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ETpro's avatar

Do you believe Trickle Down will ever work in the USA?

Asked by ETpro (34217 points ) August 6th, 2012

We have another election coming up, and one side is firmly in favor of more Trickle Down while the other believes growth comes from the bottom up. So it seems timely to ask which one is right. Here’s what we do know.

After growing from barely existent to 65% of the population in the 30 years from 1950 to 1980, the middle class in the US has now been shrinking for 30 years. Only 44% of the public is now in the middle class. If that keeps on, the middle class will largely disappear.

This video asks if the Trickle Down theoy instituted in 1980 is to blame. As this chart shows, from the end of the Depression and WWII in 1950 through 1980, we saw an unprecedented period of growth that lifted household income for all economic levels from the bottom quintile to the top equally. During that thirty-year period, AKA the post-war boom, America created the world’s first great middle class. Spending by the middle class was the economic engine that let the now-famous “job creators” make fortunes developing new products and innovations that improved old ones. There was a market for what they created.

Then in 1980, we changed course. Ronald Reagan sold the American Public on Voodoo Economics—the trickle-down theory that economic prosperity is driven solely by the “job creators” and thus public policy including tax rates; tax loopholes that only benefit the very wealthy; taxpayer subsidies for industries like big agriculture, big pharma, big oil and big coal; and tax benefits for off-shoring jobs will let the “job creators” finally amass enough wealth that it will trickle down to the rest of the nation. It’s been 30 years now, and the chart shows it hasn’t started to trickle yet. It seems that it may be trickling into off-shore bank accounts and tax shelters instead of trickling to the bottom quintiles of the American public. Is a thirty-year test long enough to say trickle-down is a foolish myth, or should we keep waiting, sure that some day in the not too distant future, the trickle will begin?

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17 Answers

RocketGuy's avatar

The trick is that the money has to trickle DOWN. If it is stashed in off-shore bank accounts, the process can’t work. If the upper class buys foreign-made goods, the trickle does not go to the lower levels in America. They have to help us out by buying American.

GracieT's avatar

People don’t seem to understand that people with large amounts of
money seem to have only one need/focus. Creating more
money is the goal, for themselves, not for us
“underlings.”. Money will never “trickle down.”. It seems to be content right where it is!

ragingloli's avatar

People also do not seem to understand that a company will only expand and add more jobs if there is increased demand for products. And demand requires that sufficient money is in the hands of the prospective customers, regardless of how much money the producers have on hand.

bolwerk's avatar

Hey, don’t knock trickle down. Trickle down has proven a smashing success…for China, India, and other third world countries that have enjoyed the outsourcing of domestic U.S. production.

But, no, it’s not likely to ever benefit the USA.

marinelife's avatar

No, it just doesn’t work.

Jaxk's avatar

Trickle Down has worked during the 20s, 60s 80s and again in 2000s. Basically every time it has been tried. Here is a good article describing it and how it works. It also talks about the dangers of using isolated statistics to skew the picture to your particular ideology. It’s important to define TDE and then to look critically at the results. The author defines the break point at top tax rates of 30% or less. If you have any real interest in looking at TDE, this article is very informative.

jerv's avatar

“Horse and sparrow” economics has been discredited for over a century.

@Jaxk Does the word “bubble” mean anything to you? Look what happened a decade after each of the ones you claim were successful and ask yourself if an unstable economy can be considered truly strong. Or is it your contention that we never actually tried TDE, merely a corrupt parody of it? Or is it one of those things that looks so good on paper that we have to keep trying it until it succeeds, no matter what the cost?

bolwerk's avatar

The most telling part of that article @Jaxk posted is the quasi-Freudian slip at the beginning: From the old story that “if the horse has better hay to eat, the birds will eat better” (it being understood that birds eat manure). Apparently the working class should be living off the feces of the rich.

But there isn’t an ounce of evidence in that spiel that trickle down actually causes wealth to accumulate at the bottom, and what data (e.g., poverty, real wage growth) I can see is not generous to TDE.

Paradox25's avatar

No, because many of the people who run corporations have only two goals, to profit themselves and to profit their investors, regardless of the means used to accomplish this. Like others have said above, when the middle class makes more money than they purchase more products, and this is what creates jobs because the demand for that product goes up.

I do believe that some regulations may hinder what is best for creating jobs, and at times even helping the enviroment. One extreme is not the answer here though and I’ve never seen an example of TDE working, at least for the middle class. Remember, locks are used not to keep criminals out, but to keep honest people honest. We will always need some form of regulations, but TDE proponents want the locks removed.

jerv's avatar

@bolwerk That wasn’t a Freudian slip any more than taking what used to be called “Shell shock” in WWI and gradually changing it through “Battle fatigue”, and “Operational exhaustion”, on it’s way to “Post Traumatic Stress Disorder”. I think the term “euphemism” is more appropriate

Ron_C's avatar

You would think that after thirty years of “trickling up” the politicians would learn, Instead the republican party is doubling down while accusing Obama of being a socialist.

If Obama was around at the time of Eisenhower, he would be considered too right wing for the republican party. My how things have changed!

bolwerk's avatar

@jerv: maybe, but I find even a conservative obliquely comparing an entire social class to turds a bit surprising.

jerv's avatar

@bolwerk I doubt many Conservatives even recognize that term despite how long it has been around.

Adagio's avatar

I have heard the Trickle Down Theory described as nothing more than “the rich pissing on the poor”, I have to agree, it certainly hasn’t worked here.

Ron_C's avatar

Obama just gave a speech it called it fairy dust trickling down. I thought that was pretty good. The good old G.O.P. are selling fairy dust again.

ETpro's avatar

@Ron_C Yep. Unfortunately, none of the people who are corporations seem willing to accept their fairy dust as payment for goods or services.

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