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ECONOMY: The Failure of Trickle Down Theory

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posted on Aug, 11 2004 @ 07:59 AM
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This is an ECONOMY post but it borders on ETHICS, since we are all experiencing a bold faced lie from the president. We’ve heard repeatedly how strong the economy is, resplendent with the Hooverism of just “Turning the Corner”, but all leading indicators, payroll rosters inclusive, indicate the truth: we’re in a death spiral due solely to inept & ideologically driven management by the executive branch that’s enabled by the partisan majority in Congress.
We’ve had, in this term, a stellar example of the fallacy of Trickle Down Economics being a viable macroeconomic tool in America. Even if it’s marketed by benign titles like the “Jobs and Growth Tax Relief Reconciliation Act of 2003”.

 


Dr Paul Krugman adds: “What we've just seen is as clear a test of trickledown economics as we're ever likely to get. Twice, in 2001 and in 2003, the administration insisted that a tax cut heavily tilted toward the affluent was just what the economy needed. Officials brushed aside pleas to give relief instead to lower- and middle-income families, who would be more likely to spend the money, and to cash-strapped state and local governments. Given the actual results - huge deficits, but minimal job growth - don't you wish the administration had listened to that advice?”
We’ve all heard robust claims of about 1.5 million new jobs over the past 11 months. But according to the Bureau of Labor Statistics, the American economy needs 150,000 new jobs a month, or 1,800,000 annually, just to break even when accounting for new entries into the workforce.
“But what about 9/11?” Bear in mind that in the 2002 Economic Report of the President, the administration's own economists predicted full recovery by 2004, with payroll employment rising to 138 million, 7 million more than the actual number.

FACTS, FICTION & SOLUTIONS:

FICTION: The president's Council of Economic Advisers projected that the administration's latest tax cut package would result in the creation of...306,000 new jobs each month starting in July 2003.

FACT: Since the tax cuts took effect, there are 2,565,000 fewer jobs than the administration projected would be created by enactment of its tax cuts.

FICTION: Apparently, Bush is unfazed by the data. At an event on Thursday, he said, "one of the reasons why our economy is strong and getting stronger is because of tax relief."

FACT: Overall, the economy has lost 1.2 million jobs since March 2001. It is the "greatest sustained job loss since the Great Depression." Had job growth simply met the average of previous recoveries "today's labor market would have 6.2 million more jobs."

FICTION: “Jobs are jobs; does it matter where they’re created?”

FACTS: Yes, it does. According to economic analysts, "the evidence increasingly suggests that the current recovery has indeed been tilted toward lower-paying jobs." According to the economic research firm Economy.com, "industries ranked in the bottom fifth for wages and salaries have added 477,000 jobs since January, while industries in the top fifth for wages had no increase at all."
Is Walmart this administration’s model of “success?” According to a recent University of California, Berkeley study, Wal-Mart actually takes a lot more from communities than it gives back in low prices. "Because of the low wages and because people do not have health insurance through their employer, people rely on public support to make ends meet," says the school's Ken Jacobs. In California, taxpayers pay an estimated $82-million a year to take care of health care, food stamps, and other social services for Wal-Mart employees.

SOLUTIONS: The Kerry-Edwards plan will unlock billions of profits that are stuck abroad, encouraging American companies to bring their profits back to America and re-invest them to jump-start the economy. This will work to increase investment because it is part of a comprehensive plan to transition to a new system that eliminates deferral and the associated incentives to keep profits overseas. At the end of 2002 American companies were keeping $639 billion in profits abroad, avoiding having to pay taxes on this money. This is up sharply from $403 billion in profits in 1999. [CRS, “Tax Exemption for Repatriated Foreign Earnings,” 10/22/2003]
For a one-year period only, John Kerry will provide companies with a special low rate of 10 percent on any profits they reinvest in the United States for companies with a domestic reinvestment plan. By ending future incentives to keep profits abroad and combining this with an appropriate transition that provides a one-time tax holiday this would increase investment and stimulate the American economy, helping to re-start job growth.

