The trickle down straw man

February 20th, 2014 at 10:00 am by David Farrar

Jenesa Jeram at the writes:

In debating, speakers are not rewarded for having a superior argument per se. They are rewarded for convincing the audience that they do. The easiest – but ultimately dishonest – way to do this is to caricature the opponent, portraying their argument as ridiculous beyond belief.
 
Trickle-down economics is an example of a “ridiculous beyond belief” idea; that giving money to the rich will eventually trickle down to the rest of the economy to benefit all. Indeed, the refutation of this theory of trickle-down economics dominates the discourse.
 
Recently, opposition leader David Cunliffe cited the theory’s failure in his State of the Nation speech, arguing that “The rich are getting much richer, the middle is struggling and the poor are going backwards. It’s the human face of “trickle-down economics”, the idea that if we give more to those at the top, eventually things will get better for the rest of us.”
 
The problem is, there is no such thing as trickle-down economics. In fact, it is an oxymoron: it has no “economics” in it whatsoever. Thomas Sowell, senior fellow at the Hoover Institution argues convincingly that the theory is a straw man argument – a flimsy invention of those arguing against it so they can easily knock it down. Sowell writes that the idea cannot be found in “even the most voluminous scholarly studies of economic theories”.

In other words the left have invented this theory, so they can claim it is what the right believes in, so they can them campaign against it.

Trickle-down economics is a complete caricature of the original arguments supporting economic growth. No economist has ever argued that in order to make a poor person richer you should make a rich person richer first. Economists have, however, argued that economic growth can make us all better off, whether we are rich or poor.
 
So why has this trickle-down nonsense persisted for so long? Perhaps because it sets the parameters of debate around redistribution, focussing solely on inequalities in wealth, rather than inequalities in capabilities. If wealth is not trickling down naturally through voluntary processes, then it is up to the government to intervene to ensure it does.
 
However, there is a much better way to deal with inequalities. Instead of trying to correct inequalities through redistribution, we should ensure that everybody has a chance to participate in our growing economy. First and foremost, this means making sure people acquire the right capabilities and education.

Absolutely.

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87 Responses to “The trickle down straw man”

  1. Carlos (686 comments) says:

    Fascinating.

    In 1992 my 6th form economics teachers, who was very pro free markets and the Labour and National economic reforms of the 80s and 90s, would go on about this trickle down economic theory and how it was the answer to our problems. He obviously believed it was a genuine economic theory at the time. I’m curious as to how he got that idea. Perhaps there were some of those on the right who genuinely believed and promoted it back then.

    Does anyone have any ideas?

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  2. Harriet (4,522 comments) says:

    Cunliffe is correct Trickle Down Theory does exist, and is what Labour do best – they piss on the poor! :cool:

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  3. EAD (618 comments) says:

    Glad Thomas Sowell got a mention. He writes beautifully on economics, politics, race-relations and history. Lefties can’t stand him because he is African American and supposed to be a “victim” according to their vile play book of collectivism rather than an individual who can think, act and hold an opinion of their own. He tears to pieces every single one of their fallacious arguments.

    His article below was one of the most influential in making me realise that the gold standard is THE very best way for the public to defend themselves against politicians and socialists who want to run up big debts and create inflation by spending more than they collect in taxes.

    http://www.realclearpolitics.com/articles/2010/09/28/politics_versus_gold_107327.html

    Gold is the best protector of our freedoms and our liberties and it why it is hated so much by politicians.

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  4. Yoza (1,545 comments) says:

    Those of us who lived through the eighties neoliberal ‘revolution’ will remember very well the “trickle down” canard being peddled to all and sundry. This is one piece of free market nonsense the Ministry of Truth will not be able to consign to the “memory hole”.

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  5. ShawnLH (3,454 comments) says:

    Iv’e been reading Thomas Sowell for years. The man is brilliant. Would love it if he did a lecture tour here in NZ. We have a few more or less solid economists here, but none that can make an argument as well as Sowell does.

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  6. Short Shriveled and Slightly to the Left (762 comments) says:

    Yeah I’ve given up trying to explain the sentiment of the last paragraph to fellow lefties for years. After reading the Facebook and Stuff comments yesterday I think I am fully out of the left now and into the centre. I had already decided I wasnt voting Greens or Labour this election but I was planning to flag voting altogether….now I’m voting National. Did anyone read the comments yesterday? why does the majority of the left not know how a fucking sampling survey works???

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  7. Yoza (1,545 comments) says:

    EAD (171 comments) says:
    February 20th, 2014 at 10:12 am

    Glad Thomas Sowell got a mention. He writes beautifully on economics
    … His article below was one of the most influential in making me realise that the gold standard is THE very best way for the public to defend themselves against politicians and socialists…

    Gold bugs are nut jobs. There is not enough gold in the world and its value is so meaningless it has no viable value as something to which any currency can be tied to protect its value.

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  8. YesWeDid (1,029 comments) says:

    You’re trying to reinvent history DPF.

    “Trickle Down Economics’ was the term used to describe the economic policies of Reagan and Thatcher in the 1980′s where you cut taxes to the wealthy and somehow magically this also benefited the people at the bottom of the heap.

    ‘Sowell writes that the idea cannot be found in “even the most voluminous scholarly studies of economic theories”.

    That is a laughable statement, its called ‘supply-side economics’.

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  9. EAD (618 comments) says:

    SSaSttL 10.20am

    I have posted this link once before to Kiwiblog back in December when the article was published but it is worth sharing again.

    It is called “The State Causes the Poverty It Later Claims to Solve”
    http://mises.org/daily/6604/

    I mean how many times do we have to look at history to see the utter failure of socialism vs. freedom. North vs. South Korea, East vs. West Germany. Countries with near identical populations and stages of development when they were formed. Tyranny, oppression, death and poverty in the former, success, freedom and liberty in the latter.

    No matter how many times history shows the Statists to be failures, there are always fresh waves of idiots who think “this time is different”……it never is.

