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Obama and the trickle-down fairy dust — 24 Comments

  1. Neither President Skittles Tax-the-Rainbow Unicorn nor his supporters has room to be calling anything “fairy dust!”

  2. Tax cuts by JFK, Reagan, and Bush II all stimulated economic growth, which resulted in more revenue for the Federal government. For a long discussion of the proof of that see this:
    http://tinyurl.com/34hzp65 (It’s long, and involved, but has the data.)

    What tax increases on the wealthy do is discourage business formation and investment. Just the threat of such tax increases has been effective in destroying confidence in business and investing. That is what’s been happening on Obama’s watch. As a result we have a pie that’s not increasing in size. Obama and the progressives are satisfied with a smaller pie if they can just divide the pieces more equally. What lowering taxes does is encourage the economy to grow, creating more pie for everyone, including the Federal government. Obama and the progs just cannot understand that because their “Cross of Gold” is equality of outcomes. Those of us who have studied the issue understand that a stagnant or smaller economy leads only to equality of misery……..except for the elites in government. For confirmation see the history of the USSR, or Cuba, or North Korea, or Zimbabwe, and many others.

    History condemns the progs economic ideas, yet they insist they are right. It is to weep.

  3. Doesn’t “a rising tide lifts all boats” work reasonably well for capturing the capitalist view of economic expansion in a catchphrase? Can’t recall hearing lefties argue against it. Simply as a piece of rhetoric, it does not present the easy target that “trickle-down” does. You could argue that economic growth doesn’t actually work that way, but you can’t argue with the image itself, which is indubitably accurate in the physical world.

    Well, strawmen are always easy targets. That’s why people like them so much.

  4. “A year ago this column defied anyone to quote any economist – in government, academia, or anywhere else outside an insane asylum – who had ever argued in favor of a “trickle down theory.””

    I love your blog but I think you are wrong. It has been argued for decades. It is just now called Stimulus and the multiplier effect. Give (print really) almost a trillion dollars give it to Obama, let him give it to his cronies, and, viola, the economy will prosper. It tends to work selectively. Been to DC lately?

    I took economics in the 70’s and realized then a Keynsian stimulus was a perfect slush fund.

    Please do not remind me of the economic intelligence of Bush 1 or 2.

  5. Sefton: that’s not a quote from me, it’s a quote from Thomas Sowell, economist and columnist on the right. He explains what he means in the column of his that I linked to.

    And here’s more from Sowell:

    Economist Thomas Sowell has written that the actual path of money in a private enterprise economy is quite the opposite of that claimed by people who refer to the trickle-down theory. He noted that money invested in new business ventures is first paid out to employees, suppliers, and contractors. Only some time later, if the business is profitable, does money return to the business owners–but in the absence of a profit motive, which is reduced in the aggregate by a raise in marginal tax rates in the upper tiers, this activity does not occur. Sowell further has made the case that no economist has ever advocated a “trickle-down” theory of economics, which is rather a misnomer attributed to certain economic ideas by political critics.

  6. 1. I would somewhat amplify and extend Sefton’s comment. I also took Economics back in the 1970s, from Samuelson (20ed.), so I suppose my professors were pretty much on the same page as his.

    Tax cuts to increase spending and stimulate the economy were perfectly orthodox Keynesianism back in 1976. As a matter of fact, I remember reading a section in Samuelson’s treatment of macro economics where he considers whether tax cuts are to be preferred to increased government spending for providing economic stimulus. Samuelson argues, based on the multiplier, that government spending is more efficacious, since the first stage of it is spent directly.

    2. Democrats seem to view the Federal budget first as a tool to reward their voters and punish Republican voters. I think this predisposes them to the mirror image error, assuming that Republicans think exactly the same way about their voters. To me, that accounts for the derision that Democrats direct towards tax cuts.

  7. Interesting. I didn’t know that about “trickle down”. I had always assumed that somebody, somewhere, had advocated for it using that term.

    This gives me ammunition to use if I should find myself in a conversation with a leftist, a situation I increasingly try to avoid.

  8. If the American economy were a tree, democrats would demand the unfairly oversized trunk be eliminated.

  9. Yes, I’m quite sure that Obama is an expert of “fairy” dust.

    P.S. I walked out of my first and only Economics class when the professor–actually a grad student with an Indian accent you could cut with a knife–started to tell us how economic theory was based on the idea of “economic man,” an individual who based all of his actions on a rational calculation about what the economic effect would be of alternative decisions/actions i.e. given a choice between buying a green or red or brown sweater, he would go for the lowest cost/best value rather than style or color.

    Well, what do I now, but as I see things, other things beside mere price usually determine which thing you choose.