NEW JOBS TAX CREDIT: The Kerry-Edwards New Jobs Tax Credit will cover an employer's share of payroll taxes for net new jobs created in manufacturing, other businesses affected by outsourcing, and small businesses. The credit will be available in 2005 and 2006.


Edit: Fixed title format only.

[edit on 12-8-2004 by ZeddicusZulZorander]




posted on Aug, 11 2004 @ 04:29 PM
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Bout Time, you are partially correct about Trickle Down Theory, but when it comes to Economics things are usually allot more complex.
Complicated problems cannot be fixed by simple short term plans, you gotta have a long term 10+ year plan in order to have a vibrant
economy. And the only sure way to create new jobs is to invest in what drives the Markets and the Economy, and in this period in time
that would be Nano-Technology. Innovation and investment in the sciences and education is what creates jobs not Tax Cuts or Tax Credits,
although the Kerry-Edwards plan is far better than Bush's Tax Cuts and Spending policy.

Also remember that in five years the first group of Boomers is going to start retiring and allot of Economist's I have spoken too, say that
there is an impending Labor Shortage that will just get worse and worse until the trend bottoms out. I already see this happening in Canada,
the most Acute shortage of labor so far in Canada is Qualified Commercial Pilots. Trades will feel this shortage the most, but I feel it might
start to trick-down(or up?) to some of the more senior positions in the White Collar world as well



posted on Aug, 12 2004 @ 10:14 AM
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"Uncle Bob really should get into a 12 step program to battle his problem with booze; it's the best thing for him" ( said while you're in the passanger seat of his car......on a mountain road.......doing 30 miles over the speed limit....and he's drunk off his arse & driving)

The right thing to do is to wrestle control of the car first, no?

That's the situation here: long term plans made without consideration of immediate factors that must be addressed derail the potency of the long term plan. Short & Long term always have to be addressed; it is exactly the complexity of Macroeconomics that requires calibration of the Long term plan in considerantion of severe Short term events.
There are just too many unaccounted for variables that would derail any sort of Long term strategy.....because they are NOT being addressed.



posted on Aug, 12 2004 @ 01:05 PM
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Originally posted by Bout TimeThat's the situation here: long term plans made without consideration of immediate factors that must be addressed derail the potency of the long term plan. Short & Long term always have to be addressed; it is exactly the complexity of Macroeconomics that requires calibration of the Long term plan in considerantion of severe Short term events. There are just too many unaccounted for variables that would derail any sort of Long term strategy.....because they are NOT being addressed.


I disagree, macro economics can show strong growth while Microeconomics show a downward trend. The purpose of investing despite it continuing to do anything for the short term economy is a valid one. It might be possible to suffer short term and still come out ahead once those investments come to fruition. The economy as a whole has been tracked for a long time now as having peaks and valleys. Strong investment builds a basis for long term growth. The only indication that short term problems could derail this kind of longterm investment would be if the economy was sustainable anyway. Look at how the American economy has bounced back from a disaster that would have destroyed it a few decades ago.

- Was



posted on Aug, 15 2004 @ 09:07 PM
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And I thought that we were done debunking trickle-down/supply-side falicy back in '86 with the publication of the book, The Triumph of Politics: Why The Reagan Revolution Failed, by David Stockman, budget director for the Reagan administration. mirrors.korpios.org...
Still they continued with this self admitted "flim-flam" until sense and fiscal responsibility finally returned to the White House in '92. George Bush the elder even called supply-side, "voodoo economics," while running against Reagan in '80.

Since we can say that from a macro view, the theory was given an adequate practical test period, found lacking, and abandoned; how did we get this failed policy foisted upon us yet again?

How, in fact, do we get the plethera of regressive policies forced down our collective throats when the administration in power can hardly claim a mandate for it's policies??? Last I checked, this Nation was divided almost exactly in two by party affilliation.

One might think that with an evenly divided electorate, we should expect more Centrist policy to prevail. This has not happened. What has become of bi-partisan cooperation, negotiation, and compromise? Instead we get unilateralism.

