Trickle down Economics - Democratic Underground

nadinbrzezinski

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Thu Jul-22-10 08:06 PM
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Trickle down Economics

Edited on Thu Jul-22-10 08:27 PM by nadinbrzezinski

Trickle-down economics
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Critics often point to a decrease in tax revenue as an effect of Supply-side or trickle-down economics.<1>

"Trickle-down economics" and "trickle-down theory" are terms of political rhetoric that refer to the policy of providing across the board tax cuts or benefits to businesses, such as tax breaks, in the belief that this will indirectly benefit the broad population. The term has been attributed to humorist Will Rogers, who said during the Great Depression that "money was all appropriated for the top in hopes that it would trickle down to the needy."<2>

Proponents of these policies claim that if the top income earners invest more into the business infrastructure and equity markets, it will in turn lead to more goods at lower prices, and create more jobs for middle and lower class individuals. Proponents argue economic growth flows down from the top to the bottom, indirectly benefiting those who do not directly benefit from the policy changes. However, others have argued that "trickle-down" policies generally do not work,<3> and that the trickle-down effect might be very slim.<4>

Today "trickle-down economics" is most closely identified with the economic policies known as Reaganomics or supply-side economics. Originally, there was a great deal of support for tax reform; there was a dual problem that loopholes and tax shelters create a bureaucracy (private sector and public sector) and that relevant taxes are thus evaded. During Ronald Reagan's presidency, the Democratic controlled House, at the urging of President Reagan, cut the marginal tax rate on the highest-income tax bracket from 70% to 28%.<5><6>

A major feature of these policies was the reduction of tax rates on capital gains, corporate income, and higher individual incomes, along with the reduction or elimination of various excise taxes. David Stockman, who as Reagan's budget director championed these cuts but then became skeptical of them, told journalist William Greider that the term "supply-side economics" was used to promote a trickle-down idea.<7>

http://en.wikipedia.org/wiki/Trickle-down_economics

With no further comment... but this is so basic it is not even funny.

Added as requested...

The paradox of thrift (or paradox of saving) is a paradox of economics, popularized by John Maynard Keynes, though it had been stated as early as 1714 in The Fable of the Bees,<1> and similar sentiments date to antiquity.<2> The paradox states that if everyone tries to save more money during times of recession, then aggregate demand will fall and will in turn lower total savings in the population because of the decrease in consumption and economic growth. The paradox is, narrowly speaking, that total savings may fall even when individual savings attempt to rise, and, broadly speaking, that increases in savings may be harmful to an economy.<3> Both the narrow and broad claims are paradoxical within the assumption underlying the fallacy of composition, namely that what is true of the parts must be true of the whole. The narrow claim transparently contradicts this assumption, and the broad one does so by implication, because while individual thrift is generally averred to be good for the economy, the paradox of thrift holds that collective thrift may be bad for the economy.

http://en.wikipedia.org/wiki/Paradox_of_thrift