Summations Only

It's not an exaggeration when you realize that many of the poor are children - I think someone in this thread already noted this fact. Anyway, this is from the opening paragraph of A Profile of the Working Poor, 2009 from the U.S. Bureau of Labor Statistics: 10.4 million individuals working out of 43.6 million total means that about 3/4 of those classified as poor in the United States are not working.--Percy

I'm open to reaching a general consensus on a definition of the poor, but the definition I had in mind was anyone living below the poverty level.--Percy

Hi Theodoric,I described the poor at the top of my message: My later comment that many of the poor are not employed was not meant as a derogatory comment. I was just providing the reason that the bottom quintile is resistant to benefit from an improving economy. Obviously referring to the unemployed as non-participants in the economy was a poor choice of words.Interestingly, an improving economy that brings increasing employment to the bottom quintile lowers median family income, which is the line on Straggler's graph against which top 5% income is being compared.--Percy

The "for all" portion is part of the problem, and "prosperity" is the other. By the "for all" criteria no economic policy will ever work. And "prosperity" means flourishing, successful, which would be nice, but the way you compare two economic policies is to determine which would provide the most improvement. If we get to "prosperity" that would just be a bonus.I believe that evidence disproving trickle-down economics does not exist, especially not in this thread. Some have interpreted this to mean that I believe trickle-down economics does work, but that is incorrect. To this point we haven't reached a consensus about what "works" means, and that seems to me a necessary first step.I'm now realizing that you would probably like more detailed criteria that measures how evenly the benefit is distributed throughout the economy, which would be fine by me.--Percy

Not increasing someone's taxes is not the same as giving them money. What you're actually proposing is an increase in taxes on the rich to finance a stimulus program that provides money to the lower income levels. I'm not objecting to the proposal, just pointing out what the proposal really is.Invested money is also put into the economy. And there are other effects to consider, such as potential job losses. Maybe things would get better, maybe not. My only objections in this thread are to claims that the evidence already shows what would happen.Economics isn't a tidy little science where you can plug numbers into an equation and come up with an answer. For almost any economic plan you care to name you'll find economists who have crunched the numbers showing it will work, and provided examples of it working sometime somewhere in the past.--Percy

Here's an interesting graph I found in the Wikipedia article on US Income Distribution: The graph is in constant $2007 dollars and provides a more accurate picture of what has been happening to incomes over the past 60 years. The higher your income the faster your income grows, but the incomes of all wage categories increased in real terms.--Percy

The income of the 40th percentile rose 100% in real terms between 1950 and 1980, but since 1980 only 20%. But growth in the other percentiles also declined, here's a table: The conclusion is inescapable that since the Reagan tax cuts the lower the income category the worse it has performed relative to the top percentile, whereas before that was not true.How would one go about establishing a causal relationship between the Reagan tax cuts and this change in the relative growth of income percentiles?The end of the Carter years were characterized by recession combined with high interest rates, and this is reflected on the graph with all income categories declining in the late 1970s and early 1980s. The lines don't begin rising again until well into the Reagan administration, but they never regain their previous growth rates. If we had kept the high top marginal tax rates would the the economy have recovered? Would the higher growth rates in income have resumed?--Percy

Oh, I understand now. When you said "giving people money" you meant cutting their taxes. You're arguing that cutting the taxes for lower income categories would provide more benefit. No, trickle-down economics does not propose increasing taxes on the lower income brackets as a means of improving the economy. For the trickle-down theory you just misdescribed, I agree with you. You think there are investment vehicles out there paying "more than was invested"? Do you know that that's greater than 100%? Many jobs are created by people who borrow the same money other people are investing. I never claimed that there was. What I claimed was that no one has offered any evidence here that it doesn't work.--Percy

So your argument is that if no one can show it isn't a causal relationship, therefore it's a causal relationship. This sounds very similar to arguments we see from creationists that if you can't show how something happened, God did it.If you're looking for other significant factors to consider, try increasing energy prices, globalization, a shift from a manufacturing to a service economy, reductions in welfare programs, and I'm sure there are many more.One thing to ask yourself: if you do the opposite of trickle-down economics and increase taxes on the rich, how is that going to shift money into your pockets?I'm already on record as saying that I think the rich do not pay their fair share in taxes, but it's because of loopholes, not tax rates. But closing loopholes is very hard to do. As Bernanke recently said about regulating the financial markets, it's very difficult because they're are a lot of creative people out there, and as one area receives more regulatory attention money seeks out risky new opportunities.--PercyEdited by Percy, : Grammar.

