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Author Topic:   Trickle Down Economics - Does It Work?
Dr Jack
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Posts: 3514
From: Immigrant in the land of Deutsch
Joined: 07-14-2003
Member Rating: 8.7


(2)
Message 91 of 404 (659553)
04-16-2012 4:08 PM
Reply to: Message 63 by Percy
04-14-2012 9:34 AM


Re: Doesn't Work....?
Hi Percy,
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.
What makes you think that those best at accruing wealth (i.e. the rich) are also the best at wealth creation?
Note: this isn't private vs. public money; it's distribution of wealth among the private sector.

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Percy
Member
Posts: 22391
From: New Hampshire
Joined: 12-23-2000
Member Rating: 5.2


Message 92 of 404 (659567)
04-16-2012 8:22 PM
Reply to: Message 87 by Straggler
04-16-2012 6:50 AM


Re: Doesn't Work....?
Straggler writes:
Median income rises and falls in rough synch with productivity per capita. That people's incomes rise the more they produce (and falls the less they produce) should hardly be a revelation to anyone.
You may be seeing what you want to see. Look again at your graph:
The rises and falls in medium household income correlate much better with top 5% income.
The problem is that the benefits of increased production over the last few decades are focused almost exclusively at the top. This directly contradicts the key prediction of trickle down theory.
Well, I guess I agree it contradicts what you define as the "key prediction of trickle down theory," but as I said earlier, you like to slice your definitions very thin and then choose those that favor your position.
But I'll stick with the definition of trickle-down economics I'm familiar with and which also, I just learned, happens to agree with how Wikipedia defines it. There can be no doubt that trickle down happens. The rich make a lot of money and they spend a lot of money by ordering, say, yachts and cause boatbuilders to hire craftsmen, plumbers, electricians, etc. When they make less money they spend less money, and they cancel their yacht orders and cause boatbuilders to lay off craftsmen, plumbers, electricians, carpenters, etc.
So obviously trickle-down happens, but does it work? I guess I don't know what that means. I have ventured my opinion of what people might mean when they ask, "Does trickle-down economics work," but have found little agreement here, so there seems little point in repeating it.
--Percy

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RAZD
Member (Idle past 1405 days)
Posts: 20714
From: the other end of the sidewalk
Joined: 03-14-2004


(1)
Message 93 of 404 (659569)
04-16-2012 9:20 PM
Reply to: Message 92 by Percy
04-16-2012 8:22 PM


Re: Doesn't Work....?
Hi Percy,
You may be seeing what you want to see. Look again at your graph:
Indeed you may.
The rises and falls in medium household income correlate much better with top 5% income.
Actually they correlate with both to equal measure, with peaks and valleys at the same years.
Well, I guess I agree it contradicts what you define as the "key prediction of trickle down theory," but as I said earlier, you like to slice your definitions very thin and then choose those that favor your position.
What is more interesting to me is the relatively inverse relationship with the lowest income category.
The claim of the trickle-down theory is that increased income at the top will result in increased income at the bottom (which was used to sell all those dodgy mortgages to the lower income people), and this graph clearly shows a counter trend to that assertion.
Enjoy.

we are limited in our ability to understand
by our ability to understand
Rebel American Zen Deist
... to learn ... to think ... to live ... to laugh ...
to share.


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This message is a reply to:
 Message 92 by Percy, posted 04-16-2012 8:22 PM Percy has replied

Replies to this message:
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Percy
Member
Posts: 22391
From: New Hampshire
Joined: 12-23-2000
Member Rating: 5.2


Message 94 of 404 (659571)
04-16-2012 9:50 PM
Reply to: Message 93 by RAZD
04-16-2012 9:20 PM


