Saturday, October 18, 2008

Trickle-Down Economics

If you want to grapple with something that bothers me about political conservatism in the economic sphere, it is what seems to me to be a commitment to the trickle-down thesis. The idea is that lowering the tax burden on the higher economic levels will stimulate the economy in general, create jobs, and benefit the people down the scale. I think this is the heart of what the Republicans are using Joe the Plumber to illustrate. Joe himself probably won't be harmed by the Obama tax plan, quite the reverse. However, if he were to get into a position where his profits exceeded $250,000, then the tax plan would increase his taxes (though, I'm told, by just 3%). However, this might cripple his ability to employ Jack the Plumber, Bill the Plumber, and Suzanne the Plumber (let's not be sexist now).

But does it work that way? In particular, does anything trickle down in America when a large corporation goes multinational, and finds labor in Mexico, China, and elsewhere, countries unfettered by American labor laws?

I tried to research the argument that Thomas Sowell had made that it is a mistake to hold that conservatives subscribe to trickle-down economics; that the term itself is a straw man. Offhand, I don't see why it's a straw man.

Ross Perot said "Trickle-down didn't trickle." Where is that guy now that we need him?

40 comments:

Clayton said...

Note that that's 3% on each additional dollar over the $250,000 mark. Each dollar below that is taxed at a lower rate.

It's amazing how difficult it is for people to appreciate the rationale for a progressive tax is. Look, there's stuff everyone thinks we have to pay for. If you go with a flat tax, the hardship for those at the bottom will be greater than for those at the top. As much as you'd like to cut spending, no one's willing to do it. So, we have a tax code that takes account of hardship. Does it take away incentive to work hard and try to get rich? Doesn't seem like it. Everyone I know is working pretty darn hard.

Anyway, for all the idiotic McCain supporters who think Obama is a socialist (I'm thinking of you, Joe), you'll note that McCain doesn't advocate a flat tax. We could play that socialist crap with him, too. We're just above it (and we know what 'socialist' doesn't mean).

Ilíon said...

There you go again, VR!

You simply are incapable of avoiding Democratic Party "talking points" -- "Trickle-down economics," indeed!

You don't *want* to understand reality. You don't *want* to think rationally, logically, honestly.

Victor Reppert said...

I am hoping for a Republican response to the issue of trickle-down economics. I even mentioned Sowell's denial that trickle-down is a good description.

Democrats do mention trickle-down econonics. What do Republicans say?

It doesn't help the discussion that you keep advancing the "stupid, ignorant, insane or wicked" line with respect to your political opponents. Could you name me one liberal you respect?

Anonymous said...

Republicans say "supply side". At least they did in the 90's, when they pretended there was a rationale behind giving the rich tax breaks. Now they mostly just accuse you of being a class wawrrior if you question it.

Ilíon said...

And behaving as though one were "stupid, ignorant, insane or wicked" is the way to "help the discussion?"

Anonymous said...

If you're wondering where Ross Perot is, you can find him (or at least a video of him) on his blog at PerotCharts.com. Stop by and take a look.

Editor
PerotCharts.com

Ron said...

I admit that I am much more of a social conservative than an economic one but let me try to explain and defend the conservative position here.

Liberals accuse Bush of passing 'tax cuts for the rich.' This is true but misleading. He cut taxes across the board. Since the rich pay more taxes they get more money than those who paid less. The progressive income tax stayed in place. He just lowered it for everyone. If Gore or Kerry were elected, their tax cuts would have probably benefited middle class people like myself more but it would have been more unfair to those who make more. You shouldn't be punished for making more. Our income tax should not be made more 'progressive' than it already is. That kind of 'spreading the wealth around' is socialism plain and simple.

Clayton said...

Ron,

Do you actually know what 'socialism' means? In a socialist society, a collective entity owns and administers the means of production. Taking tax dollars to buy up shares of private industry is socialist. Bush did that. There's nothing socialist about progressive taxation.

