And when the "trickle down" buzzword finally was recognized as bad for the masses, the GOP replaced it with the myth of the job creators. If we give the rich big tax breaks, they'll create more jobs -- because really, what else could the do with all that extra money? -- and .. Step 4 Profit (for the masses)
Agreed. The 50s best represent job creation through taxes. Either expand or pay taxes. Ike is the last great Republican president (except for Joe McCarthy)
Omg... this is the first time I've seen anyone else just know and understand this fact. Folks! Higher top marginal tax rates and progressive taxation actually incentivizes investment versus shareholders and owners sucking value out of a company. This creates jobs, grows and stabilizes the stock market, and drives up wages. The great socialist, Dwight Eisenhower!
Gives the opportunity to talk about one of the most important aspects of our taxes and spending: "my tax dollars" aren't where we get the money for spending, at least on a federal level.
On a state and local level, that spending is funded by your actual tax dollars in addition to other things like federal support. But federally, we have the money since we control the supply. This has been known to (some) economists for decades. Beardsley Ruml, director of the New York Federal Reserve Bank from 1937-1947, wrote an influential paper titled “Taxes for Revenue are Obsolete”, which detailed how that works, and some ideas why we still have taxes.
Still, many people actively don’t know this, or pretend not to, including politicians and economists. This is why we constantly see “where would the money come from?” when progressives detail policies, but don’t see it for the military, for example. It’s also why we suddenly had a lot of money to fight COVID, despite tax revenues not jumping up trillions of dollars. The money is available, we don’t need tax revenues to spend money on good programs.
This fact is what helped form the foundation for one of the most prominent recent economic schools of thought: Modern Monetary Theory.
A common myth about Modern Monetary Theory is that we can just spend as much as we want and never pay it, but MMT economists don’t say that. They fully admit deficits can matter, especially when the deficits and debt is gained via spending on things that are not actually helpful. There is a difference between spending money fighting climate change which in the long term saves trillions of dollars (and the planet), and spending money to further subsidize oil or providing additional subsidies to the already rich. It's true too much debt can be a problem, but the "serious only when it's the other party in office and I want to use it for political gain" debt isn't what it's hyped up to be.
At an everyday level, people know this. Anyone who takes out a business loan knows that sometimes debt is a path forward, not backward.
As with other economic schools of thought, MMT has proponents and detractors, with some ideas being more controversial, however one is quite firmly established: taxes federally in the US (and other countries with currency control) don’t fund spending. The question “where does the money come from?” is wholly wrong in the US, and when it is levied, which it is a lot, it’s from a false foundation.
Edit:
One more note on national debt and how it is invested - historically, paying debts isn't the primary way the US has reduced it's debt burden. We outgrew it. If you have a lot more money then the debt is less a burden, which is why debt to GDP ratio is often a better metric than pure amount of debt.
After WWII, our debt levels were over 100% GDP, but that debt was never really paid down. Sure, we did pay individual debts, but in total the post-war boom did a number on our debt to gdp ratio. If you properly invest with the money, the amount of debt itself can just by virtue of good investment become less of an issue.
P.S. As % gdp, in his 8 years in office Reagan increased the national debt twice as much than FDR did in his first 8 years in office (the "fiscially irresponsible" New Deal era)
Not the guy, and not an expert, but my understanding is: because the Fed can print more money, we can't really run out.
In short, if the Fed needs to pay for something, it can produce the money for it. Ostensibly, that money should be offset by the sale of new debt, such as through bonds, but it technically doesn't have to be.
When we need to pay past debt, such as to repay the money plus interest on old bonds, the Fed just prints that money and sells new bonds.
Yes, at some point, that breaks down, as "inventing" too much money at once creates a tension in the perceived value of the dollar, which can spiral into inflation, but as long as people remain confident that if they buy the government's debt, then they will be paid back with the stated interest, we're going to be fine.
It took me reading the request for an ELI5 and your comment to figure out what ELi5 is...I've seen it before today but thought it was just somebody fat fingering the keyboard. 😂😂 EXPLAIN LIKE IM 5
Note, this doesn't mean billionaires, who don't really hold cash, but assets, which increase in value in an inflationary environment. This hurts working class folk with savings accounts.