  10. Having dealt with federal budgetary issues over the decades, I was amused to see Press Secretary Carney characterize keeping the Bush tax cuts in force as a ( tax) expenditure; a statement which presumes that the government was entitled to more in taxes, but would have to mercifully make the sacrifice, and forgo that revenue. Which raises the question, just how much tax revenue does the federal government believe it is entitled to?

    Last time I looked. people’s incomes and assets were their property, and not the property of the governmen,t to do with as it wished.

  11. “money was all appropriated for the top in hopes that it would trickle down to the needy.” The term has been attributed to humorist Will Rogers

    In 1896, Democratic Presidential candidate William Jennings Bryan made reference to trickle-down theory in his famous “Cross of Gold” speech:

    There are two ideas of government. There are those who believe that if you just legislate to make the well-to-do prosperous, that their prosperity will leak through on those below. The Democratic idea has been that if you legislate to make the masses prosperous their prosperity will find its way up and through every class that rests upon it.

    more at wiki…

  12. Letter to the victims Obama says he will help:

    Dear Victim:

    Trickle down is a system which actually comes from Obama, who is a rich and powerful person using helpless people. He is a pretend king, who is pretending to give a lot right now, but wait until later. He is there only while he needs you. Do you trust him? He owns all the property and power. What makes you sure he will be different?

    I’m sorry to tell you this. It offends my sensibility because of the pain you have suffered. But I am speaking truth to poverty and non-power and programming and suffering and hunger and thirst and everyone that has a million to one chance.

    What I am saying is truth and power for you to recover.

    Cast away your false redeemer.

    You cannot replace God with government. Obama cannot save you.

    You cannot replace God with political purpose and Utopia. It cannot be your Provider. It will, at first, romance you, but you know how such romances end.

    There is a reason God is called Providence (the Provider). He is the boss. He has declared rules, reason and restitution. Together, they operate to teach you. If you do not want to be taught, if you hate more than you love, if you smirk more than you smile, you will find Hell, which is the fire of destruction, and, as you know, you will be destroyed. You live in that. Is it working?

    I want you to know there is a gift, a free gift, called repentance. It is not related to any religion. All religions and all souls know and accept “I’m sorry.” God is called the Author. He is the Author and Lover of your soul and of repentance. He has made a way for you to survive and to live. In fact, no one makes it without repentance.

    Repentence just “is” because God wants so much for you to live in peace and prosperity. That means your soul, your eternal soul, may be free. Repentence is the answer. Dependence on Obama and his promises: you tell me? How do the two compare?

    I’m sorry to inform you, it may cost you your freedom, your money, your pride, the rest of your life. But if you believe you have an eternal soul, then you will sacrifice whatever is necessary to obtain the world to come. That sacrifice, once made, will bring you peace, power and a positive name in the world to come. In this present world, God makes no guarantee and that is as it should be since superficial promises mean nothing. You know about those.

    God has decreed that no matter what your crimes, you may live. Plus, in this world, you may also be free of self-hate, which is no small matter, but again, this is an expression of the way the Creator has stacked the deck for those willing to learn and love. If there be an anger against those who have used you, then refuse the hate and anger, refuse the political solution, look deep inside, and rebel.

    And live.

  13. This issue, when examined more than superficially, shows the lie of the stereotype that Democrats are nuanced but Republicans only black or white. The reality is, sadly, completely opposite. It is the Democrats who relied on stereotype and the Republicans who relied upon reason and argument.

    The Democratic narrative merely asserted greed where no actual qualitative difference existed except for the mere difference of wealth. Accordingly, if were were wealthy, you were wrong. Today, the same assertion prevails and even more so.

    The truth that both groups need each other and cannot exist without one another was at least recognized in 1896 since there were Democrats who opposed free silver coinage. They understood that inflating the money supply by adding silver would devalue the gold property held by “business.” They understood the devaluation of gold property would have an effect not only on business but on rural and farm values. Therefore, there was a Democratic opposition to Byron’s emotional “cross of gold’ appeal. Today, there is no Democratic opposition.

    Byron exists an an example of the loss of nuance by Democrats. He extolled Jefferson and Jackson and the Bible (remember Scopes?) He could use the Bible for all his positions. Indeed, to do otherwise was unthinkable to him. Now, today, what Democrat can? The use of the Bible by Obama is abominable and easily refuted by anyone with half a knowledge of interpretation and history.

    ?Further, there was, indeed, a valid position for Byron’s opposition. The use of gold as currency was an artificial construct which favored Eastern business while the growth of prairie and rural farms suffered. The “old” business owned all the money while the new had none. Interestingly, it was not government, but the market which resolved the situation, which explanation must be left for another day.

    The assetion, even if wrong back then, cannot reasonably be made today. It is still not the fault of rich people who have an advantage of money. But today, the assetion is even less tenable because the assetion merely equates wrong with a difference not of quality but of quantity. In other words, if you are rich, you are bad.

