What is the evidence that trickle down economics actually works?

[Mac1337]

$tevie wrote:
Peppering a post with irrelevancies isn't going to win any points in the debate.

[Grateful11]

Dakota wrote:
[quote=$tevie]
Peppering a post with irrelevancies isn't going to win any points in the debate.

[$tevie]

[$tevie]

SO now that we are done with the Peanut Gallery, are there any adults out there who are still interested in discussing this?

[john dough]

The usual suspects are NOT adults. When confronted with facts they either run away or just grouse about something not related to the discussion.

[$tevie]

I thought the opinion piece I linked to was pretty interesting. He made supply side economics sound like the right idea at the right time. He also made it sound as if its day has come and gone.

[Mac1337]

Luxury tax example is relevant to this discussion because it is an example of trickle down. Rich people spend and others benefit. I don't know what else you'd rather have us do? Tell me ¢tevie, how does trickle up work?

[john dough]

History has shown that the more money that the wealthy have, the more they keep, not "trickle down" to others. Wealth has been becoming more and more concentrated in the last 30 year yet some mindlessly parrot that there is something to the "trickle down" lie.

Far smarter people have been tasked with the same question for proof and have come up empty. I seriously doubt someone on the fringe could do any better.

It must suck to feel compelled, every day, to carry water for groups that not only you are not part of (and will never be), but groups that look at you as a profit vehicle, nothing else.

[Grace62]

Dakota wrote:
, how does trickle up work?

The opposite economic theory to supply side is called demand side, not "trickle up." Here's a good comparison between what Clinton policies did to the economy v. Bush policies that followed:

"....Contrast this wishful thinking with Demand Side economics. Demand Side Economics, says that if taxes are to be cut, they should go to those who earn the least amount of money. The reason is that low-income workers spend virtually all of their incomes. Money given to them goes right back into circulation, fueling a boom in consumer spending. This is essentially the policy that rescued the U.S. economy from the Great Depression. This, say the Demand Side economists, is the real foundation for an expanding economy. How has this theory held up in practice?

Bill Clinton reversed Reagans Supply Side policies, raising taxes on the wealthy and lowering them on the working and middle class. This Demand Side formula was fiercely resisted by Republican leaders in Congress who predicted a stock market crash and another Great Depression. Indeed, every single Republican member of Congress voted against it. It took a tie-breaking vote by Al Gore in the Senate to get the bill passed. What happened?

The economy produced the longest sustained expansion in U.S. history. It created more than 22 million new jobs, the highest level of job creation ever recorded. Unemployment fell to its lowest level in over 30 years. Inflation fell to 2.5% per year compared to the 4.7% average over the prior 12 years. And overall economic growth averaged 4.0% per year compared to 2.8% average growth over the 12 years of the Reagan/Bush administrations.

It wasnt even close. The economy performed dramatically better in almost every way once Supply Side policies were replaced with Demand Side policies.

The most dramatic outcome was the reversal of the Reagan-era Supply Side deficits. Clintons Demand Side policies not only paid down the Reagan/Bush deficits, they produced the first budgetary surpluses since 1969. By the time Clinton left office, the government was running surpluses of almost $140 billion per year. This is what he turned over to George W. Bush in January of 2001.

Bush, of course, returned to the Supply Side policies of Reagan and his father. He lowered taxes on the very rich his base as he calls them. His $1.6 trillion in tax cuts give 45% of the benefits to the top 1% of the population. It is classic Supply Side economics. What happened?

According to the Economic Policy Institute, "By virtually every measure, the economy has performed worse in this business cycle than was typical of past ones." GDP growth since the bottom of the 2001 recession has averaged 2.8%. But it grew at an average rate of 3.5% over the prior six recoveries dating back to World War II. Or consider jobs: 1.3% more jobs under Bush versus 8.8% more during earlier upswings.

...

http://www.commondreams.org/views06/0514-20.htm

[rankandfile]

No support so far for supply side economics.

Consider this:

Life experience since 1980, or thereabouts, debunks supply side economics. GHW Bush even called it "Voodoo" economics. Rightly so.

Interest rates are at historical lows; cash in corporations and in wealthy individual hands is at record levels; unused capacity is at a very high level; actual tax rates are at historical lows; businesses have greatly improved their inventory management systems; productivity and profits are, in many cases, at record levels; CEO incomes are at all-time highs.

All the ingredients are there for increasing supply; and yet...

Businesses won't spend because they can't use the capacity they already have, and productivity and profits are just great, thank you very much. No point in making something they can't sell. The borrowing they are doing is rolling over more expensive debt for much cheaper debt, which is a bargain.

We have a financial crisis, not a cyclical business recession. The problem is not supply; it's DEMAND. The vast majority of people don't have money on the margin, and many don't even have the basics. 1% of the people can make the vast majority of the money, but they can't spend nearly enough to power the economy for the other 99%.

The 8 million jobs lost from 2007-2009 averaged approximately $25-30/hour. Job gains since then, as meager as they are, have averaged about $11/hour. McDonalds hired 62,000 people in April. They turned down over 900,000 other applicants. The jobs aren't there. At any price. If all people who really needed work, or who would rather work full-time instead of part-time were added to the official unemployment total the unemployment rate would be 15-17%.

And yet, all the conditions are there to create supply. But businesses are either unable or unwilling to do it.

This situation cries out for a wholesale, national "project(s)" to put people to work doing critically necessary and otherwise useful work. There has never been a better time or need in my lifetime to invest in our infrastructure which has deteriorated so badly. We have depreciated it beyond safety in many cases. It's an investment in the future. And many who are receiving safety net money now would actually have an opportunity to contribute and create real worth for the economy. The effects would be almost immediate because DEMAND would increase, and the capacity of businesses would be better utilized, which would foster more profits. The engine would get started.

Henry Ford understood. He paid his workers well because it created DEMAND.

There are a number of other areas in which I believe we should invest, but I don't have time right now to flesh it out. I'll just add one more example: This is the best time since the end of WW II to make major investments in critical areas of our educational system. We practically drag bottom in the industrialized world in literacy.

We could transform this country. Why not?