Re: Doesn't Work....?
RAZD writes:
Actually they correlate with both to equal measure, with peaks and valleys at the same years.
Around 2002-2003 they don't even go in the same direction, and the magnitude of the slopes are much more consistently proportional for top 5% income.
But I'm afraid I have to keep coming back to the same point. Trickle down *does* happen. The more the rich make, the more any homogenous group makes, the more they spend in the aggregate. Straggler thinks his graph shows that trickle down doesn't happen, but obviously it does. There's no way it couldn't. It's not possible.
So what does it mean to say that trickle-down economics works? This is where you get into tax policy. As Wikipedia says, "Proponents of these policies claim that if the top income earners are taxed less that they will invest more into the business infrastructure and equity markets, it will in turn lead to more goods at lower prices, and create more jobs for middle and lower class individuals." As I've been saying all along, it's a question of who can do the most good with the money, the people who's money it really is, or the people who want to tax it away.
--Percy

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Chuck77
Inactive Member


Message 95 of 404 (659578)
04-17-2012 12:08 AM


trickle down effect
Anyone here ever buy a used car? Ever? If you have you are enjoying the benefits of "trickle down effect". Do the rich buy used cars? No, they don't. When they end up selling or trading that not so new anymore car it's sold as used. That's "trickle down effect". It happens and it works. People who can't afford a brand new car buy a used one they can afford thanks to the better off person who bought the new one. That's trickle down. To say it doesn't happen or doesn't work is not at all accurate.
There are lots more examples than this and of course there are exceptions to the above example but hopefully you get the point.
Not to mention the added labor, parts, employment from the rich buying the things others cannot until it's sold as used. All trickle down.
Edited by Chuck77, : No reason given.
Edited by Chuck77, : No reason given.

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RAZD
Member (Idle past 1405 days)
Posts: 20714
From: the other end of the sidewalk
Joined: 03-14-2004


(1)
Message 96 of 404 (659581)
04-17-2012 12:56 AM
Reply to: Message 94 by Percy
04-16-2012 9:50 PM


It just doesn't work as claimed ...
Hi Percy,
But I'm afraid I have to keep coming back to the same point. Trickle down *does* happen. The more the rich make, the more any homogenous group makes, the more they spend in the aggregate. Straggler thinks his graph shows that trickle down doesn't happen, but obviously it does. There's no way it couldn't. It's not possible.
I'm not contesting that trickle-down does happen, just that the claim that it improves ALL economic strata is patently false. The graph clearly shows that the lower income bracket is not improved by it, and that in fact it changes slopes in opposition to those of the upper bracket/s.
Logically there is a point somewhere between mean income and lowest income where it is stagnant.
... Wikipedia ... "and create more jobs for middle and lower class individuals."
Quite obviously this does not occur for the lower classes. Otherwise there would be nobody in the negative side of the graph.
Any program, however it is arranged, that gave a benefit to the lowest classes would also benefit the upper classes, because trickle up ALSO occurs, much more than trickle down does. Not ALL the wealth is created by the top brackets, but it is created by entrepreneurs at ALL levels of the economic system. Wealth that is created that then is used to pay off loans to get going is an obvious means for trickle up to take money from these money makers and send it to the upper brackets without any dampening depreciation effect. This same mechanism of paying off debts does act to dampen and depreciate the effects of trickle-down, so that each lower level gets less effective trickles, spread over more people.
You can also see that the economic system as a whole is much more sensitive to trickle-up when you look at the mortgage failures: suddenly those debts at the bottom were not being paid and the whole system virtually collapsed.
Enjoy.

we are limited in our ability to understand
by our ability to understand
Rebel American Zen Deist
... to learn ... to think ... to live ... to laugh ...
to share.


