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Author Topic:   Trickle Down Economics - Does It Work?
Taq
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Posts: 5267
Joined: 03-06-2009
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(1)
Message 15 of 404 (659114)
04-12-2012 2:01 PM


I am not an expert in economics, so a grain of salt is highly recommended . . .

New jobs are created by an increase in demand. You could reduce the top tax rate to 0% and this would not increase demand for basic consumer products. Why hire more people when the people you have can meet the current demand? Why pay them more when they are meeting current demand at the current pay rate?

I agree with Jon. Wealth trickles up, not down.


  
Taq
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Posts: 5267
Joined: 03-06-2009
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Message 44 of 404 (659248)
04-13-2012 5:09 PM
Reply to: Message 26 by Percy
04-13-2012 8:00 AM


You said, "I don't think that anyone argues that rich people don't spend money in the local economy," so we agree that trickle down happens. The question I think you're raising is who can best decide how to dispose of the money of the rich, the rich themselves or the government through tax and spend programs.

If we are focusing purely on economic growth, it doesn't matter how the government spends it, as long as they do spend it. In another thread a while back someone said that it would be sound economic policy for the government to take tax revenue and just dump it out of an airplane onto the population below.

The idea, if I understand it correctly, is that money accumulates at the top and then stays there. The wealthy are wealthy because they keep their money, not because they spend all of their money. For example, we could compare Bill Gates who makes 1 million a year and 20 people who make 50k a year. At the end of the year, who is probably going to have more money in the bank? Bill Gates or all of the money that those 20 people have left? Probably Bill Gates. From the statistics I have seen, more and more money is being concentrated at the top. Whatever down trickle there is it is not as fast as the rush of money upwards.

Or to put it another way, if a small business pulls in a large profit are they going to hire someone even if demand does not dictate it? No. That would be bad business. You don't purposefully increase your labor costs for the same demand. The idea that companies will just automatically start hiring people because they have more money after taxes doesn't make sense, at least to an economic tyro like myself.

Edited by Taq, : No reason given.


This message is a reply to:
 Message 26 by Percy, posted 04-13-2012 8:00 AM Percy has responded

Replies to this message:
 Message 52 by Percy, posted 04-13-2012 10:35 PM Taq has responded

  
Taq
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Posts: 5267
Joined: 03-06-2009
Member Rating: 2.2


(1)
Message 45 of 404 (659249)
04-13-2012 5:13 PM
Reply to: Message 41 by Dr Adequate
04-13-2012 1:52 PM


Re: Data Data Data....
What we can't do is take a statistically significant number (say, 1000) of Americas, divide these Americas into two randomly selected groups, govern one group one way and the other group another way, and then have someone blinded as to the precondition decide which of them is doing better. We have to make do with what we have.

I think that experiment has already been done. It's called Canada.


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Taq
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Posts: 5267
Joined: 03-06-2009
Member Rating: 2.2


Message 88 of 404 (659522)
04-16-2012 12:53 PM
Reply to: Message 52 by Percy
04-13-2012 10:35 PM


Money does not accumulate at the top and stay there. If that were true everyone rich would stay rich.

On average, who has a larger percentage of their annual income left at the end of the year? Those making a million dollars a year or those making 50k a year? From my experience, millionaires accumulate more money than the middle class, but I could be wrong on this.


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Taq
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Posts: 5267
Joined: 03-06-2009
Member Rating: 2.2


(3)
Message 139 of 404 (659794)
04-18-2012 6:14 PM
Reply to: Message 134 by Cat Sci
04-18-2012 4:47 PM


Re: Not sure what you're seeing
But if that results in the median increasing, then the wealth has trickled down.

I don't think anyone is arguing that some of that wealth does trickle down. The argument behind tax cuts for the rich is that the extra money will by and large work its way back down. It doesn't. Only a small portion of that money finds its way back down to the middle class. What we are seeing is a surge upwards that dwarfs the trickle down, if I understand it correctly.

To use an analogy, trickle down views the rich as a coffee cup with the saucer being the middle class. Once the coffee cup is filled to the brim all of that extra will spill down to the middle class. By giving tax cuts to the rich it is thought that the coffee cup will fill faster and increase the amount of coffee spilling into the saucer. This isn't what happened. Instead, the rich just got a bigger coffee cup.


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 Message 134 by Cat Sci, posted 04-18-2012 4:47 PM Cat Sci has not yet responded

  
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