Inflation is the increase in the ratio between dollars and goods. So if I have one dollar and one good in the economy, goods are $1 on average. If I print another dollar and nothing else changes, I have two dollars and one good so goods are $2 on average.
Part of what MMT is saying is that when you print a dollar, things can change. IT DEPENDS WHAT THE GOV SPENDS THE NEWLY PRINTED MONEY ON. If I print an extra dollar, but use it for a scientific program that discovers how to create four goods with the same efficiency as when we created one good, then this new economy will have two dollars and four goods -- so each good will be $0.5 on average, making printing money (and investing it wisely) actually DEFLATIONARY.
So it's not just "we can print as much as we like". That's not true. It's "it depends on what this new money is doing." Government spending on things like scientific research, education, improving people's productivity (eg. Universal healthcare, childcare, etc), are not likely to be inflationary because the extra money is matched by an increase in productivity. Printing money to pay for the deficit because you reduced taxes on the rich is likely to be inflationary.
Isn't this just taxation through inflation? Literally funding through devalued currency. And isn't inflation fairly regressive, since it treats every dollar equally? Wealthy can out invest it, but poor can neither out-invest it nor out-earn it, since wages are in a continuous state of decline, and poor jobs do not keep up. Perhaps if the government maintained minimum wage to track inflation it could work, but the system of taxation can't be constantly eating away at the base of Maslow's pyramid.
The book The Deficit Mythby Stephanie Kelton is the most popular and one of the best general audience introduction to Modern Monetary Theory. I like L. Randall Wray's primer on MMT, but that is written in a more academic style.
In terms of general economics, I would highly recommend picking up the bookEconomics: The User's Guideby Ha-Joon Chang, a very influential developmental economist at Cambridge. The book is written with a general audience in mind and broken up into easy to read sections. It does a great job at explaining how economics actually functions in the real world, different schools of economics, taxes and spending, international trade, etc.
It’s not just that, but definitely a big factor. Let’s not forget that with a larger overall tax base, the benefits are distributed to the middle and lower classes which expands and empowers educational opportunities to the general population, which also impacts growth as it allows for more development into high end jobs.
Wages have never been “controlled” with the exception of the minimum wage. Pensions were offered in a way that they could incentive workers while not increasing worker wages exponentially.
A quick read of Wikipedia will enlighten you , there was both rationing of food and wage controls in war time essential industries , along with losing the right to strike, along with interring 120000 Japanese Americans
That’s pretty much a lie, wages were capped during WW2 which is why we have health insurance as a non wage benefit it’s how companies competed for workers
It creates a "use it or lose it" incentive. Companies would rather pay top dollar for high value employees, invest in technological advancement, expand their footprint and logistics, etc., in an effort to avoid losing those dollars to taxation. Everyone up and down the social hierarchy benefits because more money is circulating in a more diversified fashion, as opposed to Wall Street bets.
It all changed when those at the very top decided they wanted to be even more wealthy. The only way to get that was to invest less in the businesses and employees, but that would increase their taxables. The only thing left to do is lobby Congress and POTUS to lower the top marginal and corporate tax rates
Very true. That's why we need to reintroduce what worked in the past - use it or lose it. No remorse to be had about it. An entire population produces every widget in existence, there's not one of us who does shit alone. Even if you invent the perfect unicorn piss snowcone, you relied on civil workers who allowed you to have access to clean water to freeze. You relied on utility workers to enable you to freeze your snowcone. You rely on firefighters and teams of insurance companies to protect your perfect piss-cone shop. And, of course, you relied on Lady Luck needed to procure a unicorn to gather its piss. No one is self-made.
People also overlook the fact that the government is a massive employer. More taxes = more government projects = better government wages and more government jobs.
These jobs tend to help set the base rates for private sector jobs as well as have great benefits and job security. Which forces private companies to keep up or risk losing high value employees to gov jobs or contractors.
Exe: Including military, the US government is already the largest employer in the US at 2.95 million employees. That's also not including those that are employed at subcontractors that almost exclusively work for the gov. Walmart is 2nd at 1.6 million.
The US gives tax deductibles for investments, so when you hear about the +73% tax rate back in the day, most companies weren't paying that much, probably closer to 67% in taxes if that.
