Split Thread Trickle-down economics

Henri McPhee said:
These hedge fund manager commercial marauders are now attempting to asset strip GKN in the UK with their empty promises. They did the same thing with Cadburys, promising not to close factories. In the end they moved the manufacture to Poland. It's foolish in its economics. Nobody seems to have the brains to seize the situation like a man. The world is run by lunatics.
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Exporting low productivity tasks is both a symptom of a strong economy and mechanism for increasing overall living standards. In the larger scheme of things, what’s actually going on when this happens is that people are being re-deployed from low productive tasks to higher productivity tasks. More people doing higher productive tasks means more “stuff” is produced by the economy.

While superficially these appear to be lost jobs, the central bank can essentially generate as much supply AND demand as it wants using monetary policy. Eventually the pool of available workers is used up and any more monetary stimulus causes wage inflation, at which point the central bank is forced to backs off from further growth. Obviously there is a need for training, re-training and education to fit available worker to available jobs but in normal economic conditions the central bank can use monetary policy to ensure these people are employed as quickly as they can be trained for new higher value positions.

If the economy is weak the economy can’t readily absorb the money being injected by the central bank. In this case what happens is a decline in currency value which enhances the attractiveness of lower value manufacturing jobs in which case not only don’t they move elsewhere, new ones move in.
 
I just feel that subjects like theoretical economics and the law are much the same now as they have been for the past couple of centuries. It could be that people haven't got the brains. The same cannot be said for something like medicine or engineering or space research.

There is an example of this on YouTube. It's the same sort of attitude as Iain Duncan Smith and the Daily Mail and it's very unfair on the unemployed who are willing to work:

https://www.youtube.com/watch?v=nNsJRfaRdfc
 
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There is an example of trickle down economics at Ilminster in Somerset UK where Sue Osborne has been forced to auction off all of her three hundred dairy
cattle because she was renting her farm from the local authority. I suppose she needed a first-class solicitor who is thoroughly acquainted with the whole business of dealing with local authorities.

With trickle down economics, councils are now going bankrupt, or are strapped for cash. There will be a shortage of milk at this rate. The council say she was offered to buy the farm once at one and a quarter million pounds, which is expensive. Meanwhile doctors have been on a pay freeze for the past ten years, and chief executives are rolling in it. Jacob Rees -Mogg has no policy for the homeless, or social housing.

One of my grandfathers was given a compulsory purchase order in 1937 for his shop, for road widening and a car park by the men of Weston-super- Mare, which left him on his beam ends, and left him fearfully aggrieved for the rest of his life.

http://www.bbc.co.uk/news/uk-england-somerset-43962649
 
Henri McPhee said:
There is an example of trickle down economics at Ilminster in Somerset UK where Sue Osborne has been forced to auction off all of her three hundred dairy
cattle because she was renting her farm from the local authority. I suppose she needed a first-class solicitor who is thoroughly acquainted with the whole business of dealing with local authorities.

With trickle down economics, councils are now going bankrupt, or are strapped for cash. There will be a shortage of milk at this rate. The council say she was offered to buy the farm once at one and a quarter million pounds, which is expensive. Meanwhile doctors have been on a pay freeze for the past ten years, and chief executives are rolling in it. Jacob Rees -Mogg has no policy for the homeless, or social housing.

One of my grandfathers was given a compulsory purchase order in 1937 for his shop, for road widening and a car park by the men of Weston-super- Mare, which left him on his beam ends, and left him fearfully aggrieved for the rest of his life.

http://www.bbc.co.uk/news/uk-england-somerset-43962649
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While the situation for that dairy farmer in Somerset seems very unfair (if the story is as reported), you still need to demonstrate that it is in any way related to trickle-down economics.

Regarding the value of the farm, depending on the quality of the land, it can vary between £5,000 and £15,000 an acre. I cannot find a report which gives a size for the farm but if it's anything more than 100 acres, that's a fair value.

But let's look at who is making the sale:

The Conservative-run council began selling off its 62 farms in 2010.
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Gosh, is there anything he could have done about it:

Ms Osborne, a Conservative councillor at South Somerset District Council
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Different council, same party.
 