I wish that I could say that John Kerry is the "Leader" who can appeal to both sides. Frankly, I haven't been inspired by any nominee since Clinton. I truely fear that my vote this November will be one against George Bush rather than one for John Kerry.

This is hardly free licence to accept the fringe thinking of a Ralph Nader or Michael Badnarik. Though I can agree with some of their points, each is too extreme and even more alienating than their counterparts in the mainstream parties.



posted on Aug, 16 2004 @ 12:28 AM
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You can go to different sources to see how many jobs are being created or lost, and depending on how they use the data, they can show whatever they want. That is all beside the point of the morality of the tax cut.

There is no other agency more wasteful than the federal government, and you know this. You also know, by a mere cursory scan of the constitution, what the federal government is supposed to use the tax money for and anybody with the ability to read and comprehend can figure out We, The People, are being ripped off with the tax and redistribute system.

Regardless of what data you use, it takes not much thought to realize the less taxes, the more cash a corporation has to invest in itself, and the less the individual is taxed, the more the individual can both save and spend.
Regardless, sending more tax dollars to an inefficient and wateful federal government is just plain stupid.

The tax cuts are the right thing to do, and in the long run, beneficial to the country. Eventually, after, the economy and industry absorb the repercussion of these cuts, more tax cuts are the only moral thing to do. It is time the government cuts programs that are not constitutional and take from the producers so that non-producers and government bunglars can splurge, and allows the producers, both corporations and workers, to enjoy the fruits of their labors.

If you have the overwhelming feeling that the wasteful federal government needs more money, feel free to cut them a check from your own account, leave mine out of it!



posted on Aug, 16 2004 @ 08:44 AM
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............and government bunglars can splurge


Every economic theory has it's rules, variables and perceptions for it to be made unique as a theory. "Splurge" or runaway, massive deficit spending is not a tenent of any Conservative economic model or even the radical Trickle Down version.
So can the "goverment bunglars" be both things at the same time and still try to fly the Regean Trickle Down banner?
The intel on the ground that escapes consideration by those so strongly enamoured with the surface glitz of TD is this: it's not working, does not have a chance for the long term desired gain and does zero for immediate market stimulation ( since no other idea has been offered as solution, we're forced to realize that this is all that's being offered).....because of drunken sailor spending habits by this government.
If everyone did not know, "Star Wars" is going to be kicked off in October at a cost of billions of dollars. Even though it doesn't work & has failed even it's meager stage managed tests.
But then again, I'm sure our enemy will gain world power military legitimacy & be able to fire ICBM's at us from the Middle East, right? They've just been holding back & playing possum!



posted on Aug, 29 2004 @ 05:04 AM
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SOLUTIONS: The Kerry-Edwards plan will unlock billions of profits that are stuck abroad, encouraging American companies to bring their profits back to America and re-invest them to jump-start the economy. This will work to increase investment because it is part of a comprehensive plan to transition to a new system that eliminates deferral and the associated incentives to keep profits overseas. At the end of 2002 American companies were keeping $639 billion in profits abroad, avoiding having to pay taxes on this money. This is up sharply from $403 billion in profits in 1999. [CRS, “Tax Exemption for Repatriated Foreign Earnings,” 10/22/2003]
For a one-year period only, John Kerry will provide companies with a special low rate of 10 percent on any profits they reinvest in the United States for companies with a domestic reinvestment plan. By ending future incentives to keep profits abroad and combining this with an appropriate transition that provides a one-time tax holiday this would increase investment and stimulate the American economy, helping to re-start job growth.


Could somebody please explain how this will work to me? The way I understood taxes for companies are payroll, profits, etc… I didn’t know that companies had a cash flow tax. I didn’t know that businesses counted on making a return from investments with in a year. I had always understood that the average business venture is a losing proposition for the first two years. So by the time the average business venture is set to make a profit (i.e. taxable) the one year tax holiday would have been over with for a year. But, silly me what kind of plan did I expect from a life long government employee. Sounds more like a way for Kerry to say tax cut a bunch during a long speech, but not really mean it.



posted on Sep, 21 2004 @ 01:55 PM
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I have to agree with Bout Time and scottsquared that trickle down is a miserable failure and needs to be shelved forever.

