Wednesday, May 09, 2018

"Trickle-Down" Economics Has Always Been An Idiotic Idea

In the early 20th Century, corporations controlled our government. They did it through the Republican Party -- and that party sold Americans on the idea of "trickle-down" economic theory. The idea was that whatever was good for the giant corporations was good for all Americans, because "a rising tide lifts all boats". They said that if the corporations were allowed to make greater profits, much of those profits would trickle down to the rest of the population in the form of more jobs and higher wages.

It was an idiotic idea that resulted in some Americans having enormous wealth, while most Americans struggled -- and it finally resulted in economic disaster (the Great Depression). Americans learned their lesson from that, and from the thirties through the seventies they (through the Democratic Party) instituted economic changes that made the economy fairer for all (higher taxation for corporations, more regulations, strengthening of unions, minimum wage, etc.).

But time makes a lot of people forget the lessons taught by history, and with the election of Ronald Reagan in 1980, the Republicans returned to power in a big way. And they brought with them a return to the "trickle-down" economic policies of the past. They again convinced many that corporations were kindly organizations that were happily share their wealth if allowed to increase their profits through deregulation and lower taxes.

One doesn't have to be a rocket scientist to see the idiocy of that idea. Just ask yourself -- what is the purpose of a corporation (or any other business)? Is it to provide a livable wage for workers? Is it to benefit the community in which it exists? NO! A corporation (or any business) exists for only one purpose -- to make money. And they will maximize their profit in any way they can. Anyone who thinks a corporation will willingly share its profits (or tax savings) with its workers is an utter fool (or a tool of the corporations).

Corporations will pay workers as little as possible to have the workforce it needs to do business. If they can hire the workers they need at $10 an hour, where is the incentive to pay $15 an hour (or more). The answer is there is no incentive to do that. Paying workers more cuts into profit, and they won't do that even if they are enjoying enormous profits -- unless they are forced to do so by regulations or union negotiations.

The charts below show the result of the re-imposition of "trickle-down" economic policy. Note that before 1980, as productivity rose, so did worker wages. But after the "trickle-down" economic policy was instituted in 1980, productivity continued to rise but worker wages did not rise nearly as much as it had in the past. Where did the extra money from increased productivity go? It went to the richest Americans, who with the imposition of the GOP economic policy, no longer had to share that rising productivity with workers.

As the second chart shows, the new GOP "trickle-down" policy worked fairly well for the top 20% and worked great for the top 5%. But it was disastrous for the bottom 80% (who saw their share of the nations income fall).

The GOP economic theory is a LIE -- told to justify the greed of corporations (the true constituency of the Republican Party). If you are rich, then it is a great policy. But if you're not it is a policy designed to keep your income and wealth down -- it's disastrous.

The current crop of Republican officials (Trump and his cohorts in Congress) are true believers in the "trickle-down" economic policy. Their tax plan shows that -- a plan that gave huge tax cuts to corporations (and the rich), but almost nothing to anyone else. They once again assured us that the new corporate wealth would trickle down (in the form of new jobs and higher wages). It won't. Corporate greed will see that it doesn't.

The "trickle-down" economic theory has always been an idiotic idea. It works only for the rich. But it won't be changed as long as the Republicans are in power.

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