Thread: Trickle Down Economics

Earlier this evening someone asked me to explain TDE. I wasn't able to then and now that I'm back home I can't find the post but here's an explanation and why it doesn't work.

Trickle-Down Economics: Four Reasons Why It Just Doesn't Work
By Mehrun Etebari
July 17, 2003
We’ve all heard the claims that cutting tax rates for the richest Americans will improve the standard of living for the working class. Supposedly, top-bracket tax breaks will result in more jobs being created, higher wages for the average worker, and an overall upturn in our economy. It’s at the heart of the infamous trickle-down theory.
The past 40 years have seen a gradual decrease in the top bracket’s income tax rate, from 91% in 1963 to 35% in 2003. It went as low as 28% in 1988 and 1989 due to legislation passed under Reagan, the trickle-down theory’s most famous adherent. The Clinton years saw the top bracket hold steady at a higher rate of 39.6%, but under the younger Bush’s tax-cut policies, the rich are once again paying less. The drastic change in tax policy that has taken place since the early 1960s gives us a great opportunity to study and evaluate the claims that lower taxes for the rich translate to more wealth for the average American.
We can compare changes in the top tax rate with the real GDP growth rate (a measure of the growth of the entire U.S. economy), and three measures of how life is for the average working American: annual median income growth, annual average hourly wage growth, and job creation. If cuts for the rich were really the magic elixir for the economy and the middle class that the Republican consensus claims it is, we would see an increase in the four indicators whenever the tax rate dropped. However, this is not the case. Such a trend occurs sometimes, but the opposite happens at other times!

FairEconomy.org - Research Library - Trickle-Down Economics: Four Reasons Why It Just Doesn't Work

Explaining how it doesn't work doesn't exactly explain the concept. Why don't you start by explaining the concept. That might be a little more helpful.

Originally Posted by freckles

Explaining how it doesn't work doesn't exactly explain the concept. Why don't you start by explaining the concept. That might be a little more helpful.

It's where the rich and powerful piss all over a grateful middle class. That's the trickle part. The economics part still escapes me.

Originally Posted by freckles

Explaining how it doesn't work doesn't exactly explain the concept. Why don't you start by explaining the concept. That might be a little more helpful.

Well this explains it pretty good...

We’ve all heard the claims that cutting tax rates for the richest Americans will improve the standard of living for the working class. Supposedly, top-bracket tax breaks will result in more jobs being created, higher wages for the average worker, and an overall upturn in our economy. It’s at the heart of the infamous trickle-down theory.

The concept is you give the wealthy a substantial tax break and they will in turn reinvest it creating new business and along with that new jobs and everyones happy. The problem lies in that the wealthy got the tax break but the new jobs haven't materialized.

Well freckels was I close? opcorn:

Question: What prominent politician/economist/public figure claims to believe in "trickle down economics?" Certainly not those on the right, some will believe more in supply side economics - which is considerably different from "trickle down economics." "Trickle down economics" implies that the wealth starts at the top and then "trickles down" but everyone knows that long before the profit even starts coming in employees need to be paid. The entire idea is bizarre and you certainly won't find it in many...or probably any...economic textbooks.

It all revolves around deficit spending and thats not a good economic model for any country.

I think trickle down if flawed from the get go, it relies on the top to get rich, and those below make a little more. If you took out the greed factor then maybe.

The concept is quite sound.

The wealthier people in society are the ones who have the venture capital to invest in new business, new technology, et cetera.

So if the wealthier people are allowed to keep more of their money, their pool of venture capital increases.

They are able to invest more in new businesses, new technologies and so on.

More people are hired at the new businesses. More jobs available. Higher paying and more productive jobs thanks to better technology.

So ultimately everyone benefits from allowing the wealthy to keep more of their money.

Also with more money available, the interest rates will tend to go down, benefiting everyone.

Originally Posted by Dayton3

The concept is quite sound.

The wealthier people in society are the ones who have the venture capital to invest in new business, new technology, et cetera.

So if the wealthier people are allowed to keep more of their money, their pool of venture capital increases.

They are able to invest more in new businesses, new technologies and so on.

More people are hired at the new businesses. More jobs available. Higher paying and more productive jobs thanks to better technology.

So ultimately everyone benefits from allowing the wealthy to keep more of their money.

Also with more money available, the interest rates will tend to go down, benefiting everyone.

You do know there is no Santa, Easter Bunny or any of that don't you?