Summations Only

Percy writes:

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This is the story of the Reagan tax cuts.

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Incorrect. The exact opposite is true. The story of the Reagan tax cuts is that the rich get richer and the poor get poorer. Money is not spent in productive ways but rather is managed to increase capital. That's why real wages have been flat since Reagan. Your own chart shows that: GDP is up and all of that benefit went to the top. We are now at the greatest economic disparity since the Great Depression.Back before Reagan slashed the corporate tax rates, one of the common ways companies avoided paying tax was to reinvest the money back into the company, one of those things being wages. But now, money is paid off to investors and the boards consider their prime directive to be to appease the investors rather than actually maintain the business.

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Are you actually arguing that investment and borrowing is bad for the economy?

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No, unregulated investment and draconian borrowing is bad for the economy.Or haven't you been paying attention?

hooah212002 writes:

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Are you saying that the tech boom wouldn't have happened if the rich didn't get their tax breaks?

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Well, since the "tech boom" started long before Reagan but rather back in the 60s and 70s with ARPANet, it clearly can't be because of the tax breaks. Unless we're going to say that they are so powerful that they can bend time and space and cause things to happen before they're even enacted.And when we consider that it was the public investment of the Gore Act that converted ARPANet into the Internet, we see another reason why it wasn't tax breaks.[and before you jump down my throat, I am not arguing with you...just pointing something out.]

Phat writes:

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It seems that the trend has been deregulation. I am not well educated in this area, so bring me up to speed as to the benefits, for instance, of power and utility companies the old way versus AR? (After Reagan)

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One word: Enron.The deregulation of the energy market allowed a Texas company to hold California hostage, artificially restricting the supply of energy in order to increase the cost and led to rolling blackouts across the state......except in Los Angeles which did not deregulate but rather maintained its own public energy generation facility.Here in San Diego, my electric rates tripled and still haven't come down.

jar responds to Phat:

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Great subject but not related to this thread.

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I don't know. It is a very good example of very real consequences of trickle-down theory: That by deregulation of the market, prices will reduce as "competition increases" and there will be a benefit to the market.It was an unmitigated disaster. The deregulation of the energy market led to people quite literally dying due to the artificial manipulation of the energy market and health systems failed due to blackouts.That is the real effect of trickle down economics: People die.We can see it again in the BP disaster.The question is whether or not trickle down economics works. How can it be said to "work" when we see people dying at its hand?

Hi Percy, Except that money doesn't always trickle down when it trickles away. A more universal term to describe what happens to money when exchanged for products or services in the market place is that it "trickles away" from the spenders to the sellers. And conversely, "Trickle away economics" as in tax rebates for ALL spenders increases the amount of "trickle away" in the economy, is also not obvious, but is much more likely to improve the economy because it affects the whole spectrum of spenders, and the economy is based on spending money rather than accumulating wealth.In addition, giving tax rebates to net accumulators would have less benefit than net non-accumulators, as more money is returned to the spending mill that is the economy by the non-accumulators, so giving a fixed amount to all tax filers would have more benefit dollar for dollar than giving rebates only to the net accumulators.Enjoy

Because, just as Rrhain does in the very next message and just as you do at the end of this message, some here deny that any such thing as money tricking down from the rich to the rest of the economy even happens. I'm happy to use a less confusing term if someone can suggest one. Replying to you in Message 291 I said, "We know trickle down happens (and as I said before, trickle up and trickle sideways) because that is the nature of an economy." And in the very next message to Rahvin I said, "As I just said again to Hooah, we know trickle down happens because that is the nature of an economy. Everyone spends money, the money trickles everywhere in all directions, everyone benefits." I was stating a simple fact that seems to be forgotten in some of the discussion here, that money flows in all directions in an economy, including down. Then where does money spent by the rich go? When a rich person builds a mansion, do other rich people do the foundation, the framing, the drywall, and so on? Or is it people of average income?Crash and RAZD I think make the more valid point, noting that in the aggregate the rich contribute less to the economy in terms of spending than the rest of the population.--Percy

It's mathematically impossible that it not be true. If we go by Crash's number that the rich spend 60% as much as the middle three quintiles, then since the number of rich is far less than 60% of the number of people in the middle three quintiles it can't help but confirm that spending by the rich is far out of proportion to their numbers. Spending is a critical contributor to any economy. It is essential to keeping money circulating in an economy. I can't imagine why anyone would deny this. It is basic economics. Sorry, poor choice of words. I didn't mean to imply that investments are added to GDP. Crash was arguing that money put in the hands of your average person gets spent, but put in the hands of a rich person it gets invested and is in effect wasted. He seems to believe that investment is not a critical component of any modern working economy. So I stated the simple truth that invested money *is* essential. I'm not sure what point you're trying to make, but all I was trying to say was that investors became very risk averse after the 2008 financial collapse. Because the current economic climate encourages risk averse behavior, though less so than a couple years ago.--Percy