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  10. Manolo (13,375 comments) says:

    Lefties like Yoza and YesWeDid don’t like the trickle down effect. They do prefer the left-wing misery they preach equally distributed among the populace, because they know what is better for the rest of us.

    For people like these two, fellow travellers, and pinko-academics, the free market is the common enemy.

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  11. Ed Snack (1,738 comments) says:

    Yoza and YWD, OK, so find the scholarly references for “Trickle Down” economics. What you are probably correctly identifying is that theories such as supply side economics were incorrectly labelled as “TDE”; you can find plenty of references to it but they’re all part of the concerted strawman campaign to delegitimize said actual theories.

    Just as an example, Supply Side economics cannot be usefully described as a “Trickle Down” theory, although can certainly be caricatured as such.

    And as an aside, Yoza does have a good point about the supply of Gold, but if we had stuck with a Gold standard and hadn’t experienced the explosion in credit creation it is *possible* that a gold standard could have worked. That’s a bit alt-future though; right now a standard would be very difficult to introduce.

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  12. EAD (618 comments) says:

    @ Yoza 10.28am

    Good old ad hominem attacks – typical playbook of a far left ideologue to create an emotional response to try and stop intelligent thought and shut down the debate. I suppose your going to call me a “denier” a “conspiracy-theorist”, a “nazi”, a “wayyyycist”, a “bigot” or is “nut job” enough? How about you tell me why gold is not money despite it being used as money for 5,000+ years, being held by just about every single central bank in the world – why would they do that if gold was “meaningless” as you say?

    How about let people choose what they use as money? Their is no great mystic about money – all it is is a means of exchange that allows people to specialise (making us all wealthier) by removing the need for barter. Gold & Silver were chosen by the market as the the best forms of money because they were rare, divisible, uniform in their properties (i.e. gold is gold no matter where in the world you are) and most importantly a store of value. When you can create money out of thin air like governments can, then money no longer becomes a store of value as the government by deficit spending steals our labour invisibly via inflation.

    NB: nonsense about there not being enough gold in the world – the price just needs to be allowed to rise MUCH higher to cover all paper claims of wealth.

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  13. Kimble (4,381 comments) says:

    Those of us who lived through the eighties neoliberal ‘revolution’ will remember very well the “trickle down” canard being peddled to all and sundry.

    Really, then surely you will be able to find all the references to it in speeches by Reagan and Thatcher?

    Go ahead. If you don’t post them then you concede the point as they must be easy to find if what you said is true.

    You may find ONE reference by a single Reagan official one time. That would be it.

    Your memory of it being peddled to all and sundry is incorrect. The ‘debunking’ of the trickle down effect is what was peddled. And because strawmen are so easy to defeat, everyone gloried in doing it.

    Trickle down effect is NOT supply side economics. And the reason you think it is, is simply to give your strawman some twigs for bones.

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  14. seanmaitland (455 comments) says:

    Those on the left have to resort to Strawman Arguments, Ad Hominem attacks and Logical Fallacies as their arguments are usually so poorly thought out and constructed, they have no other option, than yelling loudly at someone.

    The number of times they use “National are doing this so John Key’s business roundtable mates can get rich” as a way of arguing against something is getting to epic proportions.

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  15. Reid (15,954 comments) says:

    In other words the left have invented this theory, so they can claim it is what the right believes in, so they can them campaign against it.

    Reminds me of what Wussel is doing with Craig. But seriously, the left love labels especially ones that apparently simplify a complex issue and explain the heart of it in a few short words and fact is, capitalism does a lousy job of promoting selflessness and a very good job at promoting selfishness so it lays itself wide open to this accusation which only becomes more and more evident to more and more people as more and more time goes by and more and more selfishness appears.

    As reflected in the rising costs and declining standard of living in all western nations including this one and where the epitome of unrestrained selfishness – the US – which leads the rest of the western world in trends, for the first time has a current generation of twenty somethings who have an expectation of a lower standard of living than their parents.

    You think it’s not happening here? Have a look at the rising proportion of housing costs which consume your disposable income – same house, different price. Just wait till interest rates rise and we have a simultaneous hit on the global economy, which is coming this year to your neighbourhood.

    The issue is of course the left don’t understand economics, so they have no solutions. But they don’t care, so long as the idiots who vote for them think they do.

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  16. Weihana (4,496 comments) says:

    This argument is pure semantics. Trickle-down is simply a pejorative description of supply-side economics. More important are the actual facts which scarcely get a mention.

    The writer refers to the “original arguments supporting economic growth”. But nowhere do we actually see if the rhetoric on economic growth is actually reflected in history.

    http://www.tradingeconomics.com/united-states/gdp-growth-annual


    “The United States is the world’s largest economy. Yet, in the last two decades, like in the case of many other developed nations, its growth rates have been decreasing. If in the 50’s and 60’s the average growth rate was above 4 percent, in the 70’s and 80’s dropped to around 3 percent. In the last ten years, the average rate has been below 2 percent and since the second quarter of 2000 has never reached the 5 percent level.”

    So despite the rise of neoliberal economic thought the promised economic growth has not materialized despite inequality rising to levels not seen since the Great Depression.

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  17. Kimble (4,381 comments) says:

    How about let people choose what they use as money?

    Yes lets.

    How about we conduct a decades long experiment on the matter?

    Ready. Set. Go. DONE! Gold loses.

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  18. Weihana (4,496 comments) says:

    ShawnLH (114 comments) says:
    February 20th, 2014 at 10:19 am

    Iv’e been reading Thomas Sowell for years. The man is brilliant.

    He is brilliant to be sure. Few can communicate an idea as convincingly as he can. But his political views stand in stark contrast to his own life. He attained his higher education through the G.I. Bill but now tells others to go without government assistance because they need to pull themselves up by their bootstraps.

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  19. Kimble (4,381 comments) says:

    So despite the rise of neoliberal economic thought the promised economic growth has not materialized despite inequality rising to levels not seen since the Great Depression.

