has replied

  
crashfrog
Member (Idle past 1467 days)
Posts: 19762
From: Silver Spring, MD
Joined: 03-20-2003


(3)
Message 133 of 404 (659779)
04-18-2012 4:26 PM
Reply to: Message 128 by New Cat's Eye
04-18-2012 2:50 PM


Re: Not sure what you're seeing
The fact that the median income has increased along with the top 5% tells me that the wealth *IS* trickling down.
It hasn't, though. The income of the top 5% has increased by more than 100%; the median income increased only by 30% over the same period.
"Trickle-down" doesn't work because, like I've already said, concentrating money in the hands of relatively few people wastes it, because there's too few of them to spend it. The only way that money benefits anybody else is if its spent. If it's lent or invested, it has to be paid back with interest, so it just winds up wasting even more money.

This message is a reply to:
 Message 128 by New Cat's Eye, posted 04-18-2012 2:50 PM New Cat's Eye has replied

Replies to this message:
 Message 134 by New Cat's Eye, posted 04-18-2012 4:47 PM crashfrog has replied

  
New Cat's Eye
Inactive Member


Message 134 of 404 (659780)
04-18-2012 4:47 PM
Reply to: Message 133 by crashfrog
04-18-2012 4:26 PM


Re: Not sure what you're seeing
The fact that the median income has increased along with the top 5% tells me that the wealth *IS* trickling down.
It hasn't, though. The income of the top 5% has increased by more than 100%; the median income increased only by 30% over the same period.
But they've both increased... We shouldn't expect it to be by the same amount.
"Trickle-down" doesn't work because, like I've already said, concentrating money in the hands of relatively few people wastes it, because there's too few of them to spend it. The only way that money benefits anybody else is if its spent. If it's lent or invested, it has to be paid back with interest, so it just winds up wasting even more money.
But if that results in the median increasing, then the wealth has trickled down.
It it didn't trickle down, then wouldn't we expect the top 5% to increase while the median decreases?

This message is a reply to:
 Message 133 by crashfrog, posted 04-18-2012 4:26 PM crashfrog has replied

Replies to this message:
 Message 135 by Theodoric, posted 04-18-2012 4:56 PM New Cat's Eye has replied
 Message 139 by Taq, posted 04-18-2012 6:14 PM New Cat's Eye has not replied
 Message 140 by crashfrog, posted 04-18-2012 6:33 PM New Cat's Eye has replied

  
Theodoric
Member
Posts: 9076
From: Northwest, WI, USA
Joined: 08-15-2005
Member Rating: 3.7


Message 135 of 404 (659781)
04-18-2012 4:56 PM
Reply to: Message 134 by New Cat's Eye
04-18-2012 4:47 PM


Re: Not sure what you're seeing
It it didn't trickle down, then wouldn't we expect the top 5% to increase while the median decreases?
Why do you think this should be a result?
That the top 5% increases 100% in the period and the median increases 30% clearly shows it does not work. Look at the increase of both groups before any "trickle down" policies. The numbers were not so wildly different then.
The differences we are seeing now are showing an increasing flight of capital to the top percentages. This clearly shows that trickle down does not work. If this continues where do you see financial classes in 25, 50 or 100 years?
The top percentages are seeing huge increases compared to the median and you still advocate lowering their taxes? Raise the middle's, raise the lower? Cut all social programs but keep all military? Where does the military get bodies if education and social programs is cut to the bone? Outsource it?

Facts don't lie or have an agenda. Facts are just facts

This message is a reply to:
 Message 134 by New Cat's Eye, posted 04-18-2012 4:47 PM New Cat's Eye has replied

Replies to this message:
 Message 136 by New Cat's Eye, posted 04-18-2012 5:05 PM Theodoric has not replied

  
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