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Author Topic:   Trickle Down Economics - Does It Work?
Straggler
Member
Posts: 9960
From: London England
Joined: 09-30-2006
Member Rating: 2.4


Message 61 of 404 (659290)
04-14-2012 8:48 AM


UK Data
The data I have posted thus far has been US economic data. I have been trying to find equivalent data for the UK. the closest I have found is this report: Report

The report is discussed here: Discussion

The data shows the same trend for escalating incomes of the wealthiest and the stagnating incomes of everyone else in the UK as has occurred in the US.

Trickle down doesn't seem to have worked here in the UK either.

Link writes:

You probably won't be too surprised to hear that for a long time many workers have been receiving an ever smaller portion of the fruits of economic growth. But if we are to properly understand the 'trickle-up' tendencies of British capitalism we need to not only register the depressing headline but get under the surface of what brought it about.

A new report out today does exactly that: it shows that there has been a sharp fall in the share of GDP going to those in work on below average earnings at the same time as the highest earners have received an ever larger share of the national economic pie. This is not just about stagnant wages over recent years - though that has made matters worse. This runs deeper. Over a generation the wages of the bottom half of the working population have shrunk to 10 per cent of GDP, whist the top 1 per cent have seen a 50 per cent increase in their share.

Link in conclusion writes:

Anyone who claims to want a rising-tide economy, in which the gains from growth are widely shared, must recognise that this can't mean the bottom half of wage-earners being left with an ever smaller slice of the pie.


  
Percy
Member
Posts: 13229
From: New Hampshire
Joined: 12-23-2000
Member Rating: 1.9


(1)
Message 62 of 404 (659292)
04-14-2012 9:18 AM
Reply to: Message 54 by Dr Adequate
04-14-2012 12:13 AM


Hi Dr A,

You're right, people do have different expectations of government. Probably most agree that government should be responsible for national defense, foreign policy, foreign trade, and should have the power to tax. Beyond that I guess it's open for debate.

I doubt we'll ever agree about whether government competence has a checkered history, but in my own opinion those willing to cede it increasing power need to recognize that voting is not the best way to influence government, money is, and the rich have more of it than anyone else. Probably the biggest industry in Washington is lobbying.

Very little about my posts is random. And your point is?

That was sarcasm. Of course choosing as items for comparison the worst examples of the rich to the best examples of government wasn't random. You just do it again here:

Dr Adequate writes:

The rich sometimes also act for the social good, as when they invest their money in building factories; but sometimes they don't. When a rich man pays for an oil-painting of his favorite poodle, then to be sure the painter gets paid, but it hasn't added value to the infrastructure so much as if the same money had been spent by the government on repairing pot-holes.

How about doing a flip comparison of the recently in the news GSA conference with the Bill and Melinda Gates foundation? But let's not do that, because I don't think toting up the number of examples of bad performance by the rich and by government is useful. The examples are endless, it would never end, and it would prove nothing.

But the principles involved are very clear. Government is supposed to be the servant of the people, but government can be subverted to other purposes. The more powerful the government the more dangerous this possibility looms, and the rich are much better at subverting government to their purposes than voters. When it comes to looking out for their own interests the rich are much better at it than anyone else. You should be able to tell that I'm no friend of the rich, but demonizing them for not taking on the responsibilities that properly belong to government makes no sense, and raising their tax rates will not actually result in their paying higher taxes. Tax rates on the rich have risen consistently since Reagan, yet Romney paid only 15.4% on his $20 million income, Obama only 20.5% on his $800,000. I paid more than either last year, by a healthy margin.

The solution is to get the government out of the business of trying to legislate fairness through the tax code. Our tax code might be the best illustration we have of government incompetence.

The question we're addressing is whether the government is better at allocating the money of the rich than are the rich themselves where the goal is the greater good. Yes, you're right, both the government and the rich spend money, I've been saying the same thing. The question is who spends it to greater benefit. There are innumerable examples of good and bad spending on the part of both, you're not going to get answers by comparing lists. I think you have to look at the underlying principles.

--Percy

Edited by Percy, : Get figures right for Romney and Obama tax rates.


