Summations Only

Straggler asks:

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Does it work?

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The simple answer is: No.When it was originally presented back in the Reagan era, literally fewer than a dozen of the entire 18,000 membership of the American Economic Association thought it had any chance of working. It's why George Bush (the first) called it "voodoo economics" during the 1980 Republican primary (but notice how quickly he changed his tune once he became the VP candidate.)We have been stuck under the Reagan tax cuts for the past 30 years and our economy has been unable to recover. We had a brief respite in the 90s when Clinton raised tax rates, but then Bush came back, slashed rates, and as you can see, we have had a lost decade.And currently, we are dealing with a political party that wants to return tax rates to the Reagan levels as "socialist." That must make Nixon "French" and Eisenhower a god damend commie.

Percy writes:

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spending by the rich contributes to the economy far out of proportion to their numbers.

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No, it doesn't. That's another myth. There's only so much money a single person can spend. And what they spend it on doesn't contribute much to the economy.

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Invested money is a significant contributor to economic activity.

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But it doesn't contribute to the economy. That's why the derivatives market was valued at many times more than the entire value of the entire planet. Paper transactions, while "activity," do not contribute to the economy because only those with the money to play can enter into it. Money that only gets used to make more money doesn't contribute to the economy.

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After the 2008 financial collapse the rich (and many others) changed their investment strategies from growth to capital preservation.

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No, they didn't. Because Glass-Steagall hasn't been re-enacted, the derivatives market is back on.

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The unavailability of investment funds acts as a restraint on economic growth

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But that's just it. There isn't any "unavailability." The banks are sitting on piles of cash. They're refusing to lend it out.

Percy writes:

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recessions were more frequent before the Reagan tax cuts

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You're missing something: The Reagan tax cuts spurred a recession...and then he raised taxes (people seem to forget that) and the economy got better. Then Bush came in and cut taxes, the recession hit, and then he raised them and things got better.This is exactly what happened in the Depression: The tax policy of Hoover killed the economy. When Roosevelt got in, he changed the policies and the economy grew. Then in 1937, the Republicans came into power in Congress, slashed the budget, and the economy tanked again. The Republicans then got voted out, the New Deal was restored, and the economy got back to the same levels they were before the Crash.And in the modern economy, the economy has always done better under Democrats than under Republicans. When will we ever learn from our own history?

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?

jar responds to me:

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

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"Trickle down" is the economic theory that by boosting the fortunes of the rich, that boon will "trickle down" to the lower economic strata. It is not merely cutting taxes on the rich. It also involves removal of trade restrictions, the approval of monopolies, and general corporatocracy.In short, Enron.And BP.These are the effects of trickle down economics."Too big to fail" is the result of trickle down economics.

Percy writes:

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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.

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Incorrect. Please show me specifically what I said that even remotely hints at such a thing.It appears you are engaging in equivocation and/or cherry-picking.Indeed, there are rich people who spend money. Nobody ever denies that. What is being argued is whether or not economic policy that favors the wealthy actually causes an increase in the economic standards of the entire population.After 30 years of trial, we have not seen any results. In fact, economic disparity is at its greatest levels since just before the Great Depression. And wages for the working class have been flat.So yes, you can find a millionaire out there who built a house. And the building of that house resulted in employment for a fair number of workers.That millionaire didn't keep building houses, though. Thus, the economic gains made by giving the millionaire money to do so were not actually of much help to the economy. The builders are now out of a job.You are confusing the spending of money with "trickle down."Can we please stop playing dumb?