Now, that doesn't mean that it's right. But, if you think that the motivation for a progressive tax rate is to punish the rich, you should recognize that McCain is not advocating the flat tax. Neither is Bush. Are Republicans trying to punish the rich?

If you want an argument for a progressive tax rate, here it is. We have to pay taxes. Roads, fire departments, public eduction, defense spending, that requires tax dollars. Even if the libertarians took over, we'd still need cops. Now, if you have a flat tax, that will be a greater burden on those towards the bottom of the economic scale. You don't need to think about marginal utility to see it, but if you take account of marginal utility, it is just that much more obvious. So, my question is this. If you think progressive taxation is a sufficient condition for socialism and the only other option is to run a society in which the burdens placed on taxpayers are greater for those at the bottom, what's wrong with socialism? Why do you want to punish the poor? [That last question was tossed in for rhetorical effect.]

Randy said...

Everytime I've moved up into a higher tax bracket and seen my tax rate go up, I haven't felt like I'm being punished. My quality of life has gotten better. I've had more freedom to do the things I wish to.
I know what it is like to be very poor. I don't resent having more of my money going to help improve the infrastructure of the country, to help provide more social services like health care and education to those who are poor.
I certainly think it unfair to tax everyone at the same rate regardless of their income.

A little off-topic, but I thought the Colin Powell endorsement made an excellent case for Obama. The video is online.

Ron said...

clayton,

I am not saying that the progressive tax system should be abolished. I want to learn more about the FairTax but I don't support a flat tax. Socialism is not just about the government 'owning and administering the means of production.' It also includes redistributing wealth. I don't find anything wrong with the government taxing a rich man more than a poor man to build a road or a school. What I oppose is the government taxing the rich man to pay the poor man. (The really needy should get assistance to help them support themselves but it shouldn't be government policy to redistribute wealth.)

Clayton said...

Ron,
It also includes redistributing wealth.

With all due respect, many non-socialist programs involve the redistribution of wealth. I don't think it's intellectually honest for people to label something as 'socialist' when it is a feature of many non-socialist programs.

Look, there is no connection between a progressive tax plan and socialism. Is there a connection between wealth redistribution and progressive taxation? If there is, it is indirect. Parts of my father's income will be taxed at a higher rate than any of my income will be because he is in a higher tax bracket. I'll not see any of that money. It's not like the government gives me a check. He'll pay more for highways, police, etc...

At any rate, since you don't think we should have a flat tax, why aren't you open to the charge of supporting socialism and wishing to punish the rich?

Since McCain is for taxing my health care benefits and giving tax credits to those who do not get employer provided health care, why isn't he a socialist? That's a clear case of wealth redistribution, is it not?

Here's a clear difference between McCain's plan and Obama's. I work a job that pays crap. It pays so badly that I work a second job to afford doing the first. (I teach at a private university in Dallas and now commute to a second university on my days off to teach in Fort Worth.) The one good thing I get from my job is health care. Under McCain's plan, my employer will be taxed for providing health care to people like me. They will now have to make cuts. They could cut salaries, they could higher fewer people, or they could stop providing health care. Under Obama's plan, I get a tax break. I'll still have to work two jobs because it will amount to an extra couple hundred dollars, but I might be able to open my first savings account when I turn 33.

My parents own two homes in California and are thinking about buying a little place in France. Under Obama's plan, their taxes go up about $12 and they'll get $5000 under McCain's plan because my health care is being taxed.

You tell me which redistribution is preferable?

Now I'll admit that my bad financial situation is partially my fault. I didn't have to be a teacher. I chose to take a job that pays crap because I love it and because I think I can actually do good by teaching. I could have just chosen to be an attorney, made more money, I'd benefit from the Republicans redistribution schemes, and I'd spend my days suing people for frivolous reasons and driving them into financial ruin. I dunno, I think it might be nice if there weren't such strong financial pressures against teaching, working in the ministry, etc...

normajean said...