This message is a reply to:
 Message 54 by Dr Adequate, posted 04-14-2012 12:13 AM Dr Adequate has responded

Replies to this message:
 Message 64 by Dr Adequate, posted 04-14-2012 9:42 AM Percy has responded
 Message 70 by Mr Jack, posted 04-14-2012 10:37 AM Percy has acknowledged this reply

    
Percy
Member
Posts: 13229
From: New Hampshire
Joined: 12-23-2000
Member Rating: 1.9


Message 63 of 404 (659294)
04-14-2012 9:34 AM
Reply to: Message 59 by Straggler
04-14-2012 5:07 AM


Re: Doesn't Work....?
Hi Straggler,

The public sector is not better at wealth creation than the private sector. It isn't even a close comparison. The more money you take from those best at wealth creation to give to those worst at wealth creation, the less wealth you'll have.

And because of the vulnerability of government to the influence of wealth, the greater the efforts at social engineering in terms of income redistribution the less effective they will become.

--Percy


This message is a reply to:
 Message 59 by Straggler, posted 04-14-2012 5:07 AM Straggler has responded

Replies to this message:
 Message 65 by Straggler, posted 04-14-2012 9:57 AM Percy has responded
 Message 91 by Mr Jack, posted 04-16-2012 4:08 PM Percy has acknowledged this reply

    
Dr Adequate
Member
Posts: 12776
Joined: 07-20-2006
Member Rating: 2.3


(1)
Message 64 of 404 (659295)
04-14-2012 9:42 AM
Reply to: Message 62 by Percy
04-14-2012 9:18 AM


Tax rates on the rich have risen consistently since Reagan ...

I have no idea why people believe this.

You should be able to tell that I'm no friend of the rich, but demonizing them for not taking on the responsibilities that properly belong to government makes no sense ...

I didn't demonize them for not doing so. But they don't, and this is, as you say, because some responsibilities do properly belong to government. There are some things for which we don't, can't, and shouldn't trust to Adam Smith's invisible hand.

The solution is to get the government out of the business of trying to legislate fairness through the tax code.

The solution to inequities, not to say iniquities, in our tax code is to stop trying to redress them?

This would be a strange new use of the word "solution" of which I was previously unaware.

I think you have to look at the underlying principles.

Like the fact that the government is trying to spend the money for the greater good, whereas the rich (by and large) are not?


This message is a reply to:
 Message 62 by Percy, posted 04-14-2012 9:18 AM Percy has responded

Replies to this message:
 Message 66 by Percy, posted 04-14-2012 9:59 AM Dr Adequate has responded

  
Straggler
Member
Posts: 9960
From: London England
Joined: 09-30-2006
Member Rating: 2.4


Message 65 of 404 (659296)
04-14-2012 9:57 AM
Reply to: Message 63 by Percy
04-14-2012 9:34 AM


Re: Doesn't Work....?
Percy writes:

The public sector is not better at wealth creation than the private sector. It isn't even a close comparison.

I would suggest that the ability of the private sector to flourish at creating new wealth is in large part dependent on the environment created by the public sector. Justice, the rule or law, a healthy and well educated workforce, research institutions, transport infrastructure etc. etc. etc are all essential components for a wealth creating private sector to flourish. So there is an inter-relatedness between the public and private sectors and a balance to be found between the two.

But what does this have to do explicitly with whether the proclaimed benefits of trickle down economics are real or not?

Percy writes:

The more money you take from those best at wealth creation to give to those worst at wealth creation, the less wealth you'll have.

The data strongly implies that all the wealth created is being concentrated at the top with everyone else remaining static anyway.

So in terms of raising the wealth of all (it's supposed benefit)- Trickle down appears to have failed dismally.

Do you dispute the data on this?

Percy writes:

And because of the vulnerability of government to the influence of wealth, the greater the efforts at social engineering in terms of income redistribution the less effective they will become.

Is the answer to the disproportionate political influence that the wealthiest enjoy reallyto make them even wealthier in comparison to everyone else?

That seems ridiculous.....


This message is a reply to:
 Message 63 by Percy, posted 04-14-2012 9:34 AM Percy has responded

Replies to this message:
 Message 68 by Percy, posted 04-14-2012 10:08 AM Straggler has responded

  
Percy
Member
Posts: 13229
From: New Hampshire
Joined: 12-23-2000
Member Rating: 1.9


Message 66 of 404 (659297)
04-14-2012 9:59 AM
Reply to: Message 64 by Dr Adequate
04-14-2012 9:42 AM


Dr Adequate writes:

Tax rates on the rich have risen consistently since Reagan ...