For more on the offshore money problem see Corporate Loopholes and Offshore Havens where it has been claimed that the Republicans are addressing the issue as a top priority.



posted on Sep, 23 2004 @ 08:47 PM
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Originally posted by sardion2000
Bout Time, you are partially correct about Trickle Down Theory, but when it comes to Economics things are usually allot more complex.
Complicated problems cannot be fixed by simple short term plans, you gotta have a long term 10+ year plan in order to have a vibrant
economy.

And there's the rub. Bush has none, beyond "make myself popular by giving tax cuts!" Any government programs that this takes money out of... well... they can just "borrow" money. (sorry... it's a sore point with me)


And the only sure way to create new jobs is to invest in what drives the Markets and the Economy, and in this period in time
that would be Nano-Technology.

Beg to differ here, but there's not much going on in nanotech. New announcements of nanotech breakthroughs/modifications don't cause even a squibble on the market.

Oil and energy... that's one of the big factors driving the market right now (I invest in stocks, and biotech ain't doing much. I've had my money in oil and energy stocks and they've outperformed other sectors.)



Innovation and investment in the sciences and education is what creates jobs not Tax Cuts or Tax Credits,

No kidding! Heartily agree with you, here!! :thumb



Also remember that in five years the first group of Boomers is going to start retiring and allot of Economist's I have spoken too, say that
there is an impending Labor Shortage that will just get worse and worse until the trend bottoms out. I already see this happening in Canada,
the most Acute shortage of labor so far in Canada is Qualified Commercial Pilots. Trades will feel this shortage the most, but I feel it might
start to trick-down(or up?) to some of the more senior positions in the White Collar world as well

Here in the US, the "early retirement" isn't happening and as the economy worsens and news about social security worsens, many Boomers aren't terribly eager to retire. I think we'll see more older workers hanging on to jobs, supporting themselves, kids, grandkids, and their parents.



posted on Sep, 29 2004 @ 06:40 AM
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When one considers the fact that 2/3 of the US economy is consumer spending, one can see the failure of trickle down economics here.

Rich people do not spend their money, they hoard it, invest in this or that, but the benefits of such monetary movement really dont hit home to the rest of us. Middle class and poor people, however, are consumers. Many of us know this, the fact we often are left with little money to save after our paychecks, and the amount we spend on many items, our cashflow does bubble upwards.

Case in point. I once worked at the bowling alley. When people were employed and had money to burn, we were busy. We sold alot of beer. Buy selling all that beer, we needed to buy more. Thus, the beer makers were required to produce more beer for our needs.

The prosperity of the bowling alley had little to do with how well our cheapskate owner was able to hold onto his money. It depended on the steady influx of customers.

As long as consumers have money to burn in their pockets, the economy will grow and do well. When it is left to the benevolence of the rich, they will simply stash their money where its energy cannot be accessed by the rest of the economy.



posted on Oct, 3 2004 @ 08:46 PM
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Well, let's think about it for a moment, huh? The assumption given is that cutting taxes hurts the economy and that raising taxes actually helps the economy. By taking more money from those who have earned it, we help them, and by giving MY MONEY BACK TO ME, THE GOVERNMENT IS WRONG!

Ok, you know what my problem is? I never smoked dope as a kid. Because of this, I'm just not able to get in phase with such reasoning.



posted on Oct, 3 2004 @ 08:52 PM
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Originally posted by Thomas Crowne

Ok, you know what my problem is? I never smoked dope as a kid. Because of this, I'm just not able to get in phase with such reasoning.


That cant be it TC because I dont understand it either



posted on Oct, 3 2004 @ 10:23 PM
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Originally posted by Thomas Crowne
Well, let's think about it for a moment, huh? The assumption given is that cutting taxes hurts the economy and that raising taxes actually helps the economy. By taking more money from those who have earned it, we help them, and by giving MY MONEY BACK TO ME, THE GOVERNMENT IS WRONG!

