Tuesday, January 2, 2018

Trickle Up or Trickle Down

Trickle Up or Trickle Down

by Ted Miller
(originally published January 2018 in Tumbleweird)

I recently read a quote from Will Rogers:

This election was lost four and six years ago, not this year. They didn’t start thinking of the old common fellow till just as they started out on the election tour. The money was all appropriated for the top in the hopes that it would trickle down to the needy. Mr. Hoover was an engineer. He knew that water trickled down. Put it uphill and let it go and it will reach the driest little spot. But he didn’t know that money trickled up. Give it to the people at the bottom and the people at the top will have it before night anyhow. But it will at least have passed through the poor fellow’s hands. They saved the big banks but the little ones went up the flue.
Will Rogers, And Here’s How It All Happened (1932), as published in the Tulsa Daily World, 5 December 1932.

That commentary could have been written today.

The tax bill passed by Congress and signed into law in December claims to solve a problem that doesn’t exist. By almost any measure, the economy has continued to improve since the Great Recession of 2007. The unemployment rate has been reduced from a peak of 10% in 2009 to 4.1%, lower than it was just before the recession[1]. Gross Domestic Product (GDP), which measures overall economic activity, is growing at a healthy rate of 3%[2]. Corporate profits are soaring at over $1.8 trillion for the third quarter of 2017, the highest on record[3]. And the stock market indices are at record highs.

So why do we need to cut taxes? If the goal is to give relief to the middle class, as the Republicans who passed the law claim, this tax bill makes only a token, temporary effort at doing so. The middle-class tax cuts are modest at best and expire after 10 years while the corporate tax cuts are generous and permanent. The bulk of the tax cuts go to corporations and wealthy individuals. If that is supposed to help the middle class, it contradicts history: Providing more money to the rich never trickles down to the lower classes.

When President Hoover tried it, as Will Rogers wrote, the money trickled up, not down. Government policies that allowed market greed and corporate irresponsibility to run unchecked led directly to the Great Depression of the 1930s.

The tax bill of 2017 is more of the same. Cut taxes on the rich, deregulate business, and everyone will prosper. But, not only is this tax cut unnecessary to improve the economy, it comes with a $1.4 trillion price tag. Yes, the party of fiscal responsibility passed a bill that increases the national debt by one-and-a-half trillion dollars over 10 years.

There are so many pressing issues that could be paid for with that missing revenue. Infrastructure improvement was high on the list of campaign promises, but there are no programs to repair and improve the country’s infrastructure and now even less money to pay for it. Adequately funding of health-care continues to be an issue, but Congress won’t even continue funding the Children’s Health Insurance Program for 9 million children. Veterans programs continue to be underfunded and there are many other essential programs that are being cut or defunded by the current administration.

The worst part of the tax cuts is who will end up paying for them. Social Security, Medicare, and other safety net programs are in jeopardy and members of Congress have already signaled that cuts to these programs will be the next target. As the budget deficit grows, average Americans and those in need of a social safety net will end up suffering the most. This kind of action is not the promise of a government that works for all its citizens. This is not how we take care of our fellow citizens and “promote the general welfare.”

In the stock market crash of 1929, those hurt the most weren’t the big bankers and the wealthy, but the average, hard working American who suffered from the economic collapse. Following the Great Depression, we enacted programs for the poor, established social security to take care of our elderly, and imposed tighter regulations on banks and corporations. Labor laws have improved the workplace, supported the rights of workers, and helped make America a place where a living wage is possible.

But for the last several decades, Republicans have worked to erode or eliminate many of these programs. Banking regulations passed less than a decade ago in response to the recession are being rolled back. Environmental regulations are being weakened, labor laws are being undercut, and equality is being jeopardized. The economy is growing, and corporate profits are at record levels, but wages for the poor and middle class aren’t improving. The rich keep getting richer, but they aren't letting that extra wealth trickle down to the rest of the population.

This tax cut is not about helping the middle class. It’s about concentrating wealth for members of Congress, their wealthy supporters, and corporate America.

Will Rogers got it right. Trickle-down economics is a farce. Capitalism is only sustainable with a well-regulated economy that balances the drive for profit at any cost. Until we have a Congress that truly represents the interests of all Americans, our economy will continue to trickle up.

[1] Source: US Bureau of Labor Statistics – bls.gov
[2] Source: Center on Budget and Policy Priorities - cpbb.org
[3] Source:  U.S. Bureau of Economic Analysis - bea.gov