I have no idea why people believe this.

The top marginal rate is not synonymous with effective tax rate. The reduction in the top marginal rates in the 2000's were justified by closing loopholes, in effect raising the effective tax rates on the rich. Of course, lobbyists influenced the legislation to minimize the impact on loopholes, and after the top marginal rates were reduced the rich also sought other loopholes or had legislation passed to create new ones.

We have to stop looking at the rich as a resource to be increasingly taxed. It isn't going to work. They'll win every time.

--Percy


This message is a reply to:
 Message 64 by Dr Adequate, posted 04-14-2012 9:42 AM Dr Adequate has responded

Replies to this message:
 Message 69 by Phat, posted 04-14-2012 10:09 AM Percy has responded
 Message 71 by Dr Adequate, posted 04-14-2012 12:21 PM Percy has acknowledged this reply

    
Phat
Member
Posts: 7347
From: Denver,Colorado USA
Joined: 12-30-2003
Member Rating: 1.0


Message 67 of 404 (659298)
04-14-2012 10:06 AM
Reply to: Message 11 by Straggler
04-12-2012 10:59 AM


A Senior Moment
Straggler writes:

Do the businesses that make most profits share the profits? Or do the most profitable companies lower wages, reduce employment rights and generally siphon off the benefits to the bosses at the expense of the workers?

No doubt there are examples of both sides of the coin. But is there a definitive trend in there at all?

The labor pool is becoming global. I would assert that the US Middle (working) class is a victim of trickle thru! The money goes right past us on down the line...unless we have a union that uses seniority.


This message is a reply to:
 Message 11 by Straggler, posted 04-12-2012 10:59 AM Straggler has responded

Replies to this message:
 Message 74 by Straggler, posted 04-14-2012 7:25 PM Phat has not yet responded

  
Percy
Member
Posts: 13229
From: New Hampshire
Joined: 12-23-2000
Member Rating: 1.9


Message 68 of 404 (659299)
04-14-2012 10:08 AM
Reply to: Message 65 by Straggler
04-14-2012 9:57 AM


Re: Doesn't Work....?
Straggler writes:

I would suggest that the ability of the private sector to flourish at creating new wealth is in large part dependent on the environment created by the public sector. Justice, the rule or law, a healthy and well educated workforce, research institutions, transport infrastructure etc. etc. etc are all essential components for a wealth creating private sector to flourish. So there is an inter-relatedness between the public and private sectors and a balance to be found between the two.

YES YES YES! Outstanding! Well said.

But what does this have to do explicitly with whether the proclaimed benefits of trickle down economics are real or not?

You concede that the rich do indeed create wealth but dispute whether that wealth creation produces any overall economic benefit? I think that by slicing your definitions exceptionally fine you've arrived at nonsensical conclusions, and I'm not entering your labyrinth.

--Percy


This message is a reply to:
 Message 65 by Straggler, posted 04-14-2012 9:57 AM Straggler has responded

Replies to this message:
 Message 73 by Straggler, posted 04-14-2012 6:56 PM Percy has responded

    
Phat
Member
Posts: 7347
From: Denver,Colorado USA
Joined: 12-30-2003
Member Rating: 1.0


Message 69 of 404 (659300)
04-14-2012 10:09 AM
Reply to: Message 66 by Percy
04-14-2012 9:59 AM


Sad But True
Percy writes:

We have to stop looking at the rich as a resource to be increasingly taxed. It isn't going to work. They'll win every time.

Yes, this is true. But since they have most of the money, and money is needed to fix the problem, what else are we gonna do?


This message is a reply to:
 Message 66 by Percy, posted 04-14-2012 9:59 AM Percy has responded

Replies to this message:
 Message 72 by Percy, posted 04-14-2012 4:03 PM Phat has not yet responded

  
Mr Jack
Member (Idle past 367 days)
Posts: 3475
From: Leicester, England
Joined: 07-14-2003


(1)
Message 70 of 404 (659303)
04-14-2012 10:37 AM
Reply to: Message 62 by Percy
04-14-2012 9:18 AM


Trickle-down economics and questions of tax are different
I doubt we'll ever agree about whether government competence has a checkered history, but in my own opinion those willing to cede it increasing power need to recognize that voting is not the best way to influence government, money is, and the rich have more of it than anyone else. Probably the biggest industry in Washington is lobbying.

