How's That Trickle-Down Thing Working?

Sunday, December 12, 2010

This past week, President Obama cut a deal with Republican leaders whereby unemployment benefits will be extended for another year to people whose benefits were due to run out, in exchange for a two-year extension of the Bush tax cuts for the top 2 percent of wage earners in America.

Think about that for just a minute.

After all the sanctimonious outrage professed by Republicans during the midterm elections over deficit spending, the only way the Republicans would allow money to go to the Americans who need it the most for one year is to extend a tax break for the Americans who need it the least for two years.

Republicans, who refused to consider extending the unemployment benefits past the end of the year without a way to pay for them, were willing to expand the deficit in return for an uncompensated tax cut extension for the wealthiest 2 percent of Americans.

It seems hypocritical - and it is - but it is in perfect keeping with the "trickle-down" theory of economics championed by Repub-licans; and it says everything about who they truly represent.

Rand Paul summed up the trickle-down approach recently by explaining: "The thing is that we're all interconnected; there are no rich, there are no poor, there are no middle class. ... We all either work for rich people or we sell stuff to rich people."

One wonders how "interconnected" the 17 percent of his Kentucky constituents living below the poverty level are feeling right about now.

The truth is that while there is increasing poverty and a shrinking middle class, the rich are doing just fine. In 2009, the percentage of people living below the poverty line reached its highest level in 11 years. And the median household income fell 3.6 percent from 2008 levels, but the number of households worth over $1 million increased 16 percent.

While it's true that some of us work for or sell to the rich (those of us who don't serve in the military or work in the public sector or work for small business owners who are not necessarily rich), it's just as true that the rich generally get that way by selling to or servicing the rest of us.

Wealth doesn't just trickle down, it wicks. Over the past nine years, there's been an awful lot of wicking and precious little trickling. The stock market has almost doubled from its low on March 6, 2009. Meanwhile, the percentage of people living below the poverty line is up dramatically, and unemployment is stuck perilously close to 10 percent.

Wealth is going up. It is not trickling down. This is not an aberration caused by the recession. The number of people living in poverty increased in all but one year since the Bush tax cuts even before the recession - from around 34 million in 2001 to about 38 million in 2008.

Don't expect a wave of benevolence from small business owners in the wake of the two-year extension of tax cuts for the wealthiest Americans. As stated in an article in Business Week in September, "Give the wealthiest Americans a tax cut, and history suggests they will save the money rather than spend it."

It points out that the rich saved more after the Bush tax cuts of 2001 and 2003 and less when taxes were raised under Clinton.

Hiring will be determined much more by the number of customers coming through the doors than freedom from concern over a relatively small increase in taxes.

The rich managed to stay rich and the economy expanded when the highest bracket was 91 percent or higher from 1951 to 1963. The economy boomed when the rate was at 39 percent in the 1990s.

The way to improve the economy and address the deficit is to revive the prospects of the real engine of growth, middle- and working-class Americans.

Kevin Smith lives in Aberdeen. Contact him at kevinasmith@gmx.com.

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JER 2 years, 5 months ago

Well said, Mr. Smith

nothingspecial 2 years, 5 months ago

Same old tired class warfare propaganda, same old tax the evil rich and increase social programs in the face of European country after country collapsing under the weight of the same. And they claim the Republicans are the ones with the same old ideas...

jimt 2 years, 5 months ago

Republicans have been playing class warfare for decades, against everyone except the well-off.

moonchild7 2 years, 5 months ago

Even David Stockman, "Mr. Trickle-Down Economics", now says that it doesn't work and that it's insane to give the rich anymore tax breaks. So much for sanity. The rich are going to pocket even more of these tax breaks and put them in their savings accounts, and not invest in this country. As much as I hope this works for everyones sake, I'm not at all sure it will. The rich are orchestrating a maniacal plan to destroy the poor working poor and the lower middle class.

fugitiveguy 2 years, 5 months ago

It doesn't matter how much money the gov't rakes in, they are insatiable. I heard the other day on one of those Sat am financial shows that each households share of the fed debt has now reached $1million. They broke it down to $5000/mo for 30 years. In other words, the "evil rich" could turn over every penny they have and with the idiots now in power (Dem and Republicans) they would find a way to spend all that and more. Government spending, government obligations (entitlements) have doomed this country not unlike how they doomed the US auto and steel industry. As someone who has shunned debt and worked a boatload of overtime in my life I find it all very disheartening. The most important job of the majority of politicians is to do whatever it takes to keep getting re-elected.

fugitiveguy 2 years, 5 months ago

"The rich are orchestrating a maniacal plan to destroy the poor working poor and the lower middle class."

