Why doesn't "trickle down" economics work?

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Jun 7, 2004
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#3
In very simple terms: Because it relies on rich people spending equal or faster then they make money.

But they don't - because there's no security in spending all the money you're making. And it's not even possible for many of them to do so.
 
Jun 11, 2011
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#6
The rich don't get rich by spending their money. They save it, makes loads more off the interest and the money isn't put back into society. On top of that, many of the luxury items that the wealthy purchase are made outside of the US, so even when they spend money the US economy doesn't see much of it.
 
Sep 8, 2011
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#7
The rich hoard their money, they don't pass it down. And when they do spend it is usually outside of America.

Not to mention the ideal of the rich being people who run big businesses with hundreds and thousands of employees is long past. A lot of the rich just have their money make money for them through investments and the like. There is no one for their wealth to trickle down to.

Giving tax breaks to the rich and not to the poor and middle class only helps one type of people. The rich.
 
Oct 25, 2010
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#11
Think of it this way:
The rich currently have much more than anyone else. The money is not trickling down presently; rather, the disparity is growing. Why would further increasing their riches suddenly change the status quo?

"Trickle up" economics might be viable. No-one ever really talks about that.
Unlikely. Economics needs regular cash flow for change to take place. Giving everyone a little extra here or there won't change much. Something like socializing education, which would free up tens of thousands on every family, plus furthering their opportunities, would have a massive impact.
 

C4Lukins

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Feb 27, 2006
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#12
It does work sometimes, and other times not so much. It depends on the company, how they run things, and how much they exploit their workers. For instance it does not work if a company ships its bottom tier workforce overseas. If China is making your shoes, then it fails. If your customer support is sent to India, again it fails. The trickling is going overseas. That seems to be the norm now, so the philosophy behind it no longer works.
 
Sep 8, 2011
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#14
It does work sometimes, and other times not so much. It depends on the company, how they run things, and how much they exploit their workers. For instance it does not work if a company ships its bottom tier workforce overseas. If China is making your shoes, then it fails. If your customer support is sent to India, again it fails. The trickling is going overseas. That seems to be the norm now, so the philosophy behind it no longer works.
So basically it doesn't work for nearly every large corporation in America. ;)

Seems like a genius plan for Romney to try bringing it back after it failed us miserably in the economic meltdown at the end of the last decade.
 
Sep 8, 2011
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"Trickle up" economics might be viable. No-one ever really talks about that.
Yes they do, that is Obama and the Democrats major economic theory. Tax the rich at a higher rate while reducing the tax burden of the poor and middle class. So the people with a lot to spare provide the tax dollar while those who actually are spending their money in America and have less to spare are freed up to be able to spend more.
 

Funky Papa

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Jun 7, 2004
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In very simple terms: Because it relies on rich people spending equal or faster then they make money.

But they don't - because there's no security in spending all the money you're making. And it's not even possible for many of them to do so.
And done.

If you give a dollar to a poor, he'll buy a hamburger. If you give 100k to a rich, he'll put them in an offshore account.
 
Jan 16, 2007
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#17
Unlikely. Economics needs regular cash flow for change to take place. Giving everyone a little extra here or there won't change much. Something like socializing education, which would free up tens of thousands on every family, plus furthering their opportunities, would have a massive impact.
My point being that that wealth would trickle up to the rich. There's a lot more incentive for low-income to spend money than for wealthy people to do so - and, for that matter, for them to keep it within the country - hence the rich would reap the benefits in due course.
 
Feb 6, 2011
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#18
What trickles down is technological advancement and rises in standard of living as a result

If the rich invest more, they end up investing in new inventions that otherwise would have taken longer. New inventions are awesome and/or reduce costs. Think of the cell phone. 20 years ago almost no one had one. Today, so many people do (or if they don't, it's by choice).

Unfortunately, you can make everyone better but the rich could become relatively better than everyone else.

The other problem is that there the rich having more money doesn't mean they'll actually invest more. With more money comes the less need for more money and thus less investing (or risky investment, perhaps).

And of course we're not nearly as closed an economy as we once were (outsourcing).

Stuff can "trickle down," so to speak, but the process doesn't occur just by handing over as much money as possible to "job creators," which is what trickle-down proponents like to claim.


