The bald Truth about Trickle Down ” Economics “.

My @Quora answer to Everyone knows that lower taxes boost the economy, so why do politicians always want to raise ta…

I keep hearing claims from corporatists that “Everyone knows *waves hands vehemently in air* tax breaks for the wealthy somehow create jobs and stimulate our economy.” This is what’s called politically convenient false assumptions and false conflations.

No, everyone does not “know” that lowering taxes (especially on wealthy and multinational corporations) creates jobs or stimulates the economy. Because it doesn’t. That’s an assertion started in the US just prior to the Reagan Administration, and it, quite simply, is dead wrong.  In fact one of the major past proponents of policy based upon this version of voodoo “economics” recently admitted that he’d been wrong in supporting it.

Here he is:

Here’s more on this little Fact which we’ve known since ’89:

See… we live in what’s called a Consumer Driven Economy and have since about 1900. So why do we call it that? Quite simply, because when the poor and middle class have spare cash they spend a good portion of it to improve their lives. When the wealthy (and multinational corporations) have spare cash they sequester it.  Like this:
Here’s the declared “legal” tax evasion:
Here’s a few examples of the real (and most carefully un-talked about) problem in tax collections:

Pepco Holdings

Headquartered in: DC
Industry: Utilities, Gas & Electric
Average Tax Rate: -33%

Here’s the sequestering:

What creates economic growth (and thus jobs) isn’t production, or effects in production; it’s consumers using their spare cash to purchase stuff. Yes, it really is just that simple.

Doubt me? Good! Here’s your homework:
Walk up to any local small or mid sized business owner and ask them: “When (what things cause you to) do you create and fill new job positions in your company?”

You’ll get a variant of one of three answers.
“Because my existing crew can’t produce enough of what my customers (Consumers) are demanding”
“Because I’m hiring in the hopes that the Consumer demand will increase beyond what my crew can produce.”
“Because I’m hoping to cut production costs at the same output by consolidating tasks.”

That’s it. Other than “Cousin Joey need a job.” There is no other reason to hire. 

Now ask those same business owners when they eliminate a position.

Here’s what you’ll get:
My crew can produce what the customers are demanding without the extra body.
Go ahead… ask them, ask a dozen of them. I dare you.

Here’s Why having a strong middle class is absolutely critical to having a strong economy, and having a strong wealthy class actually harms the economy (Thanks Nora Rivkis!): Nora Rivkis’ answer to Everyone knows that lower taxes boost the economy, so why do politicians always want to raise taxes?

Now consider, logically, the primary claim of Voodoo (Trickle Down) “Economics”:

That the reduction of consumer costs for products drives corporate spending which creates jobs (the “privilege” of mass production).

So… you open a coffee brewer factory making brewers with full automation at 2/3 the cost of your competitors.  Great. However, if the Consumers are broke and have their spending clamped down hard (as we do right now, and have had since ’06)… how many brewers are you going to sell? Right… all you’ve done is increased the speed of the race to the bottom in price for your industry.

Here’s a smart rich guy talking about that dynamic and how that really works (or doesnt):

Now, can we please shut the Faux “News” lies up?!

Addenda from comment thread:

Here’s the game politician play so as to appear to be “doing something” while actually doing nothing:

Most wealthy folks get the vast majority of their income from capital gains income, and have sucessfully bribed legislators into dramatically discounting that tax rate as if it were somehow a “different” type of income than wages. Thus changes to the top tiers of wage income (which is what the article talks about) have almost zero effect on the taxes paid by the wealthy… because they don’t get their income from wages, they get their income from capital gains.

As an example in the US…
I, as a wage earner, pay about 30% of gross income in total taxes, where a person “earning” the same amount via capital gains would pay below 15% of gross income. Since the vast majority of my income is from wages, and the vast majority of the wealthy persons’ income is from investment, theoretically the government could raise the wage tax rate to +100% and still not affect collections from the wealthy.

Bottom line: Our government’s are intentionally and conveniently using the wrong tool in orderto appear as if they are “responding” by “working” at “solving” the problem of wealth and income inequality which they created at the behest of their corporate bribers; while actuallydoing absolutely nothing of any substance or effect.

This is called (in casinos and in government) the game of Three Card Monte Carlo… on the streets it’s called “Find the Red Queen” and you’ll neverfind her in play (unless the dealer wants you to) because once play starts she “vanishes” up a sleeve or into the palm of a hand.

It gets even worse when you look at the tax code for small businesses… my business income and expenses are treated very differently from those of a C Corporation in that they get to deduct all utilities, housing, fuel, travel, etc while I only “get to deduct that portion which could not be reasonably used for any other purpose outside of running the business.

Thus, I only “get to” deduct 1/3 or less of my largest expenses (housing, utilities, property taxes, insurance, etc) while big corporations get to deduct everything (often including houses and cars for their higher management).

And so we end up with disengenuious claims of “Well we tried to do something about the problem but it didn’t work… further it can’t ever work.”

Of course it didn’t work because politicians are (intentionally) using a hammer in an “attempt” to drive a screw.

Want to really solve the problem? Simple:
Make capital gains and corporate effective tax rates mirror what individual Citizens pay as a percentage of gross income.  (Don’t ever talk at me about our “insanely high” Marginal Rate… you and I both know it’s utter bull shit when talking about multinational corporations)
Institute a “No Pay, No Play” policy on corporations and the wealthy. “You no pay tax? Cool! You no get to use our markets for anything! Until you pay up… no using our markets to invest, no selling your products here. (This make the tax code self enforcing because paying taxes becomes less onerous than evading them… the reverse of what we have now for the wealthy and corporations)
Throw corporations (all of them), bodily, out of our campaign finance process by reinstating our laws about bribery of public officials and by using RICO to enforce those laws. (C.E.O.s, C.F.O.s, and Boards, start going to prison for corporate tax evasion. RICO is purpose written for this function).

Will this happen? No. Not without a violent and bloody revolution… Here’s why:

“Between 2007 and 2012, 200 of America’s most politically active corporations spent a combined $5.8 billion on federal lobbying and campaign contributions. A year-long analysis by the Sunlight Foundation suggests, however, that what they gave pales compared to what those same corporations got: $4.4 trillion in federal business and support.
That figure, more than the $4.3 trillion the federal government paid the nation’s 50 million Social Security recipients over the same period, is the result of an unprecedented effort to quantify the less-examined side of the campaign finance equation: Do political donors get something in return for what they give?”
Just 200 corporations spent $5.8 Billion to get $4.4 Trillion in aid and business, during a time when we spent $4.3 Trillion on our retired and disabled folks.

So much for the Republican party brass’ claims that “we’re too broke” to offer S.S.I. and Medicare at ANYTHING close to a livable level!

*insert 30 pt. Flashing neon red letters*


*answer is written for reproduction under the Creative Commons license*
Short version: So long as you attribute it properly, share it as you will.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s