Trickle Down Economics - Why is it Vilified? By: Centinel

Trickle Down Economics - Why is it Vilified?

By: Centinel

One of the most exasperating things is talking to a socialist. Socialism (the dark side) is popular nowadays, especially among the millenniums. Of the many things they are wrong about, Trickle down economics is at the top. Maybe it isn’t their fault. They haven’t learned what trickle down was. Their socialist professors saw to it. The “new” definition of trickle down is giving money to rich people and having it “trickle down” to the middle class and poorer folks. Who knows where this definition came from. At some time, everyone starting repeating it and now, it is so. We hear so called “conservatives” declaring trickle down doesn’t work. They say we need free market policies. Trickle down is free market policies! It’s comical to see the occupy / 99% crowd declare that bailing out the banks and big corporations in 2008 / 2009 is the proof trickle down doesn’t work. I hate to break the bad news to these folks, bank bailouts and corporate money injection via government is Keynesian. Keynes was an economist that came up with a pseudo-economic theory to meet his socialist politics. Naturally, the progressives latched on to his theories. He admitted before he died he was wrong. That doesn’t stop the progressives. Obama himself said “trickle down does not work” and declared during the campaign he was a Keynesian. Upon his election in 2008, he advanced Keynes theories of government capital infusion into the economy. Of course, Keynes theories failed, as they always have, and Trickle down gets the blame. Supply side is the opposite of Keynes. Makes sense? No. But the progressive socialists never do. It is all about the agenda. Many economists claim that either you are fooled by Keynesian theories, or you just go along. Few will admit this. His theories on multipliers are a mystery, Keynes couldn’t explain them. Keynes theories are like looking at a M.C. Escher drawing watching water flow upward all the time. Looks like it works, but it can’t.  Multipliers are  voodoo - wait - that term was hijacked too.

OK. All this talk about what trickle down is not, let’s discuss what it is.

Let’s start with JFK. Yep. Liberal god, JFK was a firm believer in Supply side economics, another term for trickle down. LBJ’s presidency and big government plans, supply side had no place. Neither with Nixon, Ford or Carter. Nixon declared a new age of Keynes with his presidency. With Reagan, supply-side made a comeback. As someone who lived through this time, I can attest to how it played a huge part in bringing this country back. When Reagan became president, interest rates on mortgages were in the 18% range. Capital gains was a shade over 40%, and top tax rates were in the 70% range (down from as high as 91% post-WWII). Many of us remember. Things were bad. Reagan re-introduced supply side (trickle down) and things started coming back to life. It took several years, but America reaped the benefits of Trickle down all the way until the late 90’s. The mechanism of entrepreneurship was set free and brought the country back to life. But what was trickle down? A tax reform package that benefited the common man. Socialist policies had choked America to a standstill. Trickle down did not really give money to the rich. It was a way to get the rich to put their money to work for America that benefited all. The wealthy always can afford high priced accountants to find ways to hide their money. If you were rich, would you give it to the government, or hire an accountant to help you keep what you make? Be realistic. You would try to keep what you worked for. All trickle down did was allow all the money to come out of hidden trusts, loopholes, and many other places that did nothing but help the rich. It allowed the rich to invest without penalty, and subsequently the money went to work for the common man because of job creation. Think about it. Under Trickle down, a billionaire invests his money into equipment for a business, it creates jobs and gives a better return. Much better than parking money offshore in real estate or some other protection scheme that benefits no one but the rich person. Again we have a basic lesson in socialism vs free markets. But why do the progressive socialists hate trickle down so bad? Easy. High tax rates move a large part of the wealthy money into the hands of Washington politicians. With that Washington can buy votes, pick winners and losers, put the money in their own pockets, you get the idea. Socialists tax schemes give power to socialist regimes. So it is all about power.

Look at the most recent example. The 2008 - 2009 bailout. Where did the money go? To the corporations. What are they doing with that money? Buying influence in Washington via lobbies so they can get more taxpayer money - Socialism. Obama by his own admission claimed he would use Keynesian theories - he did.
Now let us look at what a supply side / Austrian economics theory would do. Let the market find its own level. GM, Chrysler would have gone bankrupt and would have either recovered or absorbed by another company. Same with the banks and AIG. The market would have found its level and started recovering and the economy would be booming now. Instead, we have the federal reserve injecting money into the markets, trying to prop up the disaster. America is 7 years into it and things are no better. Taxpayer money is gone. We are 18 Trillion in debt and the debt load is killing the economy. Keynesian policies are a disaster, again. This whole theory was tested in Japan. It caused Japan to lose 10 years of growth. They have not learned, Japan is doing the same thing again. The establishment has to have the power that Keynesian policies provide. You might say Keynesian policies are the drug the politicians in Washington can't kick.
The socialists in both parties still claim that trickle down does not work.
It has become an urban legend.

Why was trickle down abandoned? Reagan's term was over. Bush 1 never believed in supply side anyway, promising he would continue Reagan's policies he immediately began dismantling them right after being elected. Maybe that is why he was a one term president. I remember well how angry many people were. Along came Bill Clinton, another Keynesian, and the rest is history.