It should be noted there is no economist that believes in "trickle-down economics" at this time that I'm aware of. Hell, most supply-siders have either abandoned that belief or altered it drastically based on what we're pretty sure we know.
 
Oct 25, 2010
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#20
My point being that that wealth would trickle up to the rich. There's a lot more incentive for low-income to spend money than for wealthy people to do so - and, for that matter, for them to keep it within the country - hence the rich would reap the benefits in due course.
You are right that those with low income would spend it, which is why it would change nothing. Investment in capital is what changes economic stature, not expenditure.
 
Jul 7, 2010
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#21
The richer you are the more you like to hoard your money, its addictive seeing the bank balance getting bigger. Also if you are wealthy you want to remain so so you become risk adverse.

If you are poor and you are given an extra dollar you spend it.

Thus the economy is boosted more by distributing wealth.
 
Feb 6, 2011
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#22
You are right that those with low income would spend it, which is why it would change nothing. Investment in capital is what changes economic stature, not expenditure.
If poor people spend money, where does it go? Into the owners of businesses. And what do they do? Invest in capital in order to keep getting that money in the future.


Changes in Demand forces the issue much more.
 

C4Lukins

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#23
So basically it doesn't work for nearly every large corporation in America. ;)

Seems like a genius plan for Romney to try bringing it back after it failed us miserably in the economic meltdown at the end of the last decade.

I think you are correct. In a less globalized and homogenized world 20 years ago it was a completely valid economic policy. Today it does not work. The focus should be creating new industry. Stuff that you cannot ship off. Renewable energy, drugs that actually work. Advanced automobiles, safety features, video games film and art. We need a new Renaissance. That is what our candidates should be running on.
 
Jul 26, 2006
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#25
Some of you have a skewed/simplistic view about investing/spending.
They don't have to literally spend/invest. Their money is constantly working [unless they buy land/(already existing) property without renting it & with a small amount of tending, etc] - it's just not necessary working in their country of origin and not to the benefit of the poorest in the said countries.
 
Oct 25, 2010
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#26
If poor people spend money, where does it go? Into the owners of businesses. And what do they do? Invest in capital in order to keep getting that money in the future.


Changes in Demand forces the issue much more.
Right, but we're talking about making lives better for the poor, right? The business owners are already doing reasonably well (let's say). The poor people clearly aren't. Giving them a way to feed more money into those with capital is only the slightest of upgrades. Real change comes about when they are given means, not a slight increase in cash flow.
 
Feb 6, 2011
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#27
I think you are correct. In a less globalized and homogenized world 20 years ago it was a completely valid economic policy. Today it does not work. The focus should be creating new industry. Stuff that you cannot ship off. Renewable energy, drugs that actually work. Advanced automobiles, safety features, video games film and art. We need a new Renaissance. That is what our candidates should be running on.
It didn't even work 20 years ago...(or 30)


Right, but we're talking about making lives better for the poor, right? The business owners are already doing reasonably well (let's say). The poor people clearly aren't. Giving them a way to feed more money into those with capital is only the slightest of upgrades. Real change comes about when they are given means, not a slight increase in cash flow.
Real change comes from

A. putting the poor to work
B. making the poor more productive workers.


that said, our productive middle class workers are the ones being screwed right now and giving money to the poor would help them.
 
Jan 23, 2007
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#29
What trickles down is technological advancement and rises in standard of living as a result

If the rich invest more, they end up investing in new inventions that otherwise would have taken longer. New inventions are awesome and/or reduce costs. Think of the cell phone. 20 years ago almost no one had one. Today, so many people do (or if they don't, it's by choice).

Unfortunately, you can make everyone better but the rich could become relatively better than everyone else.

The other problem is that there the rich having more money doesn't mean they'll actually invest more. With more money comes the less need for more money and thus less investing (or risky investment, perhaps).

And of course we're not nearly as closed an economy as we once were (outsourcing).

Stuff can "trickle down," so to speak, but the process doesn't occur just by handing over as much money as possible to "job creators," which is what trickle-down proponents like to claim.


It should be noted there is no economist that believes in "trickle-down economics" at this time that I'm aware of. Hell, most supply-siders have either abandoned that belief or altered it drastically based on what we're pretty sure we know.
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Apr 23, 2010
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#33
Prestige and being rich has very different connotations now as to how it did decades ago.

