Republican economic theory, and its flaws

I'm just going to dive into this one, it came up as a question: Why do lower class citizens bother supporting the Republican party, especially with its economic stances, and we decided that during the era of Reagan, many Republicans began to cling (hoplessly) to the idea that Trickle-down economics actually works. I've done a bit of investigating, and I think that if the average American saw what these numbers mean, they'd change their affiliation rather quickly. All in all: Trickle-down is BAD FOR YOU if you are in the middle class, ergo it should be a fallacy for middle-class citizens who site economic reform as a primary concern during election time to vote Republican.

And on to the meat:

FairEconomy.org:

The past 40 years have seen a gradual decrease in the top bracket�s income tax rate, from 91% in 1963 to 35% in 2003. It went as low as 28% in 1988 and 1989 due to legislation passed under Reagan, the trickle-down theory�s most famous adherent. The Clinton years saw the top bracket hold steady at a higher rate of 39.6%, but under the younger Bush�s tax-cut policies, the rich are once again paying less. The drastic change in tax policy that has taken place since the early 1960s gives us a great opportunity to study and evaluate the claims that lower taxes for the rich translate to more wealth for the average American.

Here is what we do know about Trickle-down.

1. Cutting the top tax rate does not lead to economic growth.





2. Cutting the top tax rate does not lead to income growth.



3. Cutting the top tax rate does not lead to wage growth.



4. Cutting the top tax rate does not lead to job creation.





So....uh....it looks like Reagan was wrong......

The cold hard facts:

Overall, data from the past 50 years strongly refutes any arguments that cutting taxes for the richest Americans will improve the economic standing of the lower and middle classes or the nation as a whole. To be sure, the economic indicators examined in this report are dependent on a variety of factors, not just tax policy. However, what this study does show is that any attempt to stimulate economic growth by cutting taxes for the rich will do nothing -- it hasn't worked over the past 50 years, so why would it work in the future? To put it simply and bluntly, Bush's top-bracket tax cut is an ineffective attempt at stimulus that will cause not cause any growth -- unless, of course, if you're talking about the size of the deficit.


So, the next time you're faced with the realization that your financial situation is bad, and that your government is trying to solve this by giving you Trickle-down theory as a solution, remind them that you don't enjoy being given the rough end of the pipe.

Please, in the future, analyze the economic stance of your candidates...its more important than you think.


***PS!

I certainly hope you all understand the correlation of Trickle-down theory to Republican economic theory. If you don't, you can u2u me, and I'll lay it out for you.

Thanks for reading.

I once worked for a gas station, every morning this man would come into the area, collect all the cans and bottles, He was so dirty he was banned from the bathrooms, and he was dressed in rags. One day the manager was there with me when he came through...she told me the guy had over a million dollars.
This is an extreme example, but for the most part, rich people are rich because they don't let go of their money that easily. To think that they are going to let that many pennies trickly though their fingers isn't realistic, they will just use the money, to make more money. Equipment is an assett, it shows up on their financial statements. They are more apt to invest in newer equipment, thus, automating work once done by people, or moving the operation to a more profitable climate. I mean, employees don't show up on financial statement, not in any positive way....it's an expense, needing to be cut, so there can be more money!

Exactly!

That's a great point, dawnstar.

My roommate made that exact connection while we were discussing this.

Sorry, next post.....



[Edited on 11/8/2004 by Seapeople]

You are wrong.

It is truly a shame to see how far off base you really are. Maybe you should go to www.cpusa.org and compare some of your ideas and thoughts to theirs.

This country was founded on concervative ideas. The intent was for a greatly less involved government. That is how it was for a long time.

Now, we live in this country as a result. How many people that live "under the poverty line" in this country can talk on ATS? I bet that you would find more than you think. Just think about that one for a few minutes if its not to laboring on you. Lord knows that you shouldn't have to do anything for yourself.

I have a question for you:

If we stopped taxing the top 10 percent in the earnings bracket all together, what would be the first thing they did with their money? Everyone! Please give me your ideas.

Oh, one other thing. I just read the last post on this thread. It said something to the effect of......

Rich people just don't let the money "trickle" through their fingers.....they use it to make more money and they hold onto it.

So, next question:

How do they use this money to make more money?

I doubt any liberals have the guts to run with me on these.

In the first graph "GDP vs Tax" the opposite of your assertion seems to be shown, you can see the "Reagan" tax cut of 80'-81' and the resultant jump in GDP through 86' when congress changed investment rules causing a real estate slump and recession that lasted until 92'.

Looking at the time period covered, boom - bust cycles are shown well and when taken into account the graph shows that indeed tax cuts do work.

The graph also conveniently fails to show the results of the current round of cuts and their effect on the economy which I suspect would also show a correlation between tax cuts and increased GDP.

Really the same can be said of the other graphs when one factors recessionary periods into the equation.

