Trickle-down economics is a proven failure
by David Atkins
I have a post up at Alternet detailing the ways in which trickle-down economics is a proven failure. Here is an excerpt:
The money doesn’t trickle down. Of all the failures of supply-side economics, this is the most damning. Conservatives often excuse poor wage growth and high unemployment as part of the global competitive marketplace, saying that everyone needs to tighten their belts. But not everyone is struggling–in fact, the rich are better off than ever. They control half of all the wealth, and the top 10% control almost 9/10ths of it. Corporate profits are at or near record highs, disproving the myth that the middle class must suffer due to competitive pressures. The Dow Jones index is threatening to burst past 17,000. Meanwhile, wages have stagnated since the Reagan era, even though productivity continues to increase. Corporate executives, in other words, are forcing workers to toil longer, harder and smarter than ever, but all the proceeds are going into the hands of the very rich while the people actually creating the wealth are struggling harder than ever to get by.
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2. The rich aren’t investing almost half of their resources.
This one is almost comical. In concept, supply-side economics is supposed to work by the corporate rich taking money gleaned by tax breaks and subsidies, and plowing it back into investments that theoretically employ people. Now, we already know that the economic life doesn’t actually work that way: when wealthy individuals and companies invest, they tend to do it in financialized vehicles, mergers, acquisitions and interest-bearing accounts while employing the fewest people possible at awful wages.
But even if it did work as supply-siders theorize, the brutal reality is that the rich aren’t investing almost half of their money (corporations aren’t doing much better, as their record profits sit largely idle avoiding taxation). 40% of the assets of the wealthy are sitting in deposits: the rich person’s equivalent of stuffing money into a mattress. Money sitting in deposits in Swiss and Cayman Islands accounts is essentially wasted wealth. It does as little good for the world economy as gold hoarded by a dragon in Middle Earth. It essentially sits there uselessly as an economic security blanket for the very people who need it least. By contrast, putting more money into the hands of the poor and middle class pays off immediately for the economy, as most people living paycheck to paycheck spend the money immediately or at least create a small backstop against bankruptcy and delinquency–thus creating immediate economic and social benefits. So not only does giving the rich more money not pay off when they do invest, it doesn’t even have the opportunity to pay off at all since almost half of the money isn’t even being invested.
I also go on to note that supply-side economics leads to a more unstable bubble economy with bigger and longer recessions, that it frays society and reduces trust in institutions, and that it increases the deficit as well.
Head on over to read the whole thing.
It might have been excusable back in 1980 to believe that supply-side economics might work. There’s no excuse for it today. It’s a proven failure.
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