This is an addressable problem, though. Your country is more corrupt than mine, for example, whilst mine is substantially more corrupt than, say, Norway.

The question we're addressing is whether the government is better at allocating the money of the rich than are the rich themselves where the goal is the greater good. Yes, you're right, both the government and the rich spend money, I've been saying the same thing. The question is who spends it to greater benefit. There are innumerable examples of good and bad spending on the part of both, you're not going to get answers by comparing lists. I think you have to look at the underlying principles.

It really isn't.

The question is whether setting up the structures of the economy so that the wealthiest are free to accrue as much wealth as they can is beneficial to people in general. That's what trickle down economics is about. You don't need to alter the public-private balance of wealth and taxation to do that. The level to which we wish to fund the government is independent of trickle-down economics.

Measures such as higher minimum wages, greater support for co-operatives, better worker rights, German-style union involvement in management, etc. all have nothing to do with increased taxation but do operate opposite to principles of trickle-down economics and decrease inequality.

Now, personally, I'd go all for more progressive taxation on the rich to pay for less tax on the lower half of society, massive hikes in inheritance tax and taxes targeted at difficult to relocate wealth, as well, but that doesn't have to be part of an alternative to trickle-down economics.


This message is a reply to:
 Message 62 by Percy, posted 04-14-2012 9:18 AM Percy has acknowledged this reply

  
Dr Adequate
Member
Posts: 12776
Joined: 07-20-2006
Member Rating: 2.3


Message 71 of 404 (659307)
04-14-2012 12:21 PM
Reply to: Message 66 by Percy
04-14-2012 9:59 AM


The reduction in the top marginal rates in the 2000's were justified by closing loopholes, in effect raising the effective tax rates on the rich. [...] They'll win every time.

Which?


This message is a reply to:
 Message 66 by Percy, posted 04-14-2012 9:59 AM Percy has acknowledged this reply

  
Percy
Member
Posts: 13229
From: New Hampshire
Joined: 12-23-2000
Member Rating: 1.9


Message 72 of 404 (659313)
04-14-2012 4:03 PM
Reply to: Message 69 by Phat
04-14-2012 10:09 AM


Re: Sad But True
Phat writes:

Percy writes:

We have to stop looking at the rich as a resource to be increasingly taxed. It isn't going to work. They'll win every time.


Yes, this is true. But since they have most of the money, and money is needed to fix the problem, what else are we gonna do?

My advice would be to not let our frustration cause us to act against our own self interest. In the absence of viable alternatives to raising taxes on the rich that would suggest doing nothing.

--Percy

Edited by Percy, : Wordsmithing.


This message is a reply to:
 Message 69 by Phat, posted 04-14-2012 10:09 AM Phat has not yet responded

    
Straggler
Member
Posts: 9960
From: London England
Joined: 09-30-2006
Member Rating: 2.4


Message 73 of 404 (659317)
04-14-2012 6:56 PM
Reply to: Message 68 by Percy
04-14-2012 10:08 AM


Re: Doesn't Work....?
If trickle down economics works then increased income of the wealthiest would result in increased income for everybody else too.

Yet the data for the US and the UK for the past few decades shows the incomes of the wealthiest rocketing whilst the incomes of everybody else remain stagnant.

So the data definitely seems to refute the claim that trickle down economics works.

No?

Percy writes:

You concede that the rich do indeed create wealth but dispute whether that wealth creation produces any overall economic benefit?

The data shows that new national wealth has been indeed been created. It doesn't show that this wealth was created by the wealthiest. It does show that this wealth has been accumulated almost exclusively by the wealthiest. Look at the data......

Percy writes:

You concede that the rich do indeed create wealth but dispute whether that wealth creation produces any overall economic benefit?

I accept that the private sector is the principle creator of new wealth in an economy. That isn't the same as defining the wealthy as wealth creators. Some of the wealthiest are genuinely innovative and entrepreneurial and can be accurately described as "wealth creators". But equally many of the not-so-wealthy owners of small businesses are "wealth creators" on a smaller scale that collectively adds up to a huge amount of wealth generation that the wealthiest cannot lay claim to.