    Today’s Byrons resent not an advantage that may or may not be disputable, but merely inequality. Surely Byron himself would be gobsmacked by the lethal extension of his own arguments.

    Thank God for the two party system of the past where both parties have a common ground. However, that common ground appears to be gone. It is not politics. It is war.

  14. Since approximately 50% of Americans pay NO federal income tax, it stands to reason that any tax cut can only benefit the top half of income earners in the country, ie., the rich!!!

  15. Actually capitalism is a form of trickle down economics, but not in the way the Democrats would like you to think. Goods that are initially available only to the wealthy eventually become commodities available to everyone in a capitalist economy, genuine trickle down.

    When I was a kid, only the rich had cars with a/c, power windows, power steering, and outside mirrors. It’s hard to buy a new car today without all those features. I’m sure the readers here can think dozens of other examples.

    A government economy, controlled by bureaucrats, can’t and won’t produce wealth this way because there’s no incentive to innovate.

  16. My apologies, Neo. I should have read more closely. This is an issue that has annoyed me for 30 years and so I’m quick to respond.

    W Krebs. You are absolutely correct. I recall from Samuelson justifying tax cuts with something like this: “individuals at higher levels of income have a propensity to invest.” I remember it because I had never encountered the word propensity!

    I suspect tax cuts as stimlus became politicaly incorrect for two reasons: the permanent government by the 80s had grow so large that it could never suggest giving up a cent, and Republicans were advocating them. Thinking on it Reagan’s fiscal approach was classic Keynsian.

    My father quoted the PA governor around the time of the Bush tax cuts to the effect, “How do I know if I “give” them this money they will create jobs.”, and my father agreed with him. People just naturally assume the money is the government’s. I threw the Stimulus back at him and he was just quiet.

    I also told him by Reagan’s time after years of inflation people who were (more or less) at Kennedy’s 31% were now at Kennedy’s 71%. Reagan helped the little guy.

    We all know our Sowell and Samuelson, but most people don’t. Learn how to frame it and tie the Stimulus to a kitchen sink and throw it at them.

  17. Good points, Curtis, but it’s William Jennings Bryan. Byron was an English poet.

    And Paul in Boston, I’d go even farther than you do. I contend that government doesn’t produce wealth at all. It moves around the wealth that private sector has created, but its net addition to that wealth is zero. Even when it is paying for a “shovel-ready” project, government did not produce the funds itself. It extracted the money in the form of taxes from businesses and private individuals. So to me, it’s a complete non-sequitur when some politician says we have to “pay for a tax cut”. Huh? That only means some other sucker is going to be hit with a higher tax bill. Or the government must forgo whatever it wanted to buy with the tax revenue that was cut, and the private sector doesn’t fork over that amount of wealth to the government.

  18. Waltj,

    I agree completely. When a liberal friend extols government I always like to point out that nothing they own was made by any government. Even the roads and other infrastructure, so beloved by Lizzie Warren, were made by private companies.

  19. waltj: “I contend that government doesn’t produce wealth at all.” True, that. Government’s role is to set the conditions that allow individuals and companies to produce wealth. Private property laws enforced by courts provide confidence to entrepeneurs so they are willing to take risks. The infrastructure of roads that has been built with government funds, is useful, but those funds came from the taxpayers not some magic wealth creating activity of the government.

    Some government regulations are necessary for protection of consumers and general health. But we have reached the point of absurdity when the cost of having ever cleaner air and water exceeds the economy’s ability to pay for it. There are many other deleterious regulations regarding the environment that have a negative affect on the primary wealth producing industries of agriculture, mining, logging, oil/gas production, and fishing. A few examples: One third of the San Joaquin Valley lies fallow because of a small snail darter in the Sacramento River. Farmers in Washington State can only farm 80% of their land because of the phony designation of every swale and low point as “wetlands.” Oil and gas drilling has been shut down on Federal lands since Obama took office. Logging is a shadow of its former self in the timber states. Coal mining in Virginia and Pennsylvania is being strangled. The wealth producing basic industries are operating below their potential and the economy is suffering because of it.

    The Federal government sets 8% per year as the their normal increase in spending. The dems consider spending anything less than that a “cut.” Just holding spending at the previous year’s level is attacked as “ruinous cuts.” And any tax exemption or tax cut is considered as “giving up” money due them. Our money belongs to them unless they generously provide “tax expenditures.” The way they have twisted the language to fool those who won’t inform themselves is a travesty.

    Economic activity is seldom “trickle down.” The more capital that is amassed to invest in wealth creating activity the better. But the real magic happens as the creation of a job or an industry creates new economic activity. A study done some years ago showed that for every retiree moving into a retirement area with a pension large enough to not require government assistance, five new jobs were created in the local economy. It follows then that every new, decent paying job results in the creation of five other new jobs. That is “trickle out” economics. It is why job growth is key. Jobs, jobs, jobs!

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