Again With the Trickle Down!?!
If your only tool is a hammer, everything looks like a nail. That's what came to mind this AM when I read that John McCain's plan to address the ailing economy includes a big cut in the capital gains tax rate, from 15% to 7.5% for the next two years.
How wrongheaded is this? Let me count the ways.
First, the McCain folks may have missed this, but asset values have been falling, big time. Remember, John?... That whole financial mess that folks have been talking about? When capital assets, like stocks or bonds, lose value, that's a capital loss, and it's already deductible from your taxes.
OK, but there's probably a few folks out there who've realized some capital gains, or will do so at some point in the next couple of years. What's the point of giving them a tax break? What itch does that scratch?
The vast majority of realized capital gains--that's the money you make, for example, when you sell a stock for more than you paid for it--go the richest families, so they're the ones who benefit from this. The good number crunchers at the Tax Policy Center examined who would benefit from the McCain proposal. The middle fifth of families end up with all of 0.2% of the benefits. That's not a typo. The tax break would lower their annual tax bill by $4.00. OK, that is a gallon of gas, but it's not what you'd call a game-changer.
The top 20% end up with 98.3% of the benefits of the cut, and the top 1%, with income above $600,000 get 75% of the gains, for an average benefit of $37,600. The average tax savings for the top 0.1%--income above $3 mil--is $244,000. In other words, this isn't a recipe for helping families hurt by the financial crisis and the recession. It's a recipe for more income inequality.
So why do it...why cut the rate? You guessed it: good old trickle down. It's yet another example of that supply-side fairy dust that worked so well for Bush that McCain and Co. want to see the Bushies and raise them.
If cutting taxes for the wealthiest households boosted job creation, we'd know it. The Bush cuts, originally opposed by John McCain by the way, were sold on this premise. Yet before we began to shed jobs this year, employment growth in the Bush years was the worst on record.
If you want to provide income and job opportunities to people who are hurting, your best bet is to do so directly, through tax cuts targeted at them, and through infrastructure investment designed to create new, quality jobs. That's what Obama aims for in his recently announced package.
Finally, and this is important, does anyone really believe that this allegedly temporary cut will really sunset in two years? Like Dr. Phil says, "this ain't my first rodeo!" That's the tripwire in the Bush cuts. They end in 2011, but anyone who wants to let them do so is accused of supporting the "largest tax increase in history."
If we're foolish enough to sign onto this cut in the capital gains tax rate based on our understanding that the rate will reset in two years...well, as Bush himself put it, "fool me once, shame on...shame on you. Fool me...you can't get fooled again." In fact, here's a quote from a straight-talking Republican Senator back in 2003 when he opposed Bush's capital gain and dividend tax cuts based on these illusory sunsets: "...the problem with that is it's gimmickry. It makes a mockery out of the whole budgetary process..." Listen to yourself, Senator McCain.
So we are yet again left with John McCain getting it wrong on economic policy. There is absolutely a need to help struggling families right now, but if this is the best he can come up with, we'd all be much better off if he put the hammer back in the tool shed and left the policy construction to others.
Loading comments…
Want to reply to a comment? Hint: Click "Reply" at the bottom of the comment; after being approved your comment will appear directly underneath the comment you replied to
i think the idea on trickle down is that all the money goes into a reservoir up at the top of the hill, and when it gets full the excess will flow down the hill to the poor.
The only problem is that the reservoir has a stretchy rubber bottom and never quite gets filled, and all that trickles down is what drips off the bodies of the rich people after they have been swimming in the all that cash.
Clearly, "trickle down" economics has proven itself to be an abysmal failure as evidenced by both Bush administrations (#41 & #43).
The only bright spot over these past twenty years has been Bill Clinton's eight years of uninterrupted economic growth fueled largely by an intelligent bottom-up approach. Then George W. Bush happened and the rest is history. More "trickle down" theory applied than ever before, leading to our current severe economic contraction, chaos, and despair.
The problem, of course, is that nothing seems to "trickle down", depriving the economy of its needed and necessary refreshment. It seems to get hoarded "up there somewhere" -- bottled-up and stored away in the pantries and storehouses of the ultra-wealthy. And when you have selfish people that hoard, you get, metaphorically, a dry, withered crop and the resultant economic famine.