    Leaving aside the problem of the US not embracing liberal economic thought to the extent you imagine it has, maybe you could provide the counter factual where oppressive, centrally controlled, unionised, command economies have done better.

    Note, you will have to find examples that match the US’s starting position. Economic growth coming from the emergence from dictatorship, civil war, outright Marxism, is hardly a fair comparison.

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  20. Rick Rowling (801 comments) says:

    There’s a massive irony here, which the left fail to grasp.

    They claim (rightly) that wealth can’t effectively trickle down because there are so few at the top and so many below.

    But then they claim that they can pay for all sorts of socialist policies by taxing those (very few) at the top – even though, by the same logic, there are so few of them the benefit will dilute so much as it “trickles down” that it’s pretty much useless.

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  21. Kimble (4,381 comments) says:

    He succeeded in entering New York’s elite Stuyvesant High School, but dropped out, got into trouble with the police, worked at menial jobs and returned to full-time education only some ten years later, thanks to the U.S. Marine Corps and the GI Bill.

    The GI bill isn’t government assistance. It is government remuneration. He served.

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  22. Nigel Kearney (864 comments) says:

    Gold is not the answer. Governments do need to be able to grow and shrink the quantity of money. They often do it irresponsibly, but generally not to such an extent that a gold standard would be better. Of course there are exceptions such as Zimbabwe.

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  23. alloytoo (432 comments) says:

    The problem with gold as a basis for currency is that it is a poor reflection of the economic activity in the country.

    A big pile of gold in the middle of desert cannot be worth more than a country full of productive factories.

    That’s why we use floating currencies where the value of the currencies is determined by the markets.

    I think we should also reject this communist notion that wealth and inequality are wrong. Inequality is a meaningless term when the basics of life are met.

    What we need to examine is absolute poverty people who are deprived of the basics, food, shelter, medicines etc.

    In the last few decades absolute poverty has declined, this has coincided with the normalization of the economies formally communist countries.

    This is where the left narrative fails dismally.

    Equality does not fix poverty, it perpetuates it.

    Poverty is addressed by the pursuit of wealth in varying degrees and success.

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  24. James Stephenson (2,033 comments) says:

    This thread needs some Schiff:

    http://www.schiffradio.com/b/Trickle-Up-Economics/-336480088380452581.html

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  25. dime (9,442 comments) says:

    EAD – im starting to think the gold standard wasnt a bad thing..

    question is – do the yanks actually have any gold? why did they tell the germans it would take 8 years to give them their gold back?

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  26. Weihana (4,496 comments) says:

    Kimble (3,996 comments) says:
    February 20th, 2014 at 10:57 am

    Leaving aside the problem of the US not embracing liberal economic thought to the extent you imagine it has,

    A little bit of it doesn’t work, but a lot of it will?

    …maybe you could provide the counter factual where oppressive, centrally controlled, unionised, command economies have done better.

    I’ve already provided the counter factual: it is the 30 years prior to supply-side economics. A time when debt was reduced, when wages increased with producitivity and when overall growth averaged above 4 percent.

    Surely the Soviet Union isn’t the only comparative measure used to determine whether economic policy works.

    Note, you will have to find examples that match the US’s starting position. Economic growth coming from the emergence from dictatorship, civil war, outright Marxism, is hardly a fair comparison.

    The trouble with economics is that it’s generally difficult to run a controlled experiment. Comparisons always involve differences that may be difficult to fully account for. I think the 50s and 60s in the US provides a useful contrast to the current situation, though not perfect and certainly doesn’t prove that free market reform in general is a bad idea.

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  27. Simon (685 comments) says:

    “Trickle-down is simply a pejorative description of supply-side economics” Wrong see latest retard:

    “Some people continue to defend trickle-down theories which assume that economic growth, encouraged by a free market, will inevitably succeed in bringing about greater justice and inclusiveness in the world,”

    http://www.washingtonpost.com/business/economy/pope-francis-denounces-trickle-down-economic-theories-in-critique-of-inequality/2013/11/26/e17ffe4e-56b6-11e3-8304-caf30787c0a9_story.html

    You just know the clowns Yoza, YesI’maTard etc are frantically searching trickle-down. They will only find manipulators whose stock in trade are utter sheeple like Yoza, YesI’maTard et el.

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  28. Brian Smaller (3,992 comments) says:

    there are so few of them the benefit will dilute so much as it “trickles down” that it’s pretty much useless.

    I have met a lot of left wing believers in homeopathy. There could be a link.

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  29. ross69 (3,652 comments) says:

    Trickle down theory is a myth and has been debunked in Zombie Economics, but of course there are still those on the Right who believe in it. And if you think “trickle down economics” doesn’t exist, that’s probably because you know nothing about economics. An argument used by the Right to justify tax cuts for the wealthy is that it will help the less well off. Dumb.

    http://www.marketplace.org/topics/life/big-book/zombie-economic-ideas-still-among-us

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  30. KevinH (1,131 comments) says:

    The trickle down effect is a phrase that originated during the Thatcher/ Reagan era to explain away tax cuts. Both Thatcher and Reagan didn’t use the phrase personally but as I recall it was a phrase trumpeted around in right wing circles by the economically illiterate who had no comprehension or understanding of the impact of neo liberalism on the general populace.
    The reason this phrase has emerged into the mainstream is because it is a part of a wider discussion on the failure of neo liberal economics which are now percieved as the economics of the elite.

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  31. Weihana (4,496 comments) says:

    Rick Rowling (746 comments) says:
    February 20th, 2014 at 11:00 am

    There’s a massive irony here, which the left fail to grasp.

    They claim (rightly) that wealth can’t effectively trickle down because there are so few at the top and so many below.

    But then they claim that they can pay for all sorts of socialist policies by taxing those (very few) at the top – even though, by the same logic, there are so few of them the benefit will dilute so much as it “trickles down” that it’s pretty much useless.