I think the Wikipedia article on trickle down economics defines it pretty well.--Percy

The benefit lessens as one moves down the income brackets that encompass more people, but the benefit is still there. This again comes back to the question of how you define trickle-down economics as working. Obviously trickle-down happens, but how much does it have to happen before you'd define it as working?--Percy

I think this thread mostly reflects longstanding frustration with persistently poor economic conditions, but the reality is that trickle-down economics has received very little attention since the Reagan years. Since Reagan the Democrats have controlled the White House for 12 years, and the Republicans for 12. I don't think current tax policy has much to do with trickle-down economics.But what evidence has been presented in this thread does indicate that the incomes of the rich are soaring while those of the rest of us not so much. What's going on? This blog article from the Wall Street Journal provides some good information: Why the Rich Pay 40% of Taxes. Here's a brief excerpt: So there you go. As much taxes as the rich pay, it hasn't kept up with the rocket-like growth in their incomes.So how do you fix this? One might think that raising taxes on the very, very rich wouldn't reduce their incomes, but it would, just not in any obvious way. The higher their taxes, the more the rich will be motivated to move their incomes into categories that aren't recognized as income by current tax policy. These are called loopholes. We could move to close the loopholes, but new ones will emerge.And what if we're successful and are actually able to tax significant amounts of money away from the rich? What would be the effect on the economy? I don't have the answers. There are people out there who will claim they have the answers, and they could certainly paint a wonderful picture of repairing and enhancing our infrastructure, putting social security on a stable basis, balancing the budget and so forth, but in reality we don't know what would happen.--PercyEdited by Percy, : Grammar.Edited by Percy, : Grammar.

Hi Dr Adequate,My main concern is about those who are so certain they know what action would cause what effect in an economy, and how economies would react to specific policy changes. I guess I would call attention to what we often tell creationists about those who are most certain of what they think they know. It is still argued whether it was really New Deal policies that brought the US out of the Depression, and today's economies are much more complex and interdependent.Good managers must make decisions in the face of incomplete information, and in economics incomplete information combined with only a murky understanding of the tangle of causes and effects is always the case. We do have to decide what to do and take action, but we must also be ready to react in case it doesn't work. And I think solutions that don't work are far more likely than those that do simply because of the current stage of world economics and population growth.Ultimately the wealth of the world is a function of how much wealth we can extract from the Earth itself divided by the number of people. As Earth's resources diminish and world population grows global wealth will at some point begin to decline. And because more and more countries are exiting third world status and beginning to compete with the western democracies for world resources we're already beginning to see some of these effects, effects which are already causing world-wide economic frustration of the type displayed in this thread. In terms of wealth per person we may have already reached our peak. In the absence of remarkable technological breakthroughs it may only get worse from here, and this may not be something that is within our ability to control.--PercyEdited by Percy, : Grammar.

People spending money is what makes the economy go, and the rich spend more of it than anyone else.Say an average guy contracts to build a 6-room house for $200,000. The construction benefits foundation layers, framers, wallboarders, electricians, plumbers, roofers, lumber yards, loggers, McDonald's and even banks.Now say a rich buy contracts to build a 20-room mansion for $20,000,000. The construction benefits all the same types of people and businesses as the building of the 6-room house, only a lot more of them.Hypothetically one might imagine a choice between higher taxes and home building. The government could raise taxes on the rich, causing the rich guy to decide not to build the $20,000,000 mansion, and maybe some of the revenue from the tax increase will flow to you through government programs. Or taxes could stay the same and the rich guy could build the house, and you could have a wallboarding job. And because of other people building houses, both rich people and the people benefiting from building houses for rich people, more money is flowing in the economy and there is increased competition for construction labor, and so your wallboarding salary doubles.There's a flip side (there's always a flip side). Inflation increases, the cost of living rises 10% in your area, and your landlord raises your rent.--Percy

Hi Hooah,Our current world-wide economic dilemma began several years ago with major failures in the financial markets, not with the enacting of trickle-down economic policies. And the country has experienced both booms and busts in the quarter century after Reagan when trickle-down economic policies were originally enacted.--Percy