Posted on 09/07/2012 4:41:05 AM PDT by wayoverontheright
It is high-time we stop allowing the left to paint our economic policies as faith in “trickle-down” economics.
To begin with, it is pure projection, as the liberal way of managing the economy is the way that truly places faith in the so-called trickle down effect.
If one compares the effect on the economy of permanent tax cuts, versus the effect on the economy of government stimulus, the difference is predictable.
Permanent income tax cuts, like the 20% cuts Romney proposes, don’t “go” to anyone, they “stay” in the hands of people who can, and inevitably do, put that money in investments that promise a payoff.
Tax cuts don’t “trickle” and the direction is not “down”.
Tax cuts DIFFUSE throughout the economy, and the direction is multi-directional. Up, down, and more beneficially sideways. Capital gets allocated with super-computer-like efficiency. It doesn’t go where it is deemed to be needed, it goes to where it is requested, by the market signals.
In the case of capital gains tax cuts, it is better even than a diffusion, it creates an explosion of economic activity, because a part of the punitive aspect of the tax is removed. Because inert assets are liquidated, even more capital is freed than the amount of the tax reduction, thus the explosive effect.
If anything fits the descriptive words “trickle” and “down” it is government stimulus. Remember, in order for government stimulus to be deployed, the funds must first be removed from the private sector in the form of taxes, borrowing, or printing. This nullifies private-sector capital formation in proportion to the amount extracted. So stimulus begins with a built-in deficit to overcome, if the goal is private-sector growth.
I will never forget after the 2010 mid-term shellacking the Democrats suffered, my hometown newspaper embarked on a nine week campaign to convince its readers that the stimulus did indeed work. This was AFTER voters had rejected forthwith this type of economic stewardship.
There were nine front-page articles by various writers that examined the various recipients of stimulus monies, and how the received monies were being deployed. There were articles on teachers who were redeployed with stimulus grants, do-gooder agencies that were able to keep their doors open, only because of the government grants, it was said. I watched with fascination as not one private-sector entity was found that had benefitted, until, in the last of the series, a local bus outfitting company was found to have sold a bus to a quasi-government entity paid for by stimulus money. This is the very definition of trickle down, but it just served to illustrate the paltry effect government stimulus has on the private sector.
The reason the Democrats had so much faith in the stimulus is that they do indeed believe in trickle down. It’s just that the “targeted”, and temporary nature of the expenditures prevents government stimuli from harnessing the diffusive and explosive nature that tax cuts could have engendered in the econmy.
The liberals felt that by saving teachers jobs for example, eventually the private sector would “get theirs” when the teachers went to Target and spent some money. The problem is that the federal monies were temporary, and every recipient knew it. They didn’t spend it, they would be idiots to have spent it. They saved it. This is the reason the proponents of stimulus are so mystified. They didn’t, and don’t understand that just printing money and issuing it does not necessarily increase consumption or any other economic activity. It can become dead money, especially in the hands of people and entities that know it is temporary.
So, we must begin to change the nomenclature first, so that we can change the conversation.
Stimulus is truly “trickle-down”. Tax cuts are DIFFUSIVE AND EXPLOSIVE.
Its a different world and I don’t think trickle down economics work the way they did in Reagan’s world. There’s still no reason to invest in America.
We need to totally eliminate the tax on manufacturing, produce cheap energy through hydro, gas, coal, and nuclear, and eliminate ridiculous regulation. At the state level we need to get right to work laws and get rid of prevailing wage laws.
I remember back in Obama's heyday in 2009 flush with a buttload of cash for shovel-ready vote-buying projects. I-575 here in Georgia I drove every day. They put up some "Obama's stimulus gift is helping you..." signs and away they went...they proceeded to remove 1/2" of pavement and laydown another 1/2" - the entire length...IT ALL WENT TO CW MATHEWS & Co....just like every other GDOT road project. Done in 4-6 weeks and that was it.. I-575 is/was perhaps the one interstate road one could consider in the best condition before all that(much reduced semi traffic)....
Elsewhere in Marietta, Acworth, Woodstock - all the litte town squares got fancy new brick paver sidewalks and crosswalks...real pretty...over and done with now...sidewalk embellishment stops just out of sight of all the town and county offices....
His enormous impact here on the infrastructure of Georgia was monumental. So much so that our Georgia Government in its infinite wisdom thought it would be a good idea for a TSPLOST (transportation SPLOST) to fix all the crumbled roads and bridges of which Obama speaks so wistfully. That proposition failed (utter voter rejection) just as miserably as Obama's stimulus did.
The stimulus accomplished one substantive thing, however - it lined the pockets of favorites of the administration, union contractors, local government and other 'connected' entitities like Solyndra et al.
Leftist believe that prosperity, success, provisions, security, etc, all trickle down from the government.
The tax cuts don’t “go” to anyone and stay in the hands who have earned the money makes sense unless you believe that all money in the economy actually belongs to the government and they are there to allow you to have what they see fit. How many times have you heard them say that people “don’t need that much money anyway”?
When confronted with this in a pejorative manner, my reply is that I prefer a trickle down tsunami to a total f***-up any day.
The government debt has become a huge anchor on the economy. So much so that we’ve reached a point where more Keynesian stimulus doesn’t work (if it ever really did). Tax cuts without spending cuts may not work either because they’re really a back door form of stimulus. The money for government spending still has to come out of the economy either with more borrowing or more money printing.
I personally don’t see any real path out of this mess other than total global economic collapse. Between 2007 and 2011 the federal reserve loaned foreign and domestic banks some $16 trillion dollars in money that never existed on what appears to be the expectation that the taxpayers will create the money.
We’ve been sold into generational slavery and I don’t see any way out short of burning the plantation to the ground.
Several Dem leaders have promoted the idea that welfare and unemployment benefits create more jobs and stronger economy via the “multiplier effect”.
The problem with their lie is they only believe it when the money has first “trickled” through government claws.
The depression we are in will end when the de-leveraging process is allowed to end. High taxes slow down the de-leveraging process.
Lincoln's fault.
I think the best way to fix the government debt problem is for the government to default. People should not be lending the government money because it is insolvent. They should loose their money for investing foolishly. Maybe if more of us starting talking about government default as a solution, the investors would think a little longer about lending the government more money.
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