Not sure how this would benefit the rich.

moonchild7 2 years, 5 months ago

Our Social Security, Medicare, Medicaid, Unemployment and other Welfare programs help keep untold thousands(millions)of people in their own homes while still contributing to our society even in small ways. Once the rich break all of this down again into pre-depression era lifestyles that are without these programs, we will again need poor houses, more JAILS, more multi-familiy homes, more insane asylums, more homeless shelters, more HOBO railcars, etc. Why does this "ENRICH" the rich? Because many of these programs are now run with limited government funds compared to what they will spend later on. Perhaps the rich have plans to BUILD and OPERATE PRIVATE JAILS?, PRIVATE INSANE ASYLUMS, PRIVATE HOMELESS SHELTERS, that will be needed without all of the social programs the government offers. The Mafia do very well running and owning most of the Nursing Homes and Rest Homes in the US. Even our Gov. Perdue is cutting many of these funds from Social Services programs that very effectively and inexpensively help keep many of these people in their homes. Once cut, the State will end up putting many of these people in expensive Nursing and Rest homes. Mafia wins again. I think that members of the Mafia are considered to be rather RICH.

nothingspecial 2 years, 5 months ago

Ignorance is bliss and allows one class of people to hate another, such as this "rich are evil" class warfare that no normal person buys. All people are evil, none less than others.

In 2006, the top 1 percent of tax returns paid 39.9 percent of all federal individual income taxes and earned 22.1 percent of adjusted gross income, both of which are significantly higher than 2004 when the top 1 percent earned 19 percent of adjusted gross income (AGI) and paid 36.9 percent of federal individual income taxes. In 1990, those figures were 14 percent and 25.1 percent, respectively.

A U.S. News & World Report blogger went to the Democratic National Convention in Denver and conducted an informal poll of 24 DNC delegates. He asked them, “What should ‘the rich’ pay in income taxes?” Half the respondents said “25 percent”; 25 percent said “20 percent”; 12 percent said “30 percent”; and another 12 percent said “35 percent.” The average DNC delegate wanted the rich to pay 25.6 percent, which is lower than what the rich pay now — both by share of taxes and by tax rate

moonchild7 2 years, 5 months ago

On average the RICH pay 15% of their taxable income to the government because of the deductions their accountants and lawyers have "BROKERED" for them. NOT 25% or even 35%! Again, the word HATE got into this discussion when HATE has not been mentioned at all. Fairness is the issue. You say that ALL people are evil? Some of us at least try NOT to be but now I know why I have such a difficult time with so many of you "EVIL ONES" out there.

fugitiveguy 2 years, 5 months ago

Some poeple pay absolutely no income taxes, in fact some get more back than they put in. They have no skin in the game yet they their vote counts just as much as mine. That doesn't seem right.

moonchild7 2 years, 5 months ago

"Some get more back than they put in". Yes, they do......Exxon Mobile used its tax shelters in 2009 to avoid paying any income taxes to the US Government. G.E in 2009 made $10.3 billion in pre-tax income but paid ZERO tax because of it's OVER SEAS profits vs it's US losses. Your reasoning is more than unreasonable and mean. "LANDOWNERS" being the only ones allowed to vote in this country was made illegal quite awhile ago. Was life really better back in the wagontrain era? I think NOT!

fugitiveguy 2 years, 5 months ago

"When plunder becomes a way of life for a group of men living together in society, they create for themselves in the course of time a legal system that authorizes it and a moral code that justifies it."

Frederic Bastiat

JER 2 years, 5 months ago

Some people pay no income tax because they have no income. That group is growing because they have no jobs. They have no jobs to go to because their jobs are in third world countries. Their jobs are in third world countries because the management of the companies needed to improve their bottom line. The companies needed to improve their bottom line to provide for a continuing return on the investment of their stockholders and to provide for the funding necessary to attract the top talent needed to run the companies. People with big incomes are big stockholders while many others, including the employees of these companies who lost their jobs, are smaller investors who had invested through a wide variety of managed investment plans. The big rich investors can weather the volatility of a wildly fluctuating market, the unemployed smaller investor cannot. And, of course, there are those who never had any money to invest in the first place, since all their income was tied up in food, clothing and shelter. The result is a rapidly growing chasm between the rich and the poor which, I think, is the reason you currently see the rage against those at the top of the economic ladder. The left believes that bigger government is needed to help the poor while the right believes that big business untamed is the solution to the problem. I believe that the government is as big a contributor to the problem as the ones who created it by becoming so greedy that they have just about ruined what was once the greatest country on earth. The sad fact is that you can't put the horse back in the barn at this point and we are doomed to the same fate as the Roman Empire. It's just a matter of how much time it will take. Happy Holidays and may Santa bring the current version of whatever the latest technology you simply can't live without. The folks in that third world country and their employers will appreciate it.

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