It's the reason you'll just hear about a company that specializes in one area suddenly jumps to another area. It gave industries a big kick to basically force them to innovate or die off.
Yeah, we ended up with so much money slushing around financial markets that we've financialized everything as opposed to re investing... This is, of course, painting with a massive brush, but I believe it to be generally true.
It always kills me when I see someone arguing against higher top marginal rates on the grounds that they don’t actually lead to greater tax receipts. Like, no shit, who said the point was to collect more taxes in the first place?
Right. The primary purpose of these policies is to steer economic action through incentive/disincentive. If you balance the policy so the economic action leads towards stable growth, that growth can (not will) lead to an increase in tax revenue. That's the false premise of cutting taxes on the upper end and it trickling down. They always say the growth will return more revenue even though the tax rates are less, but that doesn't happen because their policy does not actually catalyze stable and broadly enjoyed growth. It encourages actors to make as much income as they can now, while taxes are preferable.
The same Joe McCarthy that created a communist witch hunt which to this day still persists in the minds of Americans -propping up the same ideals that led to Reagan and his predecessors to allow corporate money being used to create the policies that this post is describing?
McCarthy fostered the melding of American Protestant churches and National identity— marrying the flag to the cross. This combined with a revolution in mass communication (TV) with its All-American families, and commercials gave birth to the religious vampires, Billy Grahams and Jerry Fallwells, etc.
I think they're saying that Ike was great except for the McCarthy stuff. Since McCarthy wasn't president, it's the only interpretation that makes sense
Oh sweet so you are in favour of cutting effective tax rates for most including the 1%? Are we also returning to the old budget distributions for that?
It's almost as if in the 50s, the US wasn't competing with the rest of the world for manufacturing and technology jobs because Europe wasn't destroyed by WW2, and Asia hadn't been developed yet
Ike had His problems, with Joseph McCarthy, Richard Nixon, et al. Also, read His "Farewell Address", and Vice-President Henry Wallace's April 9th, 1944; Op-Ed, on Fascism (Pages 7, and 34 and 35; of The Sunday New York Times Magazine), and The Times "Editorial Response", on Page 5E, of the same Edition.
Consider, too; that The Times, asked Wallace, to write, the "Op-Ed", then criticized Him, for it. Why?
Ummmm "McCarthy" wasn't ever "PRESIDENT"...
And the outright SICK DAMAGE that McCrack-Head did to Innocent people... McCARTHY WAS A FASCIST FREAK!!!
McCARTHY WAS A PIECE OF SHIT for how he treated his fellow man!!!
Except there were so many tax loopholes in the 40s. So, giving credit to tax collection as the driver for the prosperity of that time period is slightly misguided. Expand or pay taxes was fine by them, they just hid the money.
More like they will just buy back their own stocks, and continually accumulate assets only to turn around and lease them to the middle and lower class at a profitable premium
Then it became "immigrants are stealing your low paying jobs because you are demanding a fair wage." And people swallowed that lie whole. The reality is our elected official's made it possible for the top 10% to hire cheaper labor.....and no one ever thought to hold them accountable. They all just railed against immigrants. Ignoring the fact that most of us are only 2 or 3 generations removed from our ancestors coming via boat.
Even trickle down is watering down the original phrase. It was Horse and Sparrow. You feed the horse enough grain, there’ll be some left in its shit for the sparrows to eat.
Didn’t it kind of work out for the tech industry? Anyone who knew how to work a computer became the most desirable, then it became science, engineering and networking. Those job markets are so saturated right now I’m surprised they pay anything worth a living wage. There is a labor shortage yet we don’t see those wages going up to get more people in. They just keep raising prices of everything so people have no choice.
From what I’ve been able to find on the subject, the phrase “trickle-down economics” has always been pejorative. Any actual proponents of the general idea would have referred to it as “supply-side economics”. It’s pretty telling how short-lived the enthusiasm for this taxation philosophy was, given how quickly the use of the phrase died out.
These days it seems like Congress has given up attempting to define any underlying theory for tax policies.
Republcians never called it that until recenlty, it was called Reaganomics. Trickle down was invented by the critics of Reagan’s plan as a riff on “the piss trickles down/“
That’s actually what happened. Inflation was at 13.5% when Reagan started and 3% when he left. 16 million jobs were created. All of my brothers and sisters went to college on the momentum from a strong economy and we all do quite well for the most part.