There is an interesting opinion about trickle down economics at this website:

https://billmoyers.com/2014/09/11/a-wealthy-capitalist-on-why-money-doesnt-trickle-down/

An economic arrangement that pays a Wall Street worker tens of millions of dollars per year to do high-frequency trading and pays just tens of thousands to workers who grow or serve our food, build our homes, educate our children, or risk their lives to protect us isn’t an expression of the true value or economic necessity of these jobs. It simply reflects a difference in bargaining power and status.
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There is another interesting website about trickle down economics at:

https://www.truthdig.com/videos/republican-tax-plan-failed-trickle-economics-video/

Kansas cut taxes on the rich and is a basket case. California raised them and is thriving. In 2012, Kansas slashed taxes on top earners and business owners, while California raised taxes on top earners to the highest state rate in the nation. Since then, California has had among the strongest economic growth of any state, while Kansas has fallen behind most other states.

So don’t fall for supply-side, trickle-down nonsense. Lower taxes on the rich don’t generate growth and jobs. They only make the rich even richer, at a time of raging inequality, and they cause bigger budget deficits.
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Nomi Prins doesn't think much of trickle down economics, and she has wide and practical experience of the financial community:

http://www.tomdispatch.com/post/176203/tomgram:_nomi_prins,_too_big_to_fail,_hillary-style/

None of the three presidential debates suggested that either candidate would have the ability (or desire) to confront Wall Street from the Oval Office. In the second and third debates, in case you missed them, Hillary didn’t even mention the Glass-Steagall Act, too big to fail, or Wall Street. While in the first debate, the subject of Wall Street only came up after she disparaged the tax policies of “Trumped-up, trickle down economics” (or, as I like to call it, the Trumpledown economics of giving tax and financial benefits to the rich and to corporations).
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The Great Zaganza said:
It's surprising how surprised people are that lower tax rates lead to less tax revenue.
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And yet, there does exist a tax rate so high that it results in less revenue, due to its punitive effect.

So, at least at that level, a reduction in rate will result in an increase in revenue.

Like many things in math, physics and economics, that effect can be plotted on a curve. Which incidentally has a name!

So, it all depends on where on the curve one finds oneself to predict the effect of a tax rate reduction.
 
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I found myself thinking this week: trickle down economics is to the right wing what communism is to the left wing: A nice sounding theory, which utterly fails when applied to the real world, because real people just don't act the way the theory assumes they will act.

Discuss.
 
Horatius said:
I found myself thinking this week: trickle down economics is to the right wing what communism is to the left wing: A nice sounding theory, which utterly fails when applied to the real world, because real people just don't act the way the theory assumes they will act.

Discuss.
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Whose “Left Wing” are we talking about? The current US Left Wing is primarily composed of Liberals who do not view Communism as a particularly good theory.
 
lomiller said:
Whose “Left Wing” are we talking about? The current US Left Wing is primarily composed of Liberals who do not view Communism as a particularly good theory.
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Anything which can be linked to "socialism", no matter how torturously, means that the proponents must be Commies.

This is Conservatism 101, and has been a fundamental part of the American political landscape since at least the end of the 19th Century.

No reason to expect them to change. They are conservatives, after all. Change is anathema.
 
lomiller said:
Whose “Left Wing” are we talking about? The current US Left Wing is primarily composed of Liberals who do not view Communism as a particularly good theory.
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Mostly historical left wing. There was a time when a lot of them actually did support communism, at least in theory, but as you said, they've now concluded that it wasn't working.

The difference is, the right wing hasn't come to the same conclusion about trickle down economics yet. I'm hoping the comparison will nudge them along a bit. Essentially, most of the same arguments they made for why communism was a bad idea that was doomed to failure can be applied to trickle down. The trick is getting them to try doing that.
 
Horatius said:
Mostly historical left wing. There was a time when a lot of them actually did support communism, at least in theory, but as you said, they've now concluded that it wasn't working.

The difference is, the right wing hasn't come to the same conclusion about trickle down economics yet. I'm hoping the comparison will nudge them along a bit. Essentially, most of the same arguments they made for why communism was a bad idea that was doomed to failure can be applied to trickle down. The trick is getting them to try doing that.
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That's about it. Almost no one still supports communism, while trickle down still has mainstream acceptance.

Unfortunately, the trick requires right wingers acknowledging evidence, and putting it above ideology, so...
 
Horatius said:
Mostly historical left wing. There was a time when a lot of them actually did support communism, at least in theory, but as you said, they've now concluded that it wasn't working.
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It’s not something recently discovered. Free Markets have always been a cornerstone of Liberalism, so it’s always been at direct odds with any form of Command Economy including Communism.