Ok, you know what my problem is? I never smoked dope as a kid. Because of this, I'm just not able to get in phase with such reasoning.



Well that is what the Liberals want us to believe, give to those that dont have by taking from those that have. Clinton reaped the benifit of trickle down economics.....of this there is no argument, maybe if he did not raise taxes and increase social funding so much the debt would have been erased. The fact is that the economy was on the way down BEFORE GW Bush was even elected. The bubble had to burst, they always do. Give GW Credit for a 'mild' recession..........when you gripe about how bad the us economy has been the last 2 years, look at the big picture and look at Europe's socialist economies and then gripe...



posted on Oct, 5 2004 @ 04:13 PM
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NO TC, it doesnt make sense the way you describe it.

However, taxing and penalizing companies for say, outsourcing, might be a good start to help Americans have more money in their pockets. More money to burn, because they have jobs.

Bush's tax cuts mean nothing to me, because for half of his years in office, I have been unemployed. Obviously, his tax cuts have not put any extra money in my pocket. They havent done squat for me. The wages I made were so low (a few years back, for the same starting position, I would have made a buck more an hour). So, cutting taxes aint putting any money in my pocket, especially when I do not have an income to be taxed.



posted on Oct, 17 2004 @ 04:20 PM
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Bush insists that his tax cuts benefited the middle class.

I would like some organization to prove it by getting a sample, lets say about 100, working middle class families and have an accounting firm examine their finances to see the changes in how much disposable income they actually had.

From personal experience I will say that most people have less disposable income.

Not only have prices for discretionary expenses have gone up but items that we absolutely need such as health insurance, drugs, car and home insurance have increased more that income. And because of the tax cuts local property taxes have increased to cover the reduction in federal assistance to local governments for education, police etc. My property taxes increases alone wiped out the federal tax benefits.

So let’s get an impartial organization to give us the real facts.



posted on Oct, 21 2004 @ 03:42 PM
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Originally posted by sgtjdc
Bush insists that his tax cuts benefited the middle class.

I would like some organization to prove it by getting a sample, lets say about 100, working middle class families and have an accounting firm examine their finances to see the changes in how much disposable income they actually had.

From personal experience I will say that most people have less disposable income.

Not only have prices for discretionary expenses have gone up but items that we absolutely need such as health insurance, drugs, car and home insurance have increased more that income. And because of the tax cuts local property taxes have increased to cover the reduction in federal assistance to local governments for education, police etc. My property taxes increases alone wiped out the federal tax benefits.

So let’s get an impartial organization to give us the real facts.


Greenspan supported the tax cuts and supports renewing them (if they are accompanied by spending cuts)...can't get any more of an impartial, expert opinion than from this man



posted on Oct, 27 2004 @ 12:52 AM
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Originally posted by sgtjdc
Bush insists that his tax cuts benefited the middle class.



Middle-class tax cuts my foot!

The so-called tax cut was a little bait and switch deal. The lower some percentages, mainly above $200,000 then cut funding to states, increased demands on municpal spending for terror. This is causing the local governments to have to raise taxes on homes and businesses. This is the middle tax burden that Kerry is talking about. The millionare who lives in a $2 mil home makes $5mill a year can easily afford the house and the tax. The average person making 50k-60K a year has a 100k to 250K home is morgaged to the hilt. See the income verses home cost and taxes. This trickle down thing was just another one of their sound-bites.
Don't let them sell the Flat Tax thingy either, it's no possible the way they want to implement it.
Here's the other one. National Sales Tax Game.
The average family is living pay check to paycheck which means they are taxed on 75% or more of their income since most money goes to food and household goods. The only thing that may be exempt is medical coverage and morgage payments, but remember most of us pay homestead taxes.
The smaller percentage of wealthy live on 10 to 20% of their income and stash away the rest because they can afford it which means they are taxed only on the 10 to 20%.




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