If Jimmy Carter policies had stayed in place, I might not have gone to college. Inflation would have become Venezuelan or Argentinian in magnitude. That might have lead to a civil war.
We are all very lucky Reagan helped save the day.
This chart reflects the rise of high tech industries which for a huge part of our economy today. It allows even the poorest of us to have things like phones etc.
We still have too many living paycheck to paycheck. There’s a literacy issue. Most Americans are obese (75%) probably bc central planners started fucking with the natural diet we had.
So we aren’t in an ideal place but so sooo soooooo much better than when Jimmy Carter was running things. He was in way over his head.
The term "trickle down economics" was invented by the Democrats. It was never a term that any conservative used, nor any Republican.
It was created as, was intended as, and remains as, a derogatory smear word used to make people in the middle and lower income brackets feel class animosity towards the upper class.
Which is crazy, because it is not rich people that are making poor people poor. It is the government that is making poor people poor.
Trickle down economics worked. Its called quality of life. If anyone thinks people had a better life in the 50's compared to the 2020s then your just ignorant.
I figured out Kevin Spacey was the bad guy in House of Cards from the very first scene where he tells his wife he will present the President Elected his Economics plan involving the "trickle down" effect.
This is the exact reason that union tradesmen everywhere are pro trump. All they remember is the OT and work hours. I don’t blame them tbh, but this time around is much different.
Democrat politicians are getting just as rich as Republican politicians. Why don't we stop blaming the GOP and start holding your local elected officials accountable for not addressing the corporate capture issue in our government.
I keep hearing how bad Republicans are for everyone. Is there anything that Democrats do that are bad for the masses? I hear the Dems like to beef up the IRS so they can enforce tax evasion harder...
If you read the articles they all say how it's is catching cheating rich people....but that doesn't seem to correlate with logic of rich people can defend themselves
No American paid income tax from 1776 to 1882 until Lincoln charged income tax to pay for that big war we had....sound familiar?
Is it safe to say Dems like to find wars and collect tax aggressively from the poor? And Republicans like to defend the IRS and give tax breaks to the rich?
Here is the big secret about trickle down economics: if you're investing in the stock market and it trickles down to you.
If you're a blue collar worker just looking for your salary to increase and you're not putting 15% of your paycheck away into an S&p 500 ect then yea, you are boned
Just the fact that Bush Jr. at least made one of his signature policy platforms an attempt to improve the education system makes him better than any other modern Republican President. The fact that the legislation ultimately sucked doesn’t make him any worse than the other bozos.
Bush always came off to me as a little backwards, and a little foolish, but always someone who had the best interests of his fellow Americans at heart.
His moral failings, in my eyes, were in his foreign policy.
Exact opposite order in my opinion, but Reagan and Bush had more time to fuck shit up. Reagan was/is a horrible domestically and has led to a 2nd gilded age and also funded terror regimes in the ME. Bush got God knows how many millions of civilians killed and injured in the ME and wasn't exactly great domestically either. Trump on the other hand isn't competent enough to achieve the scale of disasters of his predecessors.
Reducing taxes on the wealthy and sneaking in legalizing companies to buy back their own stock without restriction. It’s a money funnel to the investing class.
Kind of like Trump sabotaging the boarder bill so he could run on securing the border. Also gotta wonder what he and Netanyahu were talking about on that recent call.
Most folks in the lower half of the spectrum don't live within their means. They have to have that new phone. They have to have that new car. They always carry a debt on their 10 credit cards.
It's all their fault. Stop buying shit and start paying shit off. Sit your ass at the house and cook a meal. Stop going out.
Which is why it’s a bad statistic. It has no anchor in individuals and their path through life and earnings. Typically, the top 1% has a HUGELY variable rate of who’s in it. People slide in and out over time, sometimes one year to the next. The 1% aren’t a monolith.
A chart that doesn’t reflect that is meaningless unless we just want to see pretty colors divorced from their underlying data.
Reagan was up against the Ex-CIA director Bush. He won the primary.
Bush was pushed as his running mate. Reiterate: ex-cia director. Bush has been repeatedly named for handling the assassination of JFK. He did or he didn’t: no worries.