Furthermore many of the wealthiest simply inherited their wealth. And increasingly many of the very wealthiest have done nothing other than play the financial system at the expense of everyone else. These people are extraordinarily wealthy but have arguably destroyed far more wealth recently than they have ever created.

So, no, I don't accept that the wealthiest are necessarily the principle wealth creators at all. What evidence is there that they are?

Percy writes:

I think that by slicing your definitions exceptionally fine you've arrived at nonsensical conclusions, and I'm not entering your labyrinth.

If you think trickle down economics works I think your belief in this blatantly contradicts the evidence available.

Edited by Straggler, : No reason given.

Edited by Straggler, : No reason given.


This message is a reply to:
 Message 68 by Percy, posted 04-14-2012 10:08 AM Percy has responded

Replies to this message:
 Message 77 by Percy, posted 04-14-2012 8:24 PM Straggler has responded

  
Straggler
Member
Posts: 9960
From: London England
Joined: 09-30-2006
Member Rating: 2.4


Message 74 of 404 (659319)
04-14-2012 7:25 PM
Reply to: Message 67 by Phat
04-14-2012 10:06 AM


Re: A Senior Moment
Phat writes:

I would assert that the US Middle (working) class is a victim of trickle thru! The money goes right past us on down the line...

If the wealthiest in the US are effectively removing wealth from the local (i.e national) economy by investing their wealth in cheap labour elsewhere then on a national level trickle down economic theory isn't working.

Because the proclaimed benefit of trickle down economics is that the tax paying society in which it is implemented will benefit as a whole by increasing the wealth of the wealthiest.

That obviously isn't happening if they are investing the dividends of US economic growth elsewhere so that the US tax paying public never see any benefit of that created wealth.

One of the advantages of cutting taxes for poorer workers rather than the richest is that the poorest are much more likely to spend any extra money they get in the local economy. Thus stimulating economic activity in the local economy.


This message is a reply to:
 Message 67 by Phat, posted 04-14-2012 10:06 AM Phat has not yet responded

  
RAZD
Member
Posts: 15885
From: the other end of the sidewalk
Joined: 03-14-2004
Member Rating: 1.9


(1)
Message 75 of 404 (659320)
04-14-2012 7:29 PM
Reply to: Message 1 by Straggler
04-12-2012 9:00 AM


feedback resonance measurements of cause and effect
Hi Straggler

Does it work? What does the evidence say? I'm not interested in left-wing arguments about what is "fair" here. Nor am I interested in right-wing arguments proclaiming that tax is "theft" and suchlike.

As far as I know not one person has suggested a way to measure the result of the various programs proposed, or to in any way determine relative success. This could be intentional, if the real reason is not to stimulate the economy but to line the pockets of the rich (where measurement\determination would be counterproductive).

What we can do is compare the programs and experiences of the last few years to a resonance feedback system:

If the measured response to a {program} is "very good" then the resonance feedback would result in amplified results much greater than input, a runaway feedback loop that results in the economy growing by leaps and bounds. This would indicate a strong relationship between measurement and {program}.

If the measured response to a {program} is "very bad" then the resonance feedback would result in dampened results much less than the input, to the point of barely being noticeable. This would indicate a weak or non-existant relationship between measurement and {program}.

A neutral response would have the same output as the input.

Here the measurement is the economy, and how it reacts to the {program} (plus or minus).

When we compare the mortgage failure of mortgages for people at the bottom of the economic pyramid, the effect was much greater than just the foreclosures of those mortgages, but an amplified feedback that lead to more and bigger failures, and this indicates that there is a very strong relationship between the economy at the bottom of the pyramid to the economy overall.

When we compare the bailout program to being able to stall or turn around the failure, there was barely a ripple, and years later has not reached the pre-failure level. This indicates a very poor to non-existant relationship between the economy at the top of the the pyramid to the economy overall.

If trickle down does occur to any significant level around the sources of the trickles, it is heavily damped when it comes to the effect on the overall economy, to the point of not being measurable.

Enjoy.


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This message is a reply to:
 Message 1 by Straggler, posted 04-12-2012 9:00 AM Straggler has responded

Replies to this message:
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