The source of these graphs has as their stated mission and agenda the following:

Our vision is of a global society where prosperity is better shared, where there is genuine equality of opportunity, where the power of concentrated money and corporations neither dominates the economy nor dictates the content of mass culture. We envision communities and nations that do not have dramatic disparities of income, wages, wealth, health, safety, respect, and opportunities for recreation and personal growth.

In other words - Income redistributionist/socialistic dogma, the mantra of the lowest common denominator as an ideal economic system
About UFE

Actually the vision statement reminds me of Leninist ideals as espoused in the communist manifestos.

[edit on 8-11-2004 by Phoenix]

There are no takers to my questions? Come on guys, someone has to have an answer for me!

Please, refer to my above post and answer the questions.

Originally posted by Seapeople
You are wrong.

It is truly a shame to see how far off base you really are. Maybe you should go to www.cpusa.org and compare some of your ideas and thoughts to theirs.

This country was founded on concervative ideas. The intent was for a greatly less involved government. That is how it was for a long time.

Now, we live in this country as a result. How many people that live "under the poverty line" in this country can talk on ATS? I bet that you would find more than you think. Just think about that one for a few minutes if its not to laboring on you. Lord knows that you shouldn't have to do anything for yourself.

I have a question for you:

If we stopped taxing the top 10 percent in the earnings bracket all together, what would be the first thing they did with their money? Everyone! Please give me your ideas.

Oh, one other thing. I just read the last post on this thread. It said something to the effect of......

Rich people just don't let the money "trickle" through their fingers.....they use it to make more money and they hold onto it.

So, next question:

How do they use this money to make more money?

I doubt any liberals have the guts to run with me on these.

Ready?

Go.

They don't use it to make more money.

They already have the money.

The 'rich' just take the extra bit they get back, and bank it. It doesn't trickle anywhere. The only money that is gained from it is bank interest. After all, if you're showing large profits anyhow, why would you bother spending more money? Trickle won't work, because nothing trickles from the hands of the rich. They've got a basin called the bank.

Also, I don't think you understand the spirit in which this post was made. I came in intending to point out the weakness of Trickle-down economics, and thus the current US fiscal policy.


After that...I kind of lose you as you run off into the woods with no real statement, other than calling liberals gutless.

And to reiterate:

I said nothing of wealth re-distribution,
I merely am pointing out that trickle-down economics don't work, and we shouldn't deprive our nation of that sorely needed capital for no reason.

Phoenix:

I don't see it as communistic any more than a sound fiscal tax-and-spend balanced policy is.

There is no reason to say that something is 'Communist' or 'Bad' simply because it applies a more sound method of reason.

I mean, honestly, if a system has shown dubious results, leaning toward negative results, and is still preferred to a system that has worked (Trickle+Deficit Spending vs High-end hikes+tax-and-spend), then I think that we have some serious rethinking to do as to our fiscal policy.

Another thing I think we need to look at is to find and establish a constant pattern of our budget planning. I mean, every 8 years, or in some cases 4, or even more...it's just too much constant change. A happy medium should be found.

Good discussion, guys. Keep it up.

I see what you're saying, in regards to the first graph, and I think that there can be some middle ground here.

You could interpret this in one of a few ways, in that Trickle-down would work in the very early stages of it's start, but then, after the rates are normalised, you see how growth plummets drastically. Basically, even if you were to approach this graph with the most optimistic of views, you'd still end up having to concede that Trickle-down theory is in no way a long-term solution to a problem.

However, you must notice that the exponential growth that we should be experiencing, according to the trends of this graph (in results to high-end cuts being passed), has been decidedly more cool than you would expect. I'd wonder if the '81 boom was a fluke, as a result of the glimmer of hope in the cold war was beginning to show. Remember in the 1980 olympics, that much more than the gold medal was won by the US hockey team. It was a great symbol of the American will to succeed. All I'm saying is that the '80 games probably had more to do with the economic boom than Reagan tax cuts.

Ok LOKI,

Ready??? GO!

Your words exactly...."The Rich Bank It". Nice.....and thank you for supporting my point. You need to take a few economics classes.

Lets continue..... next Question:

What do the banks do with the money?

I'll be waiting....this is going to be fun!

Originally posted by Seapeople
Ok LOKI,

Ready??? GO!

Your words exactly...."The Rich Bank It". Nice.....and thank you for supporting my point. You need to take a few economics classes.

Lets continue..... next Question:

What do the banks do with the money?

I'll be waiting....this is going to be fun!

OOOOOOOH, you beat me to the point I was just going to make.

What does the Bank do with the money?

Originally posted by LostSailor

Originally posted by Seapeople
Ok LOKI,

Ready??? GO!

Your words exactly...."The Rich Bank It". Nice.....and thank you for supporting my point. You need to take a few economics classes.

Lets continue..... next Question:

What do the banks do with the money?

I'll be waiting....this is going to be fun!

OOOOOOOH, you beat me to the point I was just going to make.