Wealth is just sitting as wealth when rich people actually have no ambitions. You can sort of pretend them buying yachts and designer shit is stimulating the economy, but the truth is, wealthy people of the past used to spend that wealth on their own little business empires to be seen as someone important and flash cash in career ways rather than diamond encrusted toilet seats. Thus their money would in turn directly be creating jobs. Now however, people earn this same level of prestige and importance through just being rich and famous alone. No need to put any back in, save it all so their spoilt brat fuck offspring live like princes and princesses forever. Worse still for bankers, where the top number in their account is all that matters, like theyre playing some high score game, fuck needing employees.

Short version: where once people wanted to be business moguls with vast empires of employees, now people just want to be a rock star.
 

C4Lukins

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Feb 27, 2006
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#35
It didn't even work 20 years ago...
It really did. Before outsourcing and machines taking over a ton of jobs, there existed a class that I think we are losing. No they were not making millions, but they were doing hard jobs and making a living off of them. The US is transporting tens of millions of jobs overseas now for pennies on the dollar. The only way to fix that is to create new industry, because we cannot force companies to hire in house or they will just move away.
 
Sep 24, 2011
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Brittanialand
#36
In very simple terms: Because it relies on rich people spending equal or faster then they make money.

But they don't - because there's no security in spending all the money you're making. And it's not even possible for many of them to do so.
Pretty much.

"Trickle down" as a concept can never work in the real world.
A rich person has never, and will never, spend as much as they earn.
 
Jul 10, 2012
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#38
Because how can someone spend billions?

And because economist forget about the human factor, which is people like to measure dicks, rich do it with their bank account
 
Jul 26, 2006
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#39
Prestige and being rich has very different connotations now as to how it did decades ago.

Wealth is just sitting as wealth when rich people actually have no ambitions. You can sort of pretend them buying yachts and designer shit is stimulating the economy, but the truth is, wealthy people of the past used to spend that wealth on their own little business empires to be seen as someone important and flash cash in career ways rather than diamond encrusted toilet seats. Thus their money would in turn directly be creating jobs. Now however, people earn this same level of prestige and importance through just being rich and famous alone. No need to put any back in, save it all so their spoilt brat fuck offspring live like princes and princesses forever. Worse still for bankers, where the top number in their account is all that matters, like theyre playing some high score game, fuck needing employees.

Short version: where once people wanted to be business moguls with vast empires of employees, now people just want to be a rock star.
People have been inheriting and then spending money on hookers & blow for thousands of years.
But money reproducing itself without any or only slight involvement of the owner is a fairly recent phenomenon and coupled with emergence/liberalization of worldwide trade/capital flows is responsible for the increasing income inequality.
 
Feb 6, 2011
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#40
It really did. Before outsourcing and machines taking over a ton of jobs, there existed a class that I think we are losing. No they were not making millions, but they were doing hard jobs and making a living off of them. The US is transporting tens of millions of jobs overseas now for pennies on the dollar. The only way to fix that is to create new industry, because we cannot force companies to hire in house or they will just move away.
While I agree on the new industry bit, trickle down never worked. The evidence does not show it. It's a myth. The 90s was a reversal of "trickle down" and was far more prosperous.



Look at dat trickle down 80s! And 2000s!
 
Apr 17, 2007
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#42
What about "job creators"? Does cutting taxes on small business owners necessarily encourage them to hire more people or pay them any better?
No. Businesses don't hire because they have more money, they hire when they have more demand. You don't get more demand by making 1000 people richer, you get demand by making 1,000,000 people richer. A rich person won't buy 1,000 times more pairs of jeans or dinners than an average person.
 
Apr 6, 2010
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#43
In very simple terms: Because it relies on rich people spending equal or faster then they make money.

But they don't - because there's no security in spending all the money you're making. And it's not even possible for many of them to do so.
A bit of this and bit of the fact that the economy has drastically changed in the last two decades. The wealthy still do spend a shit ton of cash, but that money isn't going to hiring new workers, but rather is being spent on machines and computers which can produce those luxury goods, or as you mention below, replace cashiers, in a more efficient manner than manual labor.