    You’re missing the big picture. Tax revenue depends on income which depends on consumer demand which depends on consumers being able to participate in the economy to create that demand. Tax is not a zero-sum game (just as the market isn’t). Tax revenue that is wisely spent on long term investments like infrastructure and education can increase the ability of people to participate in the economy. People like Thomas Sowell get an education sponsored through a government benefit and they increase both their productivity and their earning potential. They then spend more which creates more income, which creates more tax, which increases what can be spent on services that enables people to earn more, and spend more, and create more tax etc.

    This is why inequality is a problem. Not because inequality is inherently bad, but because too much of it threatens this virtuous cycle by limiting opportunties, limiting the ability of the middle class to particpiate in the economy, limiting their income, limiting their spending, limiting tax that is collected and further limiting the services that can help them attain the skills they need to keep up.

    But it doesn’t happen all at once. Wages may stagnate but people do not stop expecting to continue living their lifestyle. So to keep things going they undertake more work. Longer hours, two incomes etc.. When that runs out, they start taking on debt… when that runs out the economy slides into recession and the people who are profiting off this system get bailed out by the government.

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  32. ross69 (3,652 comments) says:

    Furthermore, we’ve witnessed in NZ huge increases in productivity at the same time that real wages have fallen. Since 1982, productivity has increased by 83% while real wages have fallen by 25%. That’s completely the opposite of what should be happening according to neoliberalism. Oh well, when the facts don’t support a theory, you ditch the theory.

    http://thedailyblog.co.nz/2014/02/14/real-wages-the-brutal-truth/

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  33. redqueen (456 comments) says:

    http://en.wikipedia.org/wiki/Trickle_down_economics#History_and_usage_of_the_term

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  34. Yoza (1,545 comments) says:

    Manolo (12,217 comments) says:
    February 20th, 2014 at 10:33 am

    Lefties like Yoza and YesWeDid don’t like the trickle down effect…

    Are you mad? The entire thread is about neoliberals pretending there was never any such thing as ‘trickle down’ economic ideas.

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  35. Ed Snack (1,738 comments) says:

    Weihana is right that tax is not a zero-sum game; its a negative sum game and significantly zero at that. A dollar taxed WILL be spent inefficiently and largely to an agenda to gather votes. Sowell’s wasn’t a benefit per se, it was part of the payment one receives for serving in the armed forces.

    What you describing is a la-la land description of taxes and spending; if it were true governemnts should simply create money and spend itas they like creating a “virtuous circle” of ever increasing wealth. We’ve seen how that works in places like Spain, Greece, and even the USA which is a very long way removed from anything that vaguely even resembles “neo-liberal economics”. Recall if you will that much of supply side economics arose with the absolutely obvious failure of Keynesianism in the 1970′s staglflation, and we flirt with the same outcome again.

    What we do see in many of the more developed economies is a distinct trend to Cronyism and a form of Oligarchy. Notice the sort of coalition that installed Obama, a mix of the very rich (very, very rich) and the poorest and most “grouped” groups such as blacks and latinos (those identified primarily by their group rather than as potential individuals; and they’re not very free to remove themselves from the group). The end result has been that the very rich are getting very much richer thanks to cronyism (a proportion of which feeds back into campaign financing, a specialty of the Obama machine) and the poor, well they get all the rhetoric and the posturing, but economically they got the shaft, less money, a lot fewer jobs, and additional ghettoizing to ensure that they “stay on the plantation” and keep delivering their vote. The other group that gets the dividends so to speak is the oligarchs; the organizers and bundlers of money and support. These are the Unions and their organizers especially, the go along to get along businesses like Big Pharma, the Insurance Industry, almost the complete list of Wall St Banks: these all benefit exorbitantly from taxpayer largesse taken from the middle and the poorer middle especially.

    And you want to label this “neo-liberal economics” !?!

    The greatest success of the left has been with propaganda, they have successfully colonised the MSM to the extent that their narrative prevails just by its weight alone. They have also created often brilliantly conceived campaigns to push themselves, but these wouldn’t work if the “journolist” riddled media wasn’t so prepared to push the campaigns.

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  36. igm (1,413 comments) says:

    ross69: With all your wisdom and ideas, one should think you would have a job! Oh, yes, another leftie, in the mould of Dalziel and Brown.

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  37. Kimble (4,381 comments) says:

    A little bit of it doesn’t work, but a lot of it will?

    You can vote for your local representative, but the three levels of government above that are all selected by each higher level, with the top being a single person and that role if passed down from father to son.

    So. How well does that “little bit” of democracy work?

    I’ve already provided the counter factual: it is the 30 years prior to supply-side economics. A time when debt was reduced, when wages increased with producitivity and when overall growth averaged above 4 percent.

    The introduction of the “little bit” of democracy described above coincided with a significant technological change that led to much of the state’s citizens employed in primary production being laid off.

    “Look”, says the dictator. “This little bit of democracy has actually made all of you worse off! Far better it be removed! Right?”

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  38. beadgame (3 comments) says:

    Extreme wealth/income inequality is a significant economic problem irrespective of what one thinks from a social standpoint. The wealth is being horded and not being productively reinvested, which has been a significant drag on the global economy.

    Also note that the right is at least equally good with propaganda with respect to taxes and spending.

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  39. Weihana (4,496 comments) says:

    Ed Snack (1,350 comments) says:
    February 20th, 2014 at 12:02 pm

    Weihana is right that tax is not a zero-sum game; its a negative sum game and significantly zero at that. A dollar taxed WILL be spent inefficiently and largely to an agenda to gather votes.

    Good thing you put “WILL” in capitals. What more proof does one require? It’s in capitals. It must be true.

    Sowell’s wasn’t a benefit per se, it was part of the payment one receives for serving in the armed forces.