Technically Communism was also on the left because it was reformist rather than traditionalist, but this placement only works in societies that never actually adopted Communism. For many Russians Communism and Traditionalism are in alignment so in that context it makes sense that former Communists are close in their viewpoints to the political right in the US. (Putin, the former hard-core KGB Communists, would clearly fall on the political right in the US)

Horatius said:
The difference is, the right wing hasn't come to the same conclusion about trickle down economics yet.
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This would require the right wing has similar notions of success/failure. Generally speaking, economic success is not a right wing priority, rather they are unified by tradition, order, hierarchy and authority. Even though the US right has nominally adopted the Liberal tradition of Free Markets, it does not actually care much about making them function optimally, instead their main focus is to insure that the top of the hierarchy (modern Aristocracy) does not have limits placed on it, and tickle-down has been very successful on this front.
 
There is another interesting article by Nomi Prins about trickle down economics and how it's similar to what happened in the 1920s:

http://www.nomiprins.com/thoughts/tag/washington

There is, in fact, some historical precedent for a president surrounding himself with such a group of self-interested power-grabbers, but you’d have to return to Warren G. Harding’s administration in the early 1920s to find it. The “Roaring Twenties” that ended explosively in a stock market collapse in 1929 began, ominously enough, with a presidency filled with similar figures, as well as policies remarkably similar to those now being promised under Trump, including major tax cuts and giveaways for corporations and the deregulation of Wall Street.
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I think it's a pity that this trickle down economics now applies to Russia, if not China, as well as Britain and America. It seems to have widened in Britain since the 1980s with the north- south divide, and the concentration of glamour service industries in London and the Home counties, like fashion and football.

In Russia it seems to have started with corrupt privatisations and the Russian mafia. The children and grandchildren of some of these Russian oligarchs now spend more money on their weddings than the Royal weddings. Some say the Russians are rude, but I don't know how true that is. I'm a great believer in sound trade but I don't know if it's possible. The matter is discussed historically at this website:


http://www.geohistory.today/privately-enforced-capitalism/

The real question is: will the oligarchs lose favor with President Putin? I do not see that it is in the interest of the President to completely get rid of the oligarchs and to create a society based on laws. However, if the oligarchs give Putin reason to fear them, he will pounce on them quickly. The situation will likely continue for a long while. What the oligarchs are attempting to do is to create wealth for their children. They are slowly legitimizing their businesses while sending their children to elite European and American private schools. Slowly, the oligarchs may melt away or be replaced by their cultured children who are not interested in illegal games.
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Part of the trouble is that these so-called business stars in the IMF believe in trickle down economics. It's like beating against the wind.
 
The IMF seems to have changed its tune about trickle down economics, but nothing has been done about it. IMF loans still come with all sorts of cuts and closure clauses:

https://psmag.com/economics/trickle-down-economics-is-indeed-a-joke

"Trickle-down" economics began as a joke. Seriously.
If there’s one person most often associated with the origins of trickle-down economics, it’s President Ronald Reagan. Few people know, however, that the phrase was actually coined by American humorist Will Rogers, who mocked President Herbert Hoover’s Depression-era recovery efforts, saying that "money was all appropriated for the top in the hopes it would trickle down to the needy."
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Henri McPhee said:
The IMF seems to have changed its tune about trickle down economics, but nothing has been done about it. IMF loans still come with all sorts of cuts and closure clauses:

https://psmag.com/economics/trickle-down-economics-is-indeed-a-joke
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Loans coming with terms that mean that the country receiving the loans needs to reduce expenditure isn't any kind of support for trickle down IMO.

I think it is financially sensible that if an organisation is making a loan that they get some kind of say in how the country receiving the loan continues to act - otherwise there's a risk that you're just throwing good money after bad.
 
IMF bailouts usually do require fiscal tightening (spending cuts / tax rises) and policies to reduce inflation (usually a combination of devaluation and high interest rates). These are all contractionary (apart from devaluation which goes slightly the other way) and spending and subsidy cuts are usually income-regressive too.

AFAIK "trickle down" typically means cutting higher tax rates (also income-regressive) but that's not usually an IMF demand.

