WHY TRICKLE DOWN HAS NEVER AND WILL NEVER WORK

When Ronald Reagan was running for president in 1980 and during the GOP primary debate, he spoke of the concept of massive tax cuts to all Americans, but especially those at the top to give them more money so that they would invest and create jobs. One of his opponents in the primaries was a senior statesman who was formerly a Congressman and was the Ambassador to China by the name of George H. W. Bush who called the plan “Voodoo Economics.”

Well, Reagan won the nomination and selected George H. W. Bush as his running mate who later embraced “Voodoo Economics” only it was being presented to the voting public as “Trickle-Down” Economics because the increased wealth of the wealthiest of the nation would trickle down to all the people.

John F. Kennedy had once remarked that a “rising tide raises all ships” implying that as the middle-class grew in economic wealth and prosperity, the entire nation, including the wealthy would do better. Trickle-Down was designed to skip a step. Instead of policies that helped the middle-class to raise the tide, policies would be put in place that were geared towards the richest Americans (as well as the corporations and banks) and out of the goodness of their hearts; the rest of the economy would grow. Essentially, raise the ships, and the tide would follow.

As president, Ronald Reagan eliminated regulations on business and banks and sure enough, he slashed tax rates. He also eliminated tax loopholes in an attempt to maintain some revenues. Problem was, he didn’t slash the loopholes used by the wealthiest of Americans, instead he cut the loopholes used by middle and working class Americans. For instance, Americans were once able to write off the interest charges of credit cards and loans from their taxes. It encouraged them to borrow money to buy things and promote the economy. Well, it was eliminated and their taxes essentially went up and further, they borrowed less and the economy began to stagnate a bit.

Now even though Reagan took over as the economy was suffering from double-digit inflation and interest rates; this was the result of the bill coming due from the monies borrowed by Lyndon Johnson and Richard Nixon to pay for the Vietnam War. It was actually the policies of the Federal Reserve and the lowering of their interests rates that improved the overall economy in the nation. The Reagan Tax cuts actually ballooned our deficit and national debt. As a result, Reagan began to raise taxes again, but mostly on the middle-class, not the upper classes. When George Bush ran for President he famously said “Read my lips, no new taxes” in response to his party being upset with both Reagan and him for raising taxes. However, due to the fragile status of the economy and debt from Reagan/Bush, George H. W. Bush ended up raising taxes to put a Band-Aid on a growing problem.

However, trickle-down economics remained through the Clinton administration, who nearly finished the job started by Reagan/Bush by signing NAFTA and repealing some New Deal Banking regulations like Glass-Steagall. Clinton did significantly raised taxes on the wealthiest of Americans, a move that all Republicans said would “destroy the economy.” Well it didn’t and instead, the economy boomed under Clinton. However, the underlying problems with deregulation were not fixed.

When George W. Bush took office, he placed “trickle-down” economics on steroids and pushed and received the largest tax cuts in history that again, favored the wealthiest. Problem was, he also started two wars without providing funds to wage them, he implemented Medicare Part D without paying for it or even allowing government to negotiate prescription drug prices with pharmaceutical companies, and he removed the last vestiges of New Deal Banking Regulations. As a result, the deficit ballooned even worse than under Reagan, the housing market collapsed due to banks being allowed to gamble with investor savings and guaranteed mortgages for overly inflated home loans. Did I mention that because Bush wanted to increase economic spending, he had Alan Greenspan tell people to use their homes as “ATMs” to borrow money on the equity to spend and still write that off. That is what overpriced the housing market. Then came 2008.

Its four years later and again, the concept of “Trickle-Down” is being presented by Mitt Romney and Paul Ryan. Well, for those who don’t get it, Trickle-Down has never created jobs and will never create jobs, by giving more money to corporations or to the wealthiest Americans they end up keeping it for themselves and will not put it back in the overall economy unless they have to. It’s very simple sociology, human nature and economics.

The goal of “For Profit” Business is to make profit. Can’t get any simpler than that. One of the highest budget item on an expense column is payroll. The more people you employ, the more it costs the company. If you can maintain production with fewer employees, paying them just enough and provide just enough benefits where they stay with you, the higher your profit margin. Businesses rarely hire people just because they have the money; they hire them because they need them to maintain production. If they can automate to increase production at a lower cost, they will and will lay off employees. If they can crush “collective bargaining” so as to remove pay and benefits to reduce labor costs and increase profits, they will crush the unions. If they can get more out of an employee so they don’t need as many in order to increase profits, they will. The goal is increased profits. Hiring people eat into the profit margins.

So, just because they have more money on their accounts due to lower taxes doesn’t mean they go out and higher people they don’t need to maintain production, if they don’t need those people and that expense. Some tax breaks were imposed to give companies incentive to hire more people. If they hire them, then they get a tax break they wouldn’t have otherwise. However, those were eliminated. Instead, tax breaks were given to companies to ship jobs overseas. Its good business for them, wages are lower overseas and they get a credit for doing it. Did this idea come from government? Well, it came from business lobbyists who end up paying for the campaign of those in government who play ball with them. Even though Mitt Romney said during his first debate with President Obama that he was unaware of such tax credits, he in fact has used them in his dealings with Bain. It’s a fact.

So, companies have more money from tax breaks and don’t use it to hire people they don’t need. In the mean time, due to the recession and fewer people working, there is lower demand for goods and services from businesses. So they don’t need the people they already have to maintain production that isn’t necessary and they lay more people off. But don’t you worry about them, thanks to the tax cuts and grants; they still have money coming in to make up for the loss of business revenues. Where do they get this money from? Well, social safety net programs designed to help the people who are out of work are slashed at the request of business lobbyists. People’s “welfare” is then diverted to “corporate/business welfare.” And what make matters worse, with no one paying taxes to fund this because the wealthy have had their taxes slashed and the people don’t earn any money to pay taxes on, the debt rises to keep businesses safe and secure. That is what is important to today’s Republican Party. Survival for the businesses that pay government legislators, officials and executives to keep them in business at the cost of the well-being of the people.

Mitt Romney is a businessman who has a businessman mentality. He has no concern for people or jobs. He wouldn’t have been as successful in business as he has been if he did. People eat into corporate profits. Mitt wants more “Trickle-Down” telling you all the same lie that the more money in the hands of the few people and corporations means they will create jobs. They never had and never will. They want government assistance that is geared more to keeping the few rich people safe and secure than the “47%.”

Their ships are still rising while the tide is out. It’s very expensive and ultimately destructive to the nation. Trickle Down only works for the richest among us, and then again, only for the short term. This economy is reaching critical mass. If government doesn’t start increasing tax revenue from those who have been prospering from 30 years of tax breaks to start repairing and growing the middle-class again, as the New Deal and post war programs of FDR, Harry Truman and Republican Dwight David Eisenhower implemented in the first place, that made us an economic giant, the ships will fall and our society is doomed.

We cannot trust anyone who still advocates and supports the failed and disastrous policies of trickle down. Time to focus on the middle class.

UPDATE:

@RATM 47% reminded me in a tweet about the “Two Santa Claus Theory” that many use to explain the “Trickle-Down” Insanity. Thom Hartmann does the best job explaining this theory:

One thought on “WHY TRICKLE DOWN HAS NEVER AND WILL NEVER WORK

  1. Pingback: How to win an argument about raising the minimum wage | Engineering Justice

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