I am confident that a return to a vigorous "bottom-up" approach, as promoted by Barrack Obama, will yield positive results -- fruit on the vine so to speak. But it will take time, patience, and sacrifice.
Why must Democrats always clean up after Republican messes? It's becoming far too commonplace.
The economic growth of the 90s had nothing to do with a "bottom-up approach" by Clinton. It had more to do with entrepeneurs creating and expanding new businesses related to new technology, low inflation and low interest rates, an increase in foreign trade, and a major increase in people's wealth because of high stock prices. Clinton increased taxes but they were still lower than under the first six years of Reagan's presidency for all tax brackets. The best part of the Clinton administration - and I really liked Clinton- was that he didn't create or expand any government programs in any more than a token way; he left things be.
But he did "targeted" tax cuts that were designed to put more money into the hands of those who were more likely to spend it, thereby giving the economy an important stimulus -- which in turn helped promote business growth, etc., etc. This is what I meant by a "bottom up" approach. It certainly wasn't "trickle down", that's for sure. So, there are a variety of ways of looking at the experience.
And yet those entrepreneurs that you speak of wouldn't have been able to do that without the reasoned bottom up approach to the economy that Bill Clinton created. The fact of the matter is that with targeted tax cuts, coupled with well thought out spending the govt can do MANY things to help the economy. Trickle down theory is bunk, since the economy under Clinton only started to do well once he introduced his own tax policy, which included tax INCREASES on the rich!
Clinton did extend Medicare programs to children upon the states accepting. He did jawbone foreign manufacturers such as the Koreans. He was too much a Republican for my taste, but he wasn't a Republican and he was a concerned public servant. He did actually shrink the government even while doubling the budget to oppose terrorists. Clinton showed that Republican policies can be made to work. People can be strengthened in the pursuit of their personal destinies rather than coddled in the nanny state. The federal budget can be balanced and wars can be fought with real allies and without American casualties. Republicans say, none of this has to do with the President but just happens. Of course, some of them also blame the mortgage meltdown on President Carter.
I'm yawning with surprise that McCain wants to continue using the same policies for people who need it the least. Great column.
Savage says the Obama's plan is trickle up poverty.
And why should ANYONE give a damn what Savage has to say about ANYTHING?
Great column and so on target -- I linked to it from my Blog Action Day 2008 post.
Fabulous article, I really love it and would like this in an OBAMA ad....Come to think of it, maybe I will print it out and distribute it door to door....
I have an idea. Instead of calling it taxing the rich, why don't we substantially raise the taxes on the rich, and call it the "new" trickle down.
cool way of framing it.
I say we call it a "downpour". 8-D
No matter how much we may deny it, trickle down economics are a fact of life -- and have been since the beginning of time. The wealth created by the few will eventually trickle down to those who are less creative and less productive. That was so well before Chrst and will continue to be so eons in the future.
Well, your "fact of life" has the charm of simplicity going for it.
Now, if only that was the way things work...
Wealth is not "created by the few." Never. It is certainly often controlled by the few and those few can, in some cultures, use that wealth to create more (usually some variant of compounding).
But it seldom trickles down in amounts that match that which "the few" retain for the purpose of making more money. In other words, what you see simplistically as money trickling down is actually the vehicle "the few" use to get more money from those receiving the trickle down-stuff.
Consider this, how many front-line workers paychecks does it take to equal the income of one CEO? Do you honestly believe any COE is that many times more effective? Japanese CEO only get a tiny fraction of our Wall Street heroes' bonuses, yet they are clearly more effective.
Think.
That would be great if it were true, but there's those minor little things called "facts" going against you....
So explain to me your economic theory. I don't get it? What facts are you talking about? I have seen a number of posts by you....none of them contained any facts about anything.
Your argument is utterly absurd; read a book, or surf the web for economic policy articles, but try to make a real argument that can't be disproven with a minimum of effort.
Then how do you account for our high stadandard of living? Our economic standing in the world?
If i decide to start a business and I seek a loan or an investor is that not trickle down economics at work?
Does anyone on this board understand that trickle down was not policy but an observation of how markets work every day? When Reagan coined this phrase he was simply explaining the concept as it applied to tax policy. He was simply pointing out that lower taxes left more wealth in the hands of the private sector.....It is common sense that if you keep more of your money then there is more available to "trickle down"....that's it. That is all there is to it.
