Trickle Down Economics

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There's a name for Trickle Down Economics... it's called economics.

No rational economist will argue against the idea that if you cut someone's taxes, that they have more money. And that resulting increase in earnings will either be actively invested, saved (passively invested), or spent. And if they do any of those, that money is passed through into the economy: in other words, it trickles out (and down). Period. End.

Now there can be intelligent debates on what helps the economy more: cutting or spending, cutting at the top or the bottom. But liars (polemics, fools and the media), will perverts that debate on what helps more, into some fraud that cutting taxes at the top "doesn't work at all".

Details

I ask people deriding Trickle-Down, How can letting people have more of their own money NOT result in more spending/investment/growth?

Most often, they will hand wave, distract, use some fallacy to try to change the topic or reframe the argument. When they do that, you know that their goal is NOT understanding, or admitting the truth. And if they can't admit uncomfortable truths, then they're not up for a big-boy conversation on anything to do with that policy or economics.

Now that's not to say that there's no economists that disagree with "trickle down" theory. The deeper economic argument is basically what does better:

  • a) tax increases for everyone (increase government spending)
  • b) Across the board tax cuts that apply to everyone
  • c) tax cuts for only the poor and middle / or tax increases for the rich
  • d) tax cuts for only the rich / and tax increases for the poor and middle

If you're a progressive (see fascism, Marxist, or Keynesianism), they're looking for centralizing power under the ruling class, and using "Social Justice" as the excuse. So of course they'll tell you that (a) is the best answer. They'll use "Trickle Down" as a slur -- and they'll pretend that anything but (a) is "Trickle Down"... it isn't.

What the right calls "Trickle Down", really isn't. It is basically (b): where everyone gets a tax cut. Since the top pays more in taxes, and the bottom don't pay net taxes, even if they get the same percentage, it looks like top got more (in absolute dollars), even if in relative percent they got less than everyone else. There's two groups that don't understand this: liars and fools.

What the dishonest left does is try to convince the gullible (their base) that any across the board cut (b), is actually hurting the poor and helping the rich (d). That's what the Democrats did when Reagan, Bush, and Trump all cut taxes across the board, and in percentages, mostly bottom weighted -- which is how tax cuts made our tax code MORE progressive after they were passed, than before.

Are lower taxes better?

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Q: What is better for the economy, increasing or decreasing taxes?

Using an extreme example, if you have a choice of 0% or 100% taxes, we know both are bad, but with 0% you're free, and with 100% you're a slave. So both suck, but in general, freedom is better than slavery -- so we should strive towards the former and lower taxes is better.

In between those (say a 50% tax), if you lower someone's taxes, they will have more to spend, so they will spend and invest more -- which goes to someone else, who then does the same. If you raise someone's taxes, they have less to spend, so they will spend and invest less -- which means others don't get that spent/invested money, and thus they do the same. In other words, tax cuts and tax increase are magnified through the economy, with tax cuts being far better.

The only way that a tax increase can help the economy, is if the government was better at spending money than all individuals -- and could make things for less than private businesses. But we know that almost never happens. And all around the world, when you compare like economies, if two economies are loosely equal in resources and infrastructure, the one with the lower taxes will generally outperform the one with higher ones. So lower taxes is better.

Lastly, is who spends money better, rich or middle? Rich tend to have more of their money in investments. What are investments? They're loans to other people to grow their businesses, and create jobs and opportunities. Whereas middle income people buy staples (food and services, immediately). So tax cuts on the middle help the economy a little (in the short term)... and tax cuts on the top, help the economy more long term. The poor don't count in the economy, because they don't pay a much taxes, and they don't make enough to matter.

What about Keynes

One frequently sees far-left criticism of "trickle-down" economics, is based on the idea that the "down" part never happens.

This argument is stupid: this virtually never happens, because even just putting your money in a bank, means the bank invests it for you, and gives you an interest rate on it. The best way to really slow or stop the velocity of capital is to raise taxes and give it to the government. Or to scare the public into buying something like Gold or putting cash in the mattress.

But ignoring the stupidity of the premise, let's turn this around. If Trickle Down doesn't work, then why should Keynesianism work? Keynesianism is trickle down economics.

The difference between Keynesian trickle down, and the right's trickle-down, is whether the government is doing the spending, or the individuals. But if you say that robbing from the poor, and giving to the rich is wrong -- then Keynes ideas of taxing (robbing) from the poor and middle, and giving it to the rich/politicians, and having them spend it, to stimulate the economy, should be at least as wrong. Right?

Keynesian stimulus is just trickle-down, with the government bureaucrats getting the money, instead of investors, entrepenuers and individuals getting the money.

Conclusion

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The reason the ignorant left has a visceral reaction to "trickle down", is because they know they're wrong. If they could argue the economics intelligently, they would. Instead they use their derogatory term for Kennedy and other prior Democrats (as well as Reagan, Bush, and Trump's) ideas that cutting taxes stimulates the economy. Thus anyone that gets frothy about "Trickle Down" just gets a smile and a pat on the head, while I think to myself, "Bless your heart".

Anyone starting with "Trickle down doesn't work" either doesn't have a deep enough understanding to be worthy of discussion, or worse, they do understand that they are lying, but are oversimplifying things to mislead the gullible, or inflame the informed -- they're Robert Reich like trolls, that also aren't worth discussing things with.

References