Join the effort to solve medical problems, AIDS/HIV, Cancer and more with Team EvC! (click)

This message is a reply to:
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Tangle
Member
Posts: 9489
From: UK
Joined: 10-07-2011
Member Rating: 4.9


Message 97 of 404 (659588)
04-17-2012 3:49 AM
Reply to: Message 95 by Chuck77
04-17-2012 12:08 AM


Re: trickle down effect
Scraps from the rich man's table perhaps?
There was a rich man who wore expensive clothes. Every day was like a party to him. 20There was also a beggar named Lazarus who was regularly brought to the gate of the rich man's house. 21Lazarus would have eaten any scraps that fell from the rich man's table. Lazarus was covered with sores, and dogs would lick them. 22"One day the beggar died, and the angels carried him to be with Abraham. The rich man also died and was buried. 23He went to hell, where he was constantly tortured

Life, don't talk to me about life - Marvin the Paranoid Android

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Straggler
Member
Posts: 10333
From: London England
Joined: 09-30-2006


(2)
Message 98 of 404 (659591)
04-17-2012 7:48 AM
Reply to: Message 92 by Percy
04-16-2012 8:22 PM


Re: Doesn't Work....?
Percy you still seem to be confused by exactly what the term 'trickle down economics' refers to.
Do you think 'trickle down economics' refers to the simple fact that the rich spend money that is then received by those lower down the income scale?
Or does 'trickle down economics' refer to the idea that specifically targeting tax breaks and policy decisions at making the wealthiest wealthier is a superior method of creating growth, employment and prosperity for all in society?
The two are not the same thing. The first obviously and indisputably occurs. The second, according to the data, doesn't.
Which do you think we are talking about here?
wiki on trickle down theory writes:
Proponents of these policies claim that if the top income earners are taxed less that they will invest more into the business infrastructure and equity markets, it will in turn lead to more goods at lower prices, and create more jobs for middle and lower class individuals. Proponents argue that economic growth flows down from the top to the bottom, indirectly benefiting those who do not directly benefit from the policy changes. However, others have argued that "trickle-down" policies generally do not work,[5] and that the trickle-down effect may be very slim, if indeed it even exists at all.
Wiki on trickle down theory writes:
Proponents of Keynesian economics and related theories often criticize tax rate cuts for the wealthy as being "trickle down," arguing tax cuts directly targeting those with less income would be more economically stimulative. Keynesians generally argue for broad fiscal policies that are direct across the entire economy, not toward one specific group.
If you really need to boil the question of this thread down into a neat little sound-bite of a question then try the following: Should we aim tax breaks and policy decisions at making the wealthiest wealthier in order to create the most prosperity for all?
Percy writes:
There can be no doubt that trickle down happens.
But that is not the same as trickle down economics succeeding in terms of it's proclaimed benefits being met. Is it?
Percy writes:
But I'll stick with the definition of trickle-down economics I'm familiar with and which also, I just learned, happens to agree with how Wikipedia defines it.
The wiki entry on trickle down economics discusses serious doubts as to whether trickle down economics actually works. Certainly it does not support your statement - "It isn't a question of whether trickle down works or not. Of course it works".
Have you actually read the wiki entry in full?
Wiki entry on trickle down economics
Where in there does it say that trickle down economics works?

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crashfrog
Member (Idle past 1466 days)
Posts: 19762
From: Silver Spring, MD
Joined: 03-20-2003


(2)
Message 99 of 404 (659593)
04-17-2012 8:17 AM
Reply to: Message 92 by Percy
04-16-2012 8:22 PM


Re: Doesn't Work....?
The rises and falls in medium household income correlate much better with top 5% income.
I don't see that in the graph. Could you elucidate? The most prominent and best correlation is that of the change in top 5% household incomes to the change in US GDP per capita.
The rich make a lot of money and they spend a lot of money by ordering, say, yachts and cause boatbuilders to hire craftsmen, plumbers, electricians, etc.
But middle class people buy things, too. In fact, what typifies being poor or middle class is that ones expenditures are pretty close to one's income; the rich have far more money than they can spend even if they spend it like spending it is their full-time job. If a rich person annually spends a million dollars, but had annual income (after tax, etc) of a million and one dollars, that million and first dollar doesn't "trickle down" at all because it's not ever being spent.
The fact of the matter is that it's the middle class, the middle three income quintiles, that spend the majority of the nation's consumer spending:
I mean, obviously; there's so many more of them. This is why the top income quintile spends less as a percentage of its income than any other quintile:
If "trickle-down" is a function of spending, then that's how it doesn't work - the rich don't spend.
As I've been saying all along, it's a question of who can do the most good with the money, the people who's money it really is, or the people who want to tax it away.
No, that's exactly wrong. The question is about the decreasing marginal utility of money - the thousandth dollar has far more marginal utility than the millionth, therefore it makes an enormous amount of sense to transfer wealth from the rich who can't and won't spend it, to the middle class income levels who will spend it, and gain enormous utility in doing so.
Edited by Admin, : Improve image presentation.