The fact is that trickle-down, at its most basic level, works. New jobs are created when spending increases, and spending increases, in aggregate terms, have historically been linked to higher incomes. But that isn't the contention that drives the debate. The argument is structured on the effects of higher taxes on new spending.

Would it drastically cut consumption? For the middle-class, most likely. And that could be catastrophic to the economy.

But it's less clear when that comes to the richest in the country as their demands for those goods and services which drive job growth won't really be affected. While they might be hesitant to purchase a new yacht (a rather blunt example but it does the job), higher taxes won't make them think twice about lesser expenditures.
 
Jun 7, 2004
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#44
There is no longer a fix to this wealth inequality within the framework of capitalism.

Technology innovation resulting in job loss is outstripping technology innovation resulting in job creation.

With the human mind been the most potent tool of human productivity, and the function of computers encroaching upon the capacity of what the human mind can achieve - it is inevitable that we reached this inflection point in our development history.

If this sounds alarmist, then simply consider the automation of jobs like cashier (self-check out machines, internet grocery shopping), and future technology of self driving vehicles, as well as the nature of human education, versus knowledge/information propogation in computers.


I wouldn't say I'm a luddist in any sense - because instead I'll say, we really should take this opportunity to realize that humanity is due high time for some good old reinvention. The societal frameworks we've built are simply not keeping up with the realities of our world - buckling and straining at the limits of preconcieved notions as it is.

If we accept our destiny, then we'll accept that in capacity terms we will be less effective than machines in every productive way... that we ultimately only excel at been human. Use the machines to enhance the aspect of humanity that we find interesting. Do we honestly find it interesting to work? Or just necessary?
 
Feb 6, 2011
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#45
"trickle-down economics" is a misnomer. There is no such viable economic theory. It does not exist except in the mind of politicians.

trickle down economics is as much economics as creationism is science.
 
Apr 17, 2007
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#46
We have to head towards a Star Trek future or society will collapse when 3D printing is used to make everything and is mostly automated.

There just won't be enough jobs for everyone in the future under our current economic system. If we don't provide food and shelter to everyone by default for just being human, we will have ever growing hordes of homeless unemployed until they reach sufficient numbers to cause society as we know it to collapse.
 
Jul 26, 2006
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#47
We have to head towards a Star Trek future or society will collapse when 3D printing is used to make everything and is mostly automated.

There just won't be enough jobs for everyone in the future under our current economic system. If we don't provide food and shelter to everyone by default for just being human, we will have ever growing hordes of homeless unemployed until they reach sufficient numbers to cause society as we know it to collapse.
Why do people keep pushing this?
The agrarian sector* has been surpassed by then industrial sector to then be surpassed by the service sector. It's a constant evolution.
Did jobs like dog walker/home sitter or nutritionist exist before? Yeah..

/edit
* I meant primary sector incl. mining etc.
 
Jun 7, 2004
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#49
Taxing is the best way to trickle down.
Even if the state waste the money it is still going to projects and people that would be unemployed otherwise.

Having rich people building up savings on a bank account dose nothing.
 

C4Lukins

Junior Member
Feb 27, 2006
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#50
Pretty much.

"Trickle down" as a concept can never work in the real world.
A rich person has never, and will never, spend as much as they earn.
I am not sure you understand the concept. Trickle down economics means a successful company creates economy and jobs for people. So lets use an evil corporation like Exxon as an example. The CEO is making billions of dollars. He has underlings that are making millions of dollars. They have people drilling who make money, then they have the people making the barrels who make money, then they have the people transporting the oil that make money, then they have the people who turn the oil into gasoline making money, then they have distribution centers, then they have people transporting from the distribution centers to their thousands of stations around the US, those thousands of stations employ thousands of people who work at those station, those stations have dozens of corporations such as Coke and the people who make Twinkies delivering to these stations, Coke has thousands of people using trucks that are built by someone else, using gas that was created by someone else to get their product to these Exxon stations, it just goes on and on. That is trickle down economics. That guy making billions at the top is helping to create a million jobs in this spiderweb of distribution. This is ignoring the guy who makes the naked girl flappers on the distribution trucks, who got the matériels from a combination of a dozen other companies.
 
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