Good thoughts, Ron, Clayton... I'm puzzled too by this socialism tag to dems only. Last I checked full blown laissez-faire capitalism didn't exist here.

Ron said...

Clayton,

While tax incentives for employers who provide healthcare are very popular, economists tend to oppose it for two reasons. (Btw, my source for the is The Economist Oct. 4th- 10th). It distorts the market because it is biased against individual plans (the plan I have for example) and it ties employees to their employers, reducing labor flexibility. So, having tax credits for insurance tied to individuals rather than through employers makes more sense.

I admit that if I had my way, the federal government would not be in the healthcare business. Nor would there be a federal Department of Homeland Security or Education. I am Ron Paul-like in my libertarian leanings. Obviously, McCain and Bush are not small government types as proved by the bailout. But, since McCain's plan is more market-driven and costs less than Obama's plan and that makes it a little better.

Since you mentioned ministry, I take it that you are a Christian. As a Christian, the life of the unborn should matter more than who has a better economic plan. That is a more basic question of justice than arguing about money. There is much out there on Obama voting against assistance to infants who survive abortion. I honestly, can't bring myself to read much about it since I'd get way too angry. I don't know how a Christian can live with anywhere near a clean conscience knowing how radical Obama's pro-abortion views are.

Clayton said...

There are downsides to employer based health care systems. But, there are downsides to using taxes to break that system down. Among them, benefits will accrue to those who don't need them, groups will not be able to bargain with health care providers, etc... The point is that you focused on the redistribution of wealth, and under McCain wealth is redistributed. It goes from the bottom-up in my case.

As for which plan in more market driven, that is rubbish. Using taxes to interfere with the free arrangements that have arisen within the market is not free market. Let me give you an analogy. If I proposed a $2/gallon tax on gasoline so that few could afford to drive but then promised to give people some money back to buy either pogo sticks, bikes, or running shoes, that isn't 'free market'. That's essentially McCain's plan. It isn't liberatrian by a long shot, but I can't tell you how to use terms like 'libertarian' or 'socialist'. It's a free country.

I'm not a Christian. But, even atheists can see the value in ministry. (Somehow it seems that you've sided with the angry atheists who think that the value of ministry depends on the truth of what is being said. I think it has a value over and above the veracity of what is being preached, which is good, because I think it has no veracity.)

You wrote:
There is much out there on Obama voting against assistance to infants who survive abortion. I honestly, can't bring myself to read much about it since I'd get way too angry. I don't know how a Christian can live with anywhere near a clean conscience knowing how radical Obama's pro-abortion views are.

There is so much here that is just plain confused and misinformed. Obama voted against a bill that provided protection to these infants. If you knew the back story, you'd know that it was already illegal not to provide them with care. Maybe if you read more about it, you wouldn't be so angry and you could look at the issue rationally.

Ron said...

I admit that I was being hyperbolic with the ‘that is socialism plain and simple’ comment. I agree that McCain’s plan isn’t truly free market since it involves using taxes to manipulate the market for the benefit of citizens. I think you are trying to use terms like ‘socialist,’ ‘libertarian’ and ‘free market’ in a rigidly black and white fashion. This is inappropriate because none of these exist, in their pure forms in this country. The two political parties may have their bases in the Right and Left but they must appeal to the center to win. So all I was claiming was that McCain’s plan is more free-market. Obama, on the other hand, wants to create a government-run insurance that would run alongside the private companies. The freedom of insurers to choose who to admit into their programs would be severely reduced. The current explosion in health insurance costs has much to do with bureaucracy. Somehow, I don’t think more bureaucracy is the solution.

I assume that you see value in the social work that Christian ministries do, in helping those most marginalized in our society. That is laudable. However, I think it a bit dishonest to support such ministries if you are an atheist. I’m a Christian and believe (to varying extents) what is being preached. If I were an atheist and a humanist, I’d support secular groups that helped the disadvantaged. When it comes to beliefs and practices, I believe honesty is the best policy. It is better for all involved.