    Oh I see. It was remuneration for a service that Sowell offered in a competitive free market environment where the rewards he obtained were what the market dictated appropriate for his contribution. I wonder why it needed legislation if it wasn’t a benefit. Strange. Normally employers and employees negotiate the terms of a trade without the need for government to create specific legislation for that particular trade.

    What you describing is a la-la land description of taxes and spending; if it were true governemnts should simply create money and spend itas they like creating a “virtuous circle” of ever increasing wealth.

    No that doesn’t follow from what I said, it’s just a straw man you’ve invented for lack of a better argument.

    In the cycle I describe the tax used to pay for services comes from income that represents real productivity, not merely printing more money.

    Recall if you will that much of supply side economics arose with the absolutely obvious failure of Keynesianism in the 1970′s staglflation, and we flirt with the same outcome again.

    Stagflation occurred because of a supply shock. I agree that stimulus in response to a supply shock is not a good idea. But it has nothing to do with the current situation we face which is not a supply shock but a crisis with demand that is fueled, ultimately, by inequality.

    And you want to label this “neo-liberal economics” !?!

    The problem is nothing is ever neo-liberal economics. It’s as if everything must be identical to Galt’s Gulch before any assessment of its outcomes can be contemplated and any interim failure is precisely because we weren’t neo-liberal enough!

    O the faith is strong among this flock.

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  40. EAD (618 comments) says:

    @ dime 11.21am – that is the 8,000 tonne gorilla in the room. The whole basis for the USD being the Worlds reserve currency was that it was by far and away the worlds biggest holder of gold at the end of WWII with over 20,000 tonnes and they promised to maintain the US dollar to be “as good as gold”. They lost 12,000+ tonnes until they pulled the plug on Bretton Woods as other countries began redeeming their US Dollars for gold as America was inflating it’s currency to pay for the Vietnam War and a massive welfare programme started by Lyndon Johnson so they didn’t think the USD was being maintained at $35 per ounce.

    Once the dollar became delinked from gold in 1971, all traces of gold were removed from the international monetary system allowing governments to inflate their currencies & run practically never ending deficits.

    this links in nicely to a rebuttal of Weihana @ 10.51am. This delinking of currencies to gold, started the 43 year process (still ongoing) of the continual build up of debts as there is no restraint on the amount of currency that can be created out of thin air. As this debt pile gets bigger, growth is naturally going to slow as the debt gradually builds up requring more and more income to service and it acts as a pulling forward of demand (quicker growth followed by slower growth) by enabling people to consume what they haven’t earned. The term “neo-liberal” economics doesn’t actually mean anything but rather is just a scare word used by the left much like “Koch brothers”.

    And this leads onto why we need gold as money returned –
    1) it reduces the massive inequalities by reducing big government which perpetuates the power of a corrupt elite at the expense of ordinary people
    2) it stops massive asset price inflation which creates further disparities in wealth as the wealthy are the ones who tend to hold assets exposed to the inflation.
    3) it allows Capitalism to work properly and create jobs as it means there is a true price signal (rather than just differing levels of Cantillion effected inflation changes) allowing supply to accurately respond to demand.

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  41. Kimble (4,381 comments) says:

    The reason this phrase has emerged into the mainstream is because it is a part of a wider discussion on the failure of neo liberal economics which are now percieved as the economics of the elite.

    No it isnt part of a wider discussion. It is part of of ONE SIDE of a wider discussion.

    Whenever a strawman is argued, there will be some who dont recognise it as a strawman and take a swing.

    Then the people posing the strawman point to the swings and say, “Look! This cant be a strawman because if it was they wouldnt be swinging at it.”

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  42. Kimble (4,381 comments) says:

    The wealth is being horded and not being productively reinvested, which has been a significant drag on the global economy.

    Sorry to burst your bubble, but rich people dont keep their wealth in a Scrooge McDuck-style Money Bin.

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  43. SPC (5,392 comments) says:

    EAD, any investment in gold/gold mining stocks to declare?

    The one thing a gold standard would do is enrich those with gold mining stocks (licence to mine gold reserves) and those with gold in their personal and national wealth reserves. And of course make those nations receiving royalties off gold mining wealthier.

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  44. Kimble (4,381 comments) says:

    Normally employers and employees negotiate the terms of a trade without the need for government to create specific legislation for that particular trade.

    Serving in the military isnt a trade.

    And how much negotiation do you think people DRAFTED into the armed services got to engage in?

    Your original point has been demolished, and it wasnt even that good when you made it. Better abandon it now and save further embarrassment.

    The problem is nothing is ever neo-liberal economics.

    Maybe you can provide a list of self-identified neo-liberal economists? Could this be another label that is placed upon people to dismiss their more nuanced position?

    Anyway, nothing is pure anything. You agree by allusion a few comments above. The issue is, you cant just point to two economic states and claim that one is neo-liberal and the other not, and that the differences between them is due to that distinction.

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  45. Weihana (4,496 comments) says:

    Kimble (3,998 comments) says:
    February 20th, 2014 at 12:09 pm

    A little bit of it doesn’t work, but a lot of it will?

    You can vote for your local representative, but the three levels of government above that are all selected by each higher level, with the top being a single person and that role if passed down from father to son.

    So. How well does that “little bit” of democracy work?

    The introduction of the “little bit” of democracy described above coincided with a significant technological change that led to much of the state’s citizens employed in primary production being laid off.

    “Look”, says the dictator. “This little bit of democracy has actually made all of you worse off! Far better it be removed! Right?”

    I don’t agree with the premise. I believe technological change produces democracy, not the other way around.

    But I would accept the point that one could falsely blame a bad outcome on a little bit of something that was actually good and not responsible for that outcome, or that the apparent bad outcome was actually outweighed by other net benefits.

    But economic growth is pretty central to the argument here, and is why it has been highlighted. Surely it is reasonable to assume that with lower taxes and less regulation (not to mention more advanced technology) you would reasonably produce greater economic growth than the period of time with high tax rates and over-regulation?