Could you try making that argument again with actual data: --Percy

The rate at which the rich are spending the money compared to the rest of us obviously is vastly different, else we wouldn't be where we are. The rich spend their money on more money, whereas the rest of us pleebs spend our money on things and those things are what help the economy. And the more things us people buy, still the money goes UP, yet the money they spend on money.....stays up. I can't agree that their money is "trickling down" because it is offset by our money going right back to them 10 fold. Please do. Are there loads and loads of mansions being built? Are there so many mansions being built that it offsets the amount of construction workers that are out of work? Are there so many mansions being built that construction companies are begging for more workers?I think this secondary usage of "trickle down" that you insist on is only serving to obfuscate in light of the topic.

Okay, choose what term you like, but it doesn't hurt to understand what actually happened. Mortgage backed securities were an innovation of the financial markets that permitted non-banks (also referred to as shadow banks) like Goldman-Sachs and Lehman Brothers to acquire huge inventories of mortgages without the corresponding reserves normally required of real banks. Congress and regulatory agencies did not keep up with the innovations, but they definitely should have, and there were lobbyists arguing against regulation. If you want to accuse anyone of Grand Theft then the culprits would be regulatory agencies, Congress, lobbyists, and most of all, the companies that employed them.When the values of those securities dropped those companies had insufficient reserves, and their precarious financial situation made other financial institutions unwilling to loan them money. They foundered, the financial system tottered, trillions were lost, the government had to step in to keep the financial markets that are essential for any functional economy going.--Percy

aka the rich 1%ers. (Curiously you left out the part where the rich CEOS got BONUSES.) "the government", curiously you didn't use a more accurate term, aka the taxpayers, aka the 99%ers. They paid the bill.The Glass—Steagall Act (enacted in 1933) was repealed in 1999 with expected results. For the rich to rob the poor.Also, I've read some articles saying it MAY have NOT been essential to bail them out. At the very least, the bailout should have waited for the situation to prove itself. Instead there was a mad rush to pay the CEOs crazy bonus money. Just like Bush Jr.'s mad rush to invade Iraq before the weapons inspectors could prove there weren't any WMD. (Grrr)Edited by dronester, : clarityEdited by dronester, : Added "ALSO..."

Sorry but I see no connection between trickle down and deregulation.

But you have to be able to produce the things that your selling. If you don't have the money to produce them, then there can't be any spending either.Its not just one thing or the other. These days, things are very complex. Huh? I'm not following you... Right, but you do have to have that liquid in the first place to begin the growth.

You had to be able to produce them to get capital, too. People invest in businesses, not in bright ideas. Anybody can have an idea. It's a simple question. Can you get rich by going into debt? That's what you're saying, after all, that the rich make the rest of us better off by loaning money to us.But have you ever known somebody for whom that has worked? When you're in debt up to your eyeballs with the bank and the credit card, who's getting rich and who's getting poorer?It's the same with a business. "Investment" means "debt", because the people who invest money in your business eventually expect to be paid back - with interest. Whether or not you've made any money. Just like Capital One doesn't care that you got laid off when the credit card bill comes due, investors don't care if your business is roaring or not when they come to get paid back. If you can't pay, they'll seize and sell off your business assets until they're made whole, and then where is your productivity? Necessary but not sufficient. Liquidity in an economy makes growth possible, but it doesn't make it happen.

I never said that anything happened to productivity except broad increases, which your graph shows. Why would I "guess again"? The money came from the appropriation by the top 5% of the results of a broadly-more-productive American worker. Straggler's graph and yours prove it. That's what I'm talking about - appropriation of broad increases in productivity by the American worker. Debt. 21% is a lot higher than 0%, or even 15%. What would I "guess again" about? Have we? Where? Your graph and Straggler's demonstrate that the money did come from productivity gains. Necessary but not sufficient. Investment provides liquidity, but liquidity won't by itself grow an economy; it will actually contract an economy because nobody can make a profit in a maximally liquid market.Investments have to be paid back - with interest. Debt primarily functions to transfer wealth to the lender from the lendee. That's why they lend.