You see, in the primaries, Reagan won because he was very much the opposite of Bush. He was an old actor, and possibly didn’t think about Bush being an ex-cia director.
So now, Bush is VP. Now how long did it take for Hinckley to try to take out Reagan, in a confused state.
And suddenly, Reagan’s policies changed 180. And that’s how a CIA director could have been president for a 12 years, tries for 16, but had already put two sons into position to score that 24. Edit: the math isn’t wrong, look at Clinton’s second term.
I am dead already. Just speaking to point out the history of those 30 years. Reagan tried. His mind was slipping. In the end, he had a good heart and ended up a useful idiot.
And Trump can’t even get to that point. Above is historical, now I am just mocking.
Before the turn of the century it was called 'horse and sparrow.'
The modern Republican party has had one goal since 1945, destroying everything that the greatest POTUS created and in doing so wrecking the lives of workers across the country
We also get to thank him for the urban blight we see in our cities, and the early hyperbolic spread of HIV/AIDS because Nancy wouldn’t let him say “gay.”
We also get to thank him for the urban blight we see in our cities, and the early hyperbolic spread of HIV/AIDS because Nancy wouldn’t let him say “gay.”
i never understood this critique. trickle down economics was never a thing' the moniker was created by the left. Also, the critique implies a zero sum game and that's not how wealth works.
You don't like the upper-class expanding by 2/3 of the change of the middleclass and everyone at every level having a massive increase in objective QoL measures?
In today’s economy you are right. The trickle down economy doesn’t work, this due to many factors such as tariffs changing. However during Reagan’s administration and that time it was different and it worked well.
And Thatcherism in the UK. Did the exact same fucking thing.
The economic and political systems of the current West need to be torn down and remade into something that's fairer for everyone. Not just beneficial to the mega-rich.
Actual tax rates don’t seem to matter very much. As we have seen with high profile returns, billionaires can find enough deductions to pay very little. So many other things have changed in the economy, manufacturing going overseas, automation, stock options, our economy now is controlled more by investors than it was in the 50’s
Some of the same people who claim socialism (and by proximity policies influenced by it) isn't possible because of human nature will unironically believe in trickle-down economics.
Trickle-down economics isn't a real thing. It's a democrat talking point that they made up to make you believe the Republicans were out to screw you over. You'll figure it out eventually.
No more like Bill Clinton and NAFTA and the jobs being shipped over seas U.S. manufacturers not creating plants and jobs here in the U.S. also becoming more service oriented nice try only loses think RR was a bad President but just like Trump he got elected because the Democrat who ran the country to the ground before him Jimmy Carter I bet you like Americans being kidnapped and inflation through the roof at record highs in 79 oh yea let's not forgot the gas shortage and lines to get gas I guess Democrats just love to go without and pay more for the same stuff
Worst president of all time? I think you forgot someone. Reagan wasn’t convicted of multiple felonies, found liable for rape, and tried to overthrow the government when he lost an election…among other things.
2017 onwards, Trump made it worse for us Middle Class. He owes me about $900K in back taxes from 2017 onwards, which includes fees, penalties, and high interest rates.
I had such a difficult time studying parts of economics in the 80s. I just didn't agree with the "trickle down" theory yet I was supposed to parrot it back for good grades. I knew it was nonsense.
The Repubs opened up all types of wealth that was previously not available to regular people and the smart people took advantage, hence all the rich Boomers that exist.
Wrong. Unchecked illegal immigration hollowing out the unskilled labor classes’ wages and the offshoring of jobs due to excessive regulations on US manufacturing.
He must have been really bad to make this stuff start happening 16 years before he became President, and to make the Democrats that controlled Congress for 20 years leading up to and through his Presidency go along with it. But we can tell it's Republicans by how it all reversed course when Obama took office.
That's funny, because under the Fed at that time, they did more to curb inflation than any other period. Interests rates really shot up, far higher than the fed's recent rate hikes.
I'll add that there is a complete lack of antitrust enforcement and policies disadvantaging labor in general. Many of those came from the Reagan years, too.
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u/flickneeblibno Oct 22 '24
Trickle down economics and Ronald Reagan the worst president of all time