I am currently reading up on Obama and abortion. What I am finding is not pretty to say the least. I think I will post more about it here if the conversation is still going on later. I think Victor needs to read some of these links. It is my growing conviction that Obama would worsen the abortion holocaust. I hope that I am wrong on this.

Ilíon said...

Clayton: "Anyway, for all the idiotic McCain supporters who think Obama is a socialist ... "

Does anyone know how to spell blatant hypocrite?

Perhaps the 'idiotic' McCain supporters do think Obama is *merely* a socialist. Those in the know (whether they support or oppose him) know he's much more than a mere socialist, as bad as that would be.

Randy said...

Ron
However, I think it a bit dishonest to support such ministries if you are an atheist. I’m a Christian and believe (to varying extents) what is being preached. If I were an atheist and a humanist, I’d support secular groups that helped the disadvantaged. When it comes to beliefs and practices, I believe honesty is the best policy. It is better for all involved.

How is one being dishonest by recognizing that Christian, Jewish, Buddhist, etc. social ministries are good for this country? I have and will continue to donate to such work even though I am an atheist.
I am having trouble understanding why I have to agree with someone's religious views in order to support her for the good work she is doing like helping to feed the poor or providing help to battered women.

Ilíon said...

Clayton: "Note that that's 3% on each additional dollar over the $250,000 mark. Each dollar below that is taxed at a lower rate.

It's amazing how difficult it is for people to appreciate the rationale for a progressive tax is. ...
"

What's amazing is two things:
1) How readlily "liberals" are to misrepresent the issues.
2) How readlily the general population is willing to act like guppies: eat it up withour thinking about it.
====
What you're all missing (or avoiding, as the case may be) are questions of First Principle, non-exhaustively, these include:
1) Is it just to tax persons unequally?
1a) Is it just to *take* the produce of one person's work and give it to another?
2) Is it Constitutional to tax persons unequally?
2a) Is it Constitutional for the US government to perform "charity?" Especially when the "donors" have no choice in the matter?

The answers are: No.

Ron said...

Here is a link to this blog article on the subject of Obama and the born-alive bill that he debated and voted on.

http://johncwright.livejournal.com/192206.html

This is truly sick. I've never felt this way about anything a politician has done ever. Anyone should be apalled by this, especially if you are a Christian, as Obama calls himself.

Saying this will be controversial but I think that I must. No Christian should vote for or support the candidacy of Barack Obama. If Christians can't bravely stand up against him, then Christianity has been effectively abolished in America. This is pure evil. If we don't stop this man and his views, the servants of Moloch will win. When I reflect that God is just, I fear for my country for his justice will not wait forever.

Ilíon said...

Ron, Ron, Ron!

That's so divisive! You "wicked" man, you!

But you're right.

Ilíon said...
This comment has been removed by the author.
Ron said...

randy,

Perhaps I should have been more clear. No, I do not think that donating money to an organization that does a lot of social good has to be predicated on supporting their religious views. What I was imagining was physical participation in the ministry. It would be dishonest for me to work in a Muslim organization that feeds the poor because I do not believe in Islam. The feeding of the poor is an eminently good thing but the main part of the organization is spreading the faith. I'd be insulting the people in that organization if I became a part of it solely because I support the end of helping the disadvantaged.

Now, perhaps this would be okay, if I really wanted to help the world and could only do so through an Islamic organization. But that is not the case. I have many secular options open for me. Why risk being dishonest if I could physically participate in an organization that embodies both what I believe in and what I'd like to practice.

Randy said...

ron,
I read the portions of Obama's speech on the blog site you linked to. Didn't sound that horrible to me. If a physician has decided that a fetus is not viable, why should he be burdened with the responsibility to find another physician to support his medically based decision? If he is that incompetent, he shouldn't be practicing medicine in the first place.