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Phat
Member
Posts: 18262
From: Denver,Colorado USA
Joined: 12-30-2003
Member Rating: 1.1


Message 100 of 404 (659595)
04-17-2012 8:57 AM
Reply to: Message 97 by Tangle
04-17-2012 3:49 AM


Trickle Trickle Little George
This may sound horribly theocratic, but I believe that Trickle Down economics may have its best efforts showcased in the church. When a man with means can freely give to those less fortunate, apart from government legislated giving, he should do so.
Indeed, rather than trickling, the money should pour down....freely given, and allow those with less to be blessed.
Then maybe they will catch the spirit of generosity and bless others as well. Ive seen it happen time and time again at my store when we solicit (its our job) for charity. You see all kinds of givers. (or keepers)
Some with means wont give a nickel. They only give at the end of the year, so they say, in order to write it off.
A few give generously, but what I have noted is that it is often poorer (as I judge them) families that often give the most. By and large, poorer people are more generous than wealthier people.
As an aside, a corporation is allowed a larger corporate tax break for charity than individuals receive. Thus what they essentially do is donate your donations and get it written off their expenses.

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Straggler
Member
Posts: 10333
From: London England
Joined: 09-30-2006


(2)
Message 101 of 404 (659604)
04-17-2012 9:48 AM
Reply to: Message 90 by RAZD
04-16-2012 4:02 PM


Re: The Question Posed In This Thread
I agree.
If nothing else Percy's flawed advocacy of trickle down economics has united you and I in common cause.

This message is a reply to:
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NoNukes
Inactive Member


(3)
Message 102 of 404 (659606)
04-17-2012 10:49 AM
Reply to: Message 95 by Chuck77
04-17-2012 12:08 AM


Nope. That's not trickle down.
Anyone here ever buy a used car? Ever? If you have you are enjoying the benefits of "trickle down effect". Do the rich buy used cars? No, they don't.
I've read this several times to see if I've missed a joke. I don't think I have.
You are describing the "hand me down" effect and not the trickle down effect. I have indeed owned several used cars, but I'm utterly convinced that the poor slob who once owned the Cierra Cutlass, the big Buick, and the Toyota Maxima that I purchased as used, was not a rich dude, but was instead another middle class guy in approximately the same salary bracket as myself, but with a slightly higher penchant for spending.
Trickle down would be when the rich man uses his money to buy a Rolls at a dealership, and then hires a driver and employs a mechanic. The car dealer, the driver, and mechanic are benefiting from trickle down economics created by the rich man's wealth.
But I'm never going to own that previously own Rolls. There is some trickle down economics associated with every sale, but getting to buy used stuff from rich people is not trickle down.
And one might well ask whether just giving 100 guys like me some money and allowing us to buy new Vegas would not stimulate the economy just as much as giving one rich person enough money to buy a Rolls. Why does stuff have to pass through Bill Gates and Oprah's hands before I get it?