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  46. Kimble (4,381 comments) says:

    The one thing a gold standard would do is enrich those with gold mining stocks (licence to mine gold reserves) and those with gold in their personal and national wealth reserves. And of course make those nations receiving royalties off gold mining wealthier.

    The obvious solution would be to make the mining of gold a capital offense.

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  47. SPC (5,392 comments) says:

    Kimble, there is an extent to which rising/high asset values (housing/land and stocks) suck up available income/savings thus diminishes investment in real economic activity.

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  48. SPC (5,392 comments) says:

    Kimble, the only known, about assertions that a gold standard is the answer, is that some would certainly benefit and they can be identified.

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  49. Kimble (4,381 comments) says:

    I believe technological change produces democracy, not the other way around.

    Durr. It wasn’t a real example. I was lampooning your conflation of correlation and causation.

    Surely it is reasonable to assume that with lower taxes and less regulation (not to mention more advanced technology) you would reasonably produce greater economic growth than the period of time with high tax rates and over-regulation?

    And that can be a prior. But it is pathetic if it represents the total extent of your analysis.

    I await your narrative which will detail how high taxes and OVER-regulation (your term) would have produced better outcomes for the US with all else held constant.

    Perhaps you can also describe how the US of 1949 is comparable to the US of 1989.

    And after that you can have a go at explaining how the size of current US government spending is the natural outcome of “neo-liberal” economics?

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  50. Weihana (4,496 comments) says:

    Kimble (4,001 comments) says:
    February 20th, 2014 at 12:42 pm

    Serving in the military isnt a trade.

    Indeed, hence the GI Bill was a benefit.

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  51. Kimble (4,381 comments) says:

    Kimble, there is an extent to which rising/high asset values (housing/land and stocks) suck up available income/savings thus diminishes investment in real economic activity.

    That’s mis-investment and mal-investment. It is not in any way the wealthy “hoarding” resources.

    In fact, that example is self-defeating. The truly wealthy (those that cause the nasty old inequality that people who want to appear to care love to cite) would already have their housing costs covered, and have spare wealth to invest in the “real” economy.

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  52. Ed Snack (1,738 comments) says:

    Weihana, I suggest you try find a decent reference that suggests that taxation is not a negative sum game. Some negatives are acceptable, I’m not a zero tax zealot, but I suggest it is widely accepted that taxation is not 100% efficient except in some theories.

    Ahem, Sowell was employed by the government, in the armed forces, it was an accepted part of his “employment” that post satisfactory service, assistance was available for education; that formed part of the employment relationship. What part of an employment package don’t you understand ?

    OK the tax comes from incomes that represents “real productivity” (nice evasion that), but that tax would otherwise be spent by it’s recipient; unless you can find a 100% efficient (no bureaucrats to pay to supervise this transfer !) way to transfer that money via a tax then it isn’t anything that wouldn’t occur otherwise as a general rule. As Kimble points out, money is rarely hoarded. So you’re immediately into a negative sum game, you take (say) $100 from someone and give $99 out with a $1 absorbed in overheads (ignoring that actually paid as income to someone). And that’s not what Keynesianism is about, it involves borrowing and in large quantities. That borrowing competes with and removes from availability capital to invest in productive entities.

    Further, I would dispute your characterization of our current problems as one of low demand fuelled by inequality. Even if true, the Keynesian style policies followed in the USA for example, has increased and not decreased inequality; or do you not think that the US is following stimulus spending policies, maybe they were a la Krugman, simply too small ? And QE, not stimulus ? I would put the blame primarily on excessive debts incurred as a result of excessively loose monetary policy aggravated by policies that not only encourage debt but specifically encourage poor quality debt primarily in real estate speculation. That drove up spending and demand for some years but the overhang of poor quality debt caused problems when the bubble burst. Inequality had nothing to do with it.

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  53. Kimble (4,381 comments) says:

    Indeed, hence the GI Bill was a benefit.

    You misuse a term and then try and use the correction as proof of the correctness of another of your errors.

    The skills acquired in the military (in particular the military of that time) are not easily transferable to many other industries. Even worse is that those skills were gained at the expense of those the individuals would have acquired voluntarily.

    The government TOOK something from people and then made reparations. That is as much a benefit as a tax refund would be.

    Are all civil servants also receiving a benefit? Are the CEO’s of SOE’s also being paid a benefit?

    I told you to abandon the point lest you embarrass yourself further. Too late now.

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  54. Weihana (4,496 comments) says:

    Kimble (4,003 comments) says:
    February 20th, 2014 at 12:53 pm

    I await your narrative which will detail how high taxes and OVER-regulation (your term) would have produced better outcomes for the US with all else held constant.

    I have already provided a narrative that is sufficient in detail for the purposes of this forum, and much more than you have offered. I agree correlation doesn’t prove causation. But that does not mean that correlation cannot be considered evidence.

    Further, I have not advocated that economic policy prior to stagflation was perfectly conceived, and yes I do believe there was too much regulation in some areas.

    And after that you can have a go at explaining how the size of current US government spending is the natural outcome of “neo-liberal” economics?

    Good point… except increased spending and lower tax rates should increase productivity… at least in the short-run. That doesn’t appear a likely explanation for relatively low rates of growth.

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  55. SPC (5,392 comments) says:

    Kimble, you say “the truly wealthy (those that cause the nasty old inequality that people who want to appear to care love to cite) would already have their housing costs covered, and have spare wealth to invest in the “real” economy.”

    Investment in stock ownership is not investment in the real economy – new share issues maybe. Investment in asset ownership – rental property, or commercial property or gold is not investment in the real economy either.

    Many are increasing their wealth substantially relative to others without investing in the real economy themselves – simply via speculating.

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  56. questions (169 comments) says:

    Thanks for setting the record straight, here I was thinking National has been giving money hand over fist to rich people because it would eventually tickle down to the poor, in reality they are giving money to the rich hand over fist because they feel like it?

    Nice to know!