What does the Bank do with the money?

Thats because you know where I am taking our buddy LOKI with this....

Dude, from what you're telling me, and I hate to sound conceited, but you have about as much knowlede as to what REALLY happens with that money as my right pinky finger...nail.

Banks keep it, sit on it, circulate it, invest it for the gains of which they will pay their employees, reap a nice profit, and pay interest to the people who do their banking with them, and then, it's all cyclical. The rich take their interest, and bank it, and then the bank will take the money, invest it, take the profit, and pay out interest, and give themselves a cut.

It's not a new idea, but I'm arguing the basis of the "Trickle-down economic theory", which states that the way to stimulate economic growth, and to create jobs for lower class citizens, is to decrease the tax rate for the upper crust, the desired result of which, will be their passing on of this tax cut, by means of job creation, pay increases, etc.

THE PROBLEM WITH THIS! is that the values of Capitalism teach people to be INTRINSICALLY greedy to get ahead. Ergo, all surplus is kept, rather than passed on.

I still see no way that you can argue this. If you're such a fiscal genius, please, enlighten me, because there's obviously something I'm not seeing in these plain numbers that are seemingly TELLING ME that I'm not mistaken.

Originally posted by Loki
Dude, from what you're telling me, and I hate to sound conceited, but you have about as much knowlede as to what REALLY happens with that money as my right pinky finger...nail.

Banks keep it, sit on it, circulate it, invest it for the gains of which they will pay their employees, reap a nice profit, and pay interest to the people who do their banking with them, and then, it's all cyclical. The rich take their interest, and bank it, and then the bank will take the money, invest it, take the profit, and pay out interest, and give themselves a cut.

It's not a new idea, but I'm arguing the basis of the "Trickle-down economic theory", which states that the way to stimulate economic growth, and to create jobs for lower class citizens, is to decrease the tax rate for the upper crust, the desired result of which, will be their passing on of this tax cut, by means of job creation, pay increases, etc.

THE PROBLEM WITH THIS! is that the values of Capitalism teach people to be INTRINSICALLY greedy to get ahead. Ergo, all surplus is kept, rather than passed on.

I still see no way that you can argue this. If you're such a fiscal genius, please, enlighten me, because there's obviously something I'm not seeing in these plain numbers that are seemingly TELLING ME that I'm not mistaken.

Oh there is so much I have to say about this....

First off, they do not sit on it....You are again off base.

Question #3:

How do they give you interest?

Banks invest the money. All of them do (except for one). They invest it in plenty.

Question #4: What do they, the people who they invest in do with the money?

Now LOKI....Do some research and think before you make a fool out of yourself.

Answer the questions.

[Edited on 11/8/2004 by Seapeople]

Seapeople, firstly, I'd like to ask you to please spell my name correctly. One capital L, with three lower case letters, oki.

Secondly, you're running in circles. I've told you. Banks take your money, and invest it soundly, return you profits in the form of interest, and make enough that your money is sound, and they have enough to turn a profit. I'm going to try to be as thorough now as I can (Here is everything I've learned about banks in those oh-so soreley needed economics classes you think I haven't taken.)

Banks are just like other businesses. Their product just happens to be money. Other businesses sell goods or services; banks sell money, in the form of loans, certificates of deposit (CDs) and other financial products. They make money on the interest they charge on loans because that interest is higher than the interest they pay on depositors' accounts.

However, here is the key point. Rich people still end up with the excess money from targetted tax cuts at the rich.

What kind of question is #3 anyhow? Any 15 year old who has started a savings acct. knows that interest is merely the bank's way of saying thank you for letting them use your money for loans.

as for #4, most people turn around and use the money to buy something from a rich person, IE, a house, a car, a boat, etc. etc. Then, they're stuck paying off the bank for the loan they took out.

Then, the man they bough the car from, does it the same way he always does. He takes all his profit, and tosses it in his cayman off-shore acct.

And voila, the ideal of trickle-down ceases, because the currency has been taken out of the system.

Maybe i'm just a pessimist, but I see far far more ways for this system to fail, than I do for it to succeed.

The more money a bank has directly effects the economy.

If banks are turning huge profits on investments, their interest rates on private loans go down.

More people take out private loans, which in turn, encourages growth at the middle income level.

I dont put it as elequently as Seapeople, but see where I'm trying to go?

I see where you're trying to go with it, but I still say that the lower class loses money on the deal, because loans are usually taken out to buy EXPENSIVE things like Cars, and the like, with all the extra profit not drifting below a certain income level, you see what I mean?

Why can't the lower class take out loans to pay for an education, which in turn might move them out of the lower class bracket?

A two year technical college isn't too expensive and could help the people out at the lower income levels.

I had to take out private loans to assist me through my Marine Engineering schooling.

That's a good point there, but the realism of the situation is that this long-revered theory of economics is a far cry from the panacea that it is lauded as.