Under a government which imprisons any unjustly, the true place for a just man is also in prison. Thoreau: Civil Disobedience (1846)
The apathy of the people is enough to make every statue leap from its pedestal and hasten the resurrection of the dead. William Lloyd Garrison

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Dr Jack
Member
Posts: 3514
From: Immigrant in the land of Deutsch
Joined: 07-14-2003
Member Rating: 8.7


(1)
Message 103 of 404 (659618)
04-17-2012 12:36 PM
Reply to: Message 102 by NoNukes
04-17-2012 10:49 AM


Re: Nope. That's not trickle down.
I don't think that describes the theory of trickle down either.
From wikipedia
quote:
Proponents of these policies claim that if the top income earners are taxed less that they will invest more into the business infrastructure and equity markets, it will in turn lead to more goods at lower prices, and create more jobs for middle and lower class individuals.
I've bolded what I consider the key part. Trickle down economics isn't about wealth flowing down the hill, it's the idea that investment by the rich will create jobs for the poor. The rich man builds a new factory, the poor man gets a job in the factory. The rich man invests in a new computer games startup, the middle class graduate gets a job as a games programmer.
It's about the notion of money freed for investment will boost everything so much that everyone gets better off as a result.
Key to it is the notion that invested money is the best money for the economy. This is simply bollocks. Spent money is better for the economy that invested money. A business that takes a fiver for a sandwich is better off than a business that borrows a fiver to buy the ingredients for a sandwich.

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Straggler
Member
Posts: 10333
From: London England
Joined: 09-30-2006


(3)
Message 104 of 404 (659619)
04-17-2012 12:54 PM
Reply to: Message 94 by Percy
04-16-2012 9:50 PM


Obama on ‘Trickle Down’ Economics: ‘It Doesn’t Work, It Has Never Worked’
Percy writes:
Straggler thinks his graph shows that trickle down doesn't happen, but obviously it does. There's no way it couldn't. It's not possible.
Then maybe you should credit Straggler (and president Obama) with a bit more intelligence. I am not asking if trickle down happens. I am asking if trickle down economics works.
quote:
Trickle down economics, the conservative theory embraced by Ronald Reagan and virtually every conservative since, doesn’t work, Obama declared. And even as conservatives have clung to the idea in the face of overwhelming evidence against it, it has never worked, Obama added:
"Now, just as there was in Teddy Roosevelt’s time, there’s been a certain crowd in Washington for the last few decades who respond to this economic challenge with the same old tune. The market will take care of everything, they tell us. If only we cut more regulations and cut more taxes — especially for the wealthy — our economy will grow stronger. Sure, there will be winners and losers. But if the winners do really well, jobs and prosperity will eventually trickle down to everyone else. And even if prosperity doesn’t trickle down, they argue, that’s the price of liberty.
It’s a simple theory — one that speaks to our rugged individualism and healthy skepticism of too much government. And that theory fits well on a bumper sticker. Here’s the problem: It doesn’t work. It has never worked. It didn’t work when it was tried in the decade before the Great Depression. It’s not what led to the incredible post-war boom of the 50s and 60s. And it didn’t work when we tried it during the last decade."

Link
Edited by Straggler, : Add link and fix quotes.

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Dr Adequate
Member (Idle past 284 days)
Posts: 16113
Joined: 07-20-2006


(1)
Message 105 of 404 (659626)
04-17-2012 2:11 PM
Reply to: Message 95 by Chuck77
04-17-2012 12:08 AM


Would You Buy A Used Car From Chuck77?
In the first place, that's not what "trickle down" means.
In the second place, following your own argument, I would be better off if rich people had less money and bought cheaper cars. At present, I cannot afford to buy the second hand car of a rich man. I am never going to be able to buy a second hand BMW or Aston Martin, that's still out of my price range. I might as well dream of buying a second-hand Lear Jet.
If taxes had been so high ten years ago that all the rich man could afford was a cheap Toyota without air-conditioning, and if taxes had been so high for the last ten years that he hasn't been able to afford to change his car between then and now, when he finally upgrades, then today I might just be able to buy his ten-year-old Toyota, and his wealth would in fact have benefited me in the way that you suggest.
So if you were to tax the fuck out of the rich, then in ten years' time I might be able to afford the cast-offs of a rich man, or what would be a rich man if you hadn't made him not rich through punitive taxation. Otherwise, not so much.
Edited by Dr Adequate, : No reason given.

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