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  57. Weihana (4,496 comments) says:

    Kimble (4,005 comments) says:
    February 20th, 2014 at 1:03 pm

    You misuse a term…

    No I don’t. The Department of Veteran’s Affairs uses the term “benefit”.

    Are all civil servants also receiving a benefit? Are the CEO’s of SOE’s also being paid a benefit?

    The government competes in a market to hire such workers. Your analogy is flawed.

    I agree that Sowell earned his reward in that I think his service makes him deserving. But the reward given has no relation to some sort of market process where the reward is proportional to what was provided. It is something decided by society that legislates to grant those benefits.

    Point is, Sowell advanced with the assistance of a society that provided opportunities to climb the ladder of success and we are better off because of that.

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  58. RRM (9,467 comments) says:

    :lol: LOL, there are so many straw man arguments in politics, you could be forgiven for thinking they were the only kind of argument to have.

    (Apparently the greens want us to all ride bicycles or horses…? A guy in the pub said so, it must be true.)

    But let us choose ONE strawman to focus on… this one!

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  59. Weihana (4,496 comments) says:

    Ed Snack (1,351 comments) says:
    February 20th, 2014 at 12:58 pm

    What part of an employment package don’t you understand ?

    Sowell wasn’t employed, he was drafted.

    …but that tax would otherwise be spent by it’s recipient; unless you can find a 100% efficient (no bureaucrats to pay to supervise this transfer !) way to transfer that money via a tax then it isn’t anything that wouldn’t occur otherwise as a general rule.

    It is not necessarily spent, but that’s not the real issue. It does not follow that the spending undertaken in the marketplace would be of the same type and of the same value as that undertaken by the government. Whether or not a bureaucrat is employed does not determine whether the spending represents a net benefit or an inefficient use of money.

    Government can invest in things that the marketplace simply has no incentive to look into. For instance, private companies today are worth billions and they earn that wealth using a technology, the internet, that was not developed because of a private market stimulating investment for private gain. It was developed as a government research project.

    Some things, like basic research or education, are investments where the gains are long-term and the benefits are not easily confined to a single area where someone in particular can expect to profit. But they represent true value nonetheless and provide the basis for real productivity.

    The simple point is that the markets are great in many areas, producing efficient outcomes. But they are not perfect and the government does some things better than would otherwise occur.

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  60. Scott Chris (5,881 comments) says:

    Thomas Sowell has written that the actual path of money in a private enterprise economy is quite the opposite of that claimed by people who refer to the trickle-down theory. He noted that money invested in new business ventures is first paid out to employees, suppliers, and contractors.

    Er, doesn’t that mean that for business owners to invest in new businesses the money has to start with them via tax breaks or other means?

    Not saying supply-side economics doesn’t work but it appears to me that the idea that the ‘trickle-down strawman’ is an invention of the left is actually a ‘trickle-down strawman strawman’, an invention of the right.

    In other words, partisan bullshit.

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  61. Ryan Sproull (7,033 comments) says:

    So why has this trickle-down nonsense persisted for so long? Perhaps because it sets the parameters of debate around redistribution, focussing solely on inequalities in wealth, rather than inequalities in capabilities. If wealth is not trickling down naturally through voluntary processes, then it is up to the government to intervene to ensure it does.

    Speaking of strawmen, this is a persistent one used by pro-capitalists – that left-wing views ignore inequalities of capabilities.

    The socialist criticism of capitalism is not a complaint that more capable people are rewarded with more wealth. The criticism is that capital owners are rewarded with wealth disproportionately higher than their contribution through being capable, which means the workers are rewarded with wealth disproportionately lower than their contribution through being capable.

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  62. Kimble (4,381 comments) says:

    The Department of Veteran’s Affairs uses the term “benefit”.

    And employer paid health insurance is also a benefit.

    They dont use the word like we do.

    But the reward given has no relation to some sort of market process where the reward is proportional to what was provided.

    By your definition a private scholarship is also a benefit. Think about that.

    Point is, Sowell advanced with the assistance of a society that provided opportunities to climb the ladder of success and we are better off because of that.

    Sowell advanced with the remuneration he earned as a member of their armed forces. He was not paid a “market wage” during his time in the military. The benefits veterans get is part of their remuneration that is only accessible after they leave. Just like the US-style defined-benefit pensions.

    Despite your frantic googling you are achieving nothing more than embarrassing yourself further.

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  63. Kimble (4,381 comments) says:

    The simple point is that the markets are great in many areas, producing efficient outcomes. But they are not perfect and the government does some things better than would otherwise occur.

    Spoken like a REAL neo-liberal economist.

    The idea that economic liberals are arguing for zero government is yet another strawman.

    It looks like you only ever believe in strawmen.

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  64. Kimble (4,381 comments) says:

    Er, doesn’t that mean that for business owners to invest in new businesses the money has to start with them via tax breaks or other means?

    Define, other means. And then consider how silly it is to give tax-breaks an equal billing.

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  65. Weihana (4,496 comments) says:

    Kimble (4,007 comments) says:
    February 20th, 2014 at 1:34 pm

    Sowell advanced with the remuneration he earned as a member of their armed forces.

    But “earned” according to what or whom? It was society that deemed him deserving and provided assistance through legislation.

    He advanced through hard work… but he was also helped. That assistance and that help is the part of the equation that I do not think is being considered.

    Government assistance does not necessarily negate working for something.

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  66. Kimble (4,381 comments) says:

    But “earned” according to what or whom? It was society that deemed him deserving and provided assistance through legislation.

    Society? So the gap between the minimum wage and what an employer would be willing to pay (and you willing to receive) is a social welfare payment just because it was legislated? Ridiculous.

    Any time a government pays someone it is due to a piece of legislation.

    The difference between a “benefit” as we use the term and the remuneration to government employees is stark and only an idiot would fail to recognise it.

    You have lost. Move on.

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  67. DJP6-25 (1,269 comments) says:

    dime 11.21 AM The Us has 4500 tons of it. The CIS has 450 tons.