Thanks for explaining your position regarding religious charities. Still not sure I agree with you there, but at least your position makes more sense to me.

Ron said...

The whole rationale for the Born Alive Infant Protection Act was to protect the minority of infants who are born, survive a botched abortion, and then are left to die alone. Basically, it was to close a loophole in the law. For Obama, since such babies are meant to die, measures shouldn't be taken to determine if they really are viable and deserving of medical attention. Under then-current law, that wasn't happening all the time. According to this nurse who testified in court and is interviewed here: http://www.foxnews.com/story/0,2933,407882,00.html 10 to 20 percent of these infants would be left to die. Even NARAL supported this bill. Anyone with an ounce of a moral compass would have supported this bill. Unfortunately, Obama didn't just vote against this bill but argued against it in debate twice.

What's most damning about this are Obama's own words.

Victor Reppert said...

Ilion, on your view neither the Republicans nor the Democrats advocate justice, at least not those involved in this campaign.

What is "unequal" taxation? $5000 taken out of my pocket would be intolerable for me but a flea bite for Bill Gates. 10% of my income would be more money for me than someone less wealthy than myself, but would do considerably more economic harm.

Randy said...

Ron,
For Obama, since such babies are meant to die, measures shouldn't be taken to determine if they really are viable and deserving of medical attention.


That is not exactly what he said. He said it was the responsibility of the perfroming physician to decide the viability of the fetus. There shouldn't be a requirement that another physician be called in to confirm non-viability.

Medicine is a practice not a science like physics or chemistry. You can never be 'really sure' about viability of a fetus even if every fetus has extraordinary measures taken to revive and keep it alive.

Ilíon said...

VR: "Ilion, on your view neither the Republicans nor the Democrats advocate justice, at least not those involved in this campaign."

Why do you so resist comprehending that I am not a Republican? Are you so in the tank for the Democrats that you're simply incapable of seeing anything which is not in the same murky waters?


Ilíon: "1) Is it just to tax persons unequally?
1a) Is it
just to *take* the produce of one person's work and give it to another? "

VR: "What is "unequal" taxation? [attempted distractions]"

You know very well what justice and is not. And that, along with intellectual dishonesty, is why you hypocritically whinge about how "unfair" it is that you (personally) pay the taxes that "the rich" are "supposed" to pay.

And you know very well what "equal" means with respect to justice. You know very well that injustice is *precisely* the act (and at a deeper level, the mindset) of favoring one person, or class of persons, over another.

You *also* know that injustice is immoral.

But then, because you seem to need to defend "liberalism," you're also into that whole "social justice" bullshit.

Blue Devil Knight said...

It is possible to disagree with Obama in reasonable and substantive way, but the 'socialist' label is silly and false. It is a category mistake.

Blue Devil Knight said...

Obama's behavior with the born alive bill doesn't seem all that bad. He addresses the issue fairly well here. This also came up in the previous debate.

Randy said...

I've seen the point made several times in these political threads that giving one's money freely to help the poor is a good thing. I would agree with that: all charitable work is good. And so the refusal to help the poor would logically be a bad thing.

But why does that entail that being taxed to help the poor is a bad thing?
Whether to perform an act of charity is a moral matter. Whether or not to have taxes is I think a practical matter. If so, charity and taxation are in different categories and so shouldn't be lumped together or treated in the same way.

Charlie said...

Does anyone know how to spell blatant hypocrite?

I-l-i-o-n

Ilíon said...

Look at that ^ … illiterate, too.

Ilíon said...

Randy: "I've seen the point made several times in these political threads that giving one's money freely to help the poor is a good thing. I would agree with that: all charitable work is good."

If you *literally* mean what you literally wrote, then what you wrote and mean is false. For, in fact, not *all* charitable work is good -- any charitable work which does more harm than good is not a good thing.