It was not some lab experiment.....it was simply an observaton.
Great idea.
I won't have to pay so much on my $87.16 of capital gains this year.
The rich get richer. We've known it forever; however, if they get richer at the expense of the rest of us, then it's time to call a halt to the thievery. The same people who got us into this financial disaster are STILL the heads of the very companies we're pouring money into via the Treasury. How does that make any sense? Nobody wants to invest in these companies until their leadership changes! Can you blame them or us? If we do not change leadership in the White House, we're all going to go to the poor house en masse!
Look, about 40% of our population pays no tax. The top earners pay about 80%. And don't forget your social security which is paid 50% by your employer.
you gotta be kidding me.... The payroll tax is almost as much as the income tax and that was raided so that Bush could TRICKLE DOWN 1 trillion dollars on his nearest and dearest, the haves and have mores..
The Payroll tax surplus was well over 100 billion a year....Besides, the rich take their money in capital gains and dividends so god forbid they should pay income taxes on it...
The trickle down theory works like the infamous two story out-house of the 1930's with the rich people on the top story and all the rest of us on the bottom floor.
I think it's more like Roseanne's version:
Tinkle-down economics.
Why Everyone Should Be in Favor of Reducing Taxes on the "Rich"
http://mises.org/story/3087
Do you ever do any checking on your sources? Or do you just believe whatever you find that goes along with what you want to believe? We have used the trickle down theory since reagan, so how is it working now?
Desmo,
Did you actually READ that article???? That's the lamest piece of tripe I've ever read!!
Trickle down is for the rubes who have no money. For the super-rich, it's more like a torrent. Let's call it, Torrent Up, Trickle Down...that's more to the heart of this twisted Ponzi scheme. After the ultra-super-rich have engorged themselves on excess, whatever scraps of that excess might well trickle off their blubbery cheeks...and that's ours! Kind of like potentates of old who traveled in splendor and gold, who would, now and then, toss a penny to one of the poor, unwashed masses (that's you and me pilgrims!). This is the ridiculous heart of "trickle down"...just another shell game to fleece the rubes.
The Reagan thugs played America like the pack of rubes we all are. Trickle down? Look up the word trickle...and you'll see the pea hiding under the shell(game).
Dictionary.com Unabridged (v 1.1) - Cite This Source - Share This
trick·le /ˈtrɪkəl/ Pronunciation Key - Show Spelled Pronunciation[trik-uhl] Pronunciation Key - Show IPA Pronunciation verb, -led, -ling, noun
–verb (used without object)
1. to flow or fall by drops, or in a small, gentle stream: Tears trickled down her cheeks.
2. to come, go, or pass bit by bit, slowly, or irregularly: The guests trickled out of the room.
–verb (used with object)
3. to cause to trickle.
–noun
4. a trickling flow or stream.
5. a small, slow, or irregular quantity of anything coming, going, or proceeding: a trickle of visitors throughout the day.
Look at it this way, criminals don't stop being criminals, even when you put them in jail. John McCain is a criminal, and he continues doing what he does best, take care of his "base"...aka the ultra-rich. My plan would be to impeach him, and all of the Senators and Congresspeople who voted to Rape Iraq. Once that's done, trials should be started to have them all answer for their crimes. Due to John McCain's signing the Military Commissions Act, which codified torture, he should face charges based on the War Crimes Act of 1996, which carries the greatest punishment allowed in our so called "civil" society. You see, I am no advocate for the death penalty, but I can at least argue that if it is on the books, and someone violates the law severely enough to face the ultimate penalty, so be it. George W. Bush should face charges on this law, and his sycophant, John McCain should as well. If it can be proven that their pro-torture stance has resulted in deaths by torture, the death penalty is required.
I'm sure both Milton Friedman and Ronald Reagan are laughing at all of us from beyond the grave. What schmucks we are for allowing that Supply Side philosophy to become standard operating procedure.
Considering the deepest levels of hell those two simply must be inhabiting, I doubt their laughing about anything.
Well, one thing's for sure. You can't take it with you.
And what's that parable, a camel has a better chance of passing through the eye of a needle than a rich man has of getting into heaven?
Don't tell Republicans they can't take it with them...that will make them frown. And a frowning Republican is a nasty, dirty, naughty thing (to paraphrase Larry Craig).
You must be logged in to comment. Log in or connect with