IMF policies are better considered to be those that a "lender of last resort" would impose, the IMF steps in when there is nobody else around who will. So in an important sense it is a last-ditch safety net. In the absence of a bailout from the fund it can easily be imagined that the outcome for a country would be (i) even more contractionary and (ii) even more regressive.
 
Henri McPhee said:
I don't think trickle down economics is academically satisfactory.
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I think that’s a better way to put it.

Personally, I see money “injected” at the top “trickle down” in myriad ways. It seems undeniable, and later I can give an example. But the question is, is it the most effective way to stimulate an economy. I think that depends on myriad factors, so that there’s no simple answer.
 
Fast Eddie B said:
I think that’s a better way to put it.

Personally, I see money “injected” at the top “trickle down” in myriad ways. It seems undeniable, and later I can give an example. But the question is, is it the most effective way to stimulate an economy. I think that depends on myriad factors, so that there’s no simple answer.
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There is however a simple answer to the hilited part: NO … it´s certainly not the most effective way.
 
Fast Eddie B said:
I think that’s a better way to put it.

Personally, I see money “injected” at the top “trickle down” in myriad ways. It seems undeniable, and later I can give an example. But the question is, is it the most effective way to stimulate an economy. I think that depends on myriad factors, so that there’s no simple answer.
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I guess it depends on whether you are viewing it in the context of deficit spending or not. If you were to balance it with spending cuts such that the who thing were revenue neutral I’m not convinced there would be a net stimulus effect.

If you are talking about deficit spending I think that it’s generally accepted that in most (but perhaps not all) it’s better to stimulate an economy is though monetary policy. If you want fiscal stimulus anyway, my expectation is that in most the top is probably not going to be the best place to apply it, but this could depend on why you decided to go the fiscal stimulus route.
 
This trickle down economics is the theoretical economics for a few rich. It's just cutting public spending. Northamptonshire and Somerset local authorities in the UK are going bankrupt.
 
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Not everybody agrees about trickle down economics. This is an article in the British Guardian newspaper:

https://www.theguardian.com/comment...ckle-down-economics-broken-promise-richest-85

This applies to both companies and individuals. Small business gets clobbered by taxes and business rates, while big business turns around and says to the state: "This is how much tax I fancy paying this year, take it or leave it". The rich no longer create jobs, through a process of consolidation, takeover and merger, they actually destroy them. Zero-hours contracts are the way of the future; in a society that is hungry, desperate and devoid of political engagement or unionism, why would anyone offer terms and conditions that give individual workers any standing?
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Henri McPhee said:
Not everybody agrees about trickle down economics. This is an article in the British Guardian newspaper:

https://www.theguardian.com/comment...ckle-down-economics-broken-promise-richest-85
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no one agrees with trickle-down.
It was invented as a fig-leaf to justify wealth transfer from average taxpayers to the rich. It was never an actual economic theory.
Also, there is no such thing as Supply-side economics: there is only supply and demand. Sound economy policy is to keep both in balance. Promoting one to the exclusion of the other cannot possibly work.
 
I still think this trickle down theory of theoretical economists is really just bankers speak for trickle up remuneration policy and cutting social security to cut public spending. The trouble is it seems to be being applied all over the world, including Brazil and Russia. They should be furthering the interests of the people. An example of this is from today's Daily Mail newspaper:

https://www.dailymail.co.uk/news/ar...pay-rise-despite-austerity-public-sector.html

John O'Connell, chief executive of the TaxPayers' Alliance, told the newspaper: 'The sheer scale of this payrise is bound to raise questions as colleagues across the public sector face only a modest pay rise — if they are lucky.
'To families struggling with rising bills, a pay rise of this magnitude will be unthinkable.'
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Henri McPhee said:
https://www.dailymail.co.uk/news/ar...pay-rise-despite-austerity-public-sector.html
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It's the Daily Fail!!!

Assuming we can believe anything in that article....

Top judges are in line for a pay hike of up to £27,000 despite austerity being imposed on the rest of the public sector, it has emerged...

It will cost taxpayers up to £3 million annually,
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3 MILLION pounds! This outrageous extortion will surely bankrupt the nation. :rolleyes:

But why are they getting it?

The move - intended to tackle a recruitment crisis - would add between £21,572.16 and £26,965.20...

Counsel for the judges Michael Beloff QC said the pay rise was to compensate the judiciary for a £25,000 tax charge they suffered by having to move into a new pension scheme.
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Trickle down, trickle up, or trickle through?
 
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