18 Jul 2017

Trickle down economics just doesn't work

I wrote this on reddit, but it's worth repeating:

The premise of "trickle down" is that wealth for the rich will result in (some) wealth for the poor. More important, it assumes that the government should get involved by making the rich richer. (This is why the term is considered derogatory.)

So... how do the rich get richer?
(1a) The government gives them wealth ("rents") via a contract, corrupion, or other "neoliberal" policy (I hate that term as often confuses markets and politics); or
(1b) They make themselves rich.

For (1a), see "cheap oil royalties", patent trolls, defense contractors et al. For (1b), see "Bill Gates"

Now, how can it "trickle down"?
(2a) The government taxes the wealth and transfers the $ to the poor. That's kinda counter productive for (1a) (why not just give the royalties to the poor?), but makes sense with 1b.
(2b) The poor somehow benefit from rich people being richer (see Fable of the Bees).

Both of these make no real sense compared to the real source of prosperity for the masses, i.e.,
(3a) Cheap access to education and health care
(3b) Competitive markets (reducing rents)
(3c) Taxes on wealth that pay for (3a)

So, next time you hear ANYONE say "trickle down" just walk away. It's bullshit. A government that wants efficiency and equity will do 3a-c, which is compatible with basic income, carbon taxes, property taxes, etc., btw...