And merely throwing money at someone in need frequently does more harm than good -- money is not wealth. The "problem of povery" is not that "the poor" have no money, but that they have no wealth, frequently starting with their fundamental attitude and approach toward living their own life.

In a society such as we have in America, it takes consistent and sustained effort to be "poor" year after year, decade after decade, generation after generation. In America, merely showing up is almost enough all by itself to give a person a (materially) comfortable life.


Randy: "I've seen the point made several times in these political threads that giving one's money freely to help the poor is a good thing. I would agree with that: all charitable work is good. And so the refusal to help the poor would logically be a bad thing."

The conclusion does not logically follow. If the "help" is not really going to actually help, or cannot be reasonably expected to actually help, or after experience has show the expectation to be faulty, then to refuse to "help" is logically (and morally) the correct thing to do.

Good intentions are not good enough.


Randy: "But why does that entail that being taxed to help the poor is a bad thing?"

Do you not understand the concept of freedom? And if you are an American, do you not understand the concept of Constitutional?

Randy: "Whether to perform an act of charity is a moral matter. Whether or not to have taxes is I think a practical matter. If so, charity and taxation are in different categories and so shouldn't be lumped together or treated in the same way."

And have you not started to answer your own query? Governmental "aid to the poor" is *not* charity. Moreover, when "aid to the poor" is undertaken by the US Federal government, it is unConstitutional, which is worse than merely being illegal.

And, governmental "aid to the poor" *never* solves "poverty" -- though it does serve to furnish a nice perpetual income for "caring professionals."


And these "liberals" who try to portray anyone who opposes governmental confiscation of others' income to redistribute as "aid to the poor" (aka "guaranteed income for poverty-bureaucrats") as being wicked are themselves wicked, on many levels.

Ilíon said...

Blue Devil Knotruth: "It is possible to disagree with Obama in reasonable and substantive way, but the 'socialist' label is silly and false. It is a category mistake."

Oh? Did Marxism cease to be socialistic while we weren't looking? Did "redistribute the wealth" cease to be socialism while we weren't looking?

Charlie said...

^Failed his Logic 101 course

Charlie said...

http://johncwright.livejournal.com/192206.html

As has been pointed out several times, but which people like Ron conveniently keep ignoring, there were already legal requirements for doctors to take care of live babies. It doesn't follow from the fact that some doctors failed to satisfy those requirements (which was a felony in Illinois) that this new bill should be passed, a bill that was clearly developed for political reasons, not moral ones.

Obama is explicitly in favor of doctors taking care of live babies (obviously); he's not in favor of passing bills which use isolated felonies as a pretext to undermine Roe v. Wade. Both republicans and democrats joined Obama in voting against the bill, contrary to the attempt by some to construe Obama as a lone madman bent on "killing babies".

Don't believe everything you read on random blogs.

Ilíon said...

^ Has the "hots" for Ilíon; keeps trying to get is attention (is a miserable failure).

Jim Jordan said...

Randy said to Ron--If a physician has decided that a fetus is not viable, why should he be burdened with the responsibility to find another physician to support his medically based decision?

That's exactly the loophole they were trying to close. No doctor was ever prosecuted for letting an "unviable" baby die who'd been born alive. One "doctor" even strangled babies he found to be "not viable"...with impunity). Obama's position is disturbing. What else lurks in that brain?

That aside, the most frightening part of our economic collapse is that neither party seems to know what happened or how to fix it. Whoever wins needs to understand that powerful capitalists do need to be watched closely and government needs to shrink greatly. Both have screwed our economy and when they get together, look out. For some reason I think we're going to see more of that worst case scenario.

Blue Devil Knight said...

ilion: lol. you don't understand the meaning of the word 'socialism'. Or you probably do but are being funny as usual.

Mike Licht said...

Trickle-Down Economics and Beer?

See http://notionscapital.wordpress.com/2008/10/28/mccain-economic-policy/