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  68. Weihana (4,496 comments) says:

    Kimble (4,008 comments) says:
    February 20th, 2014 at 1:37 pm

    The idea that economic liberals are arguing for zero government is yet another strawman.

    I note Ed Snack is not a “zero tax zealot” but it seems strangely contradictory to refer to taxation as inherently a negative sum game, since the implication appears to be that without it we would always be better off which naturally leads to the conclusion that the best scenario is zero tax.

    If zero tax is not the goal then one must accept that taxation can produce real benefits over and above what would be realized if that money was not collected.

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  69. Harriet (4,522 comments) says:

    “……The criticism is that capital owners are rewarded with wealth disproportionately higher than their contribution through being capable, which means the workers are rewarded with wealth disproportionately lower than their contribution through being capable…..”

    Hardly – just because owners do less for their share of wealth, does not then mean that workers do more for their share Ryan.

    That’s like suggesting that when gold doubles in price, then miners should get double the wages.

    Investments are investments Ryan – and doing something else [like working] is doing something else altogether.

    Do you seriously think that a job candidate trying for a job as a forklift driver at the wharf should be asking to have their weekly wage pegged to the avearge underlying commodities that they have been lifting all week?

    The short answer is that he’ll be laughed at.

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  70. Kimble (4,381 comments) says:

    Harriet, the socialist mind is conveniently incapable of recognising risk as a real thing.

    To them, every rich person has wealth and has invested, so investments always leads to wealth.

    They look at the thing produced and say, “Gosh, that thing took 5 hours to make but the guy in suit didnt do anything he just gave that WORKER the tools and said make this”.

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  71. Weihana (4,496 comments) says:

    Kimble (4,009 comments) says:
    February 20th, 2014 at 2:03 pm

    Society? So the gap between the minimum wage and what an employer would be willing to pay (and you willing to receive) is a social welfare payment just because it was legislated? Ridiculous.

    I don’t believe it would be usual to label it as such, but it is true to say that the remuneration received may be over what the unregulated market might have offered.

    As it happens I also agree with a minimum wage.

    Any time a government pays someone it is due to a piece of legislation.

    True, but a reward determined by market prices would not be comparable to a benefit given to veterans.

    The difference between a “benefit” as we use the term and the remuneration to government employees is stark and only an idiot would fail to recognise it.

    1. He wasn’t an employee. He was drafted.
    2. I’m not suggesting he was on something akin to the DPB. I am suggesting that his fortunes owe to something beyond purely his own effort.

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  72. Harriet (4,522 comments) says:

    Eitherway, Sowell advanced in American society because he studied economics and ignored the input of Karl, but if instead he had bothered to take onboard Karl’s input – he’d now be President. And a recognised idiot.

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  73. cha (3,779 comments) says:

    Who to believe…

    “It’s kind of hard to sell ‘trickle down,’” he explained, “so the supply-side formula was the only way to get a tax policy that was really ‘trickle down.’ Supply-side is ‘trickle-down’ theory.”

    http://www.theatlantic.com/magazine/archive/1981/12/the-education-of-david-stockman/305760/?single_page=true

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  74. Ryan Sproull (7,033 comments) says:

    Hardly – just because owners do less for their share of wealth, does not then mean that workers do more for their share Ryan.

    That’s like suggesting that when gold doubles in price, then miners should get double the wages.

    If the market value of the product of their work doubles, the value of their work doubles.

    Investments are investments Ryan – and doing something else [like working] is doing something else altogether.

    Do you seriously think that a job candidate trying for a job as a forklift driver at the wharf should be asking to have their weekly wage pegged to the avearge underlying commodities that they have been lifting all week?

    The short answer is that he’ll be laughed at.

    I’m saying that capitalism rewards ownership as well as contribution, and I was pointing this out in response to the common misconception that socialists don’t think harder, smarter or more talented workers should get paid more than less productive ones.

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  75. Ryan Sproull (7,033 comments) says:

    Harriet, the socialist mind is conveniently incapable of recognising risk as a real thing.

    Another strawman.

    To them, every rich person has wealth and has invested, so investments always leads to wealth.

    And another strawman.

    They look at the thing produced and say, “Gosh, that thing took 5 hours to make but the guy in suit didnt do anything he just gave that WORKER the tools and said make this”.

    That’s a bit of a cartoon version, but in principle, writ large, it’s more or less accurate.

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  76. Harriet (4,522 comments) says:

    “……If the market value of the product of their work doubles, the value of their work doubles….”

    LOL………..you really think workers own the products they make Ryan?

    They’re under contract to make it – that’s all.

    Imagine getting your rare car fixed at the mechanics……..and upon returning they told you that the quote has been increased multiple times and you now owe them $4000.00 for a service – simply because they had a mate ring you up and offer to buy the car for double it’s worth – and you said “….no – it’s worth 3 times that…”. :cool:

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  77. Kimble (4,381 comments) says:

    Ryan those are caricatures, not strawmen.

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  78. Ryan Sproull (7,033 comments) says:

    LOL………..you really think workers own the products they make Ryan?

    They’re under contract to make it – that’s all.

    Harriet, if you’re going to engage in a conversation about the merits or failings of capitalism, you have to take a mental step outside of a capitalist mindset. Workers do not own the products that they make within a capitalist framework. Within other frameworks they might.

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  79. Ryan Sproull (7,033 comments) says:

    Ryan those are caricatures, not strawmen.

    They can be both, when they misrepresent socialist criticisms of capitalism in ways that let the proponent of capitalism avoid dealing with the actual criticisms.

    There are probably socialists who do not recognise the place that risk plays in capitalism, and there are probably socialists who believe that all investment leads inevitably to more wealth. But I am not one of them, and as Harriet was replying to me when you advised him on what socialists think, your caricatures were either directed at me or were irrelevant.

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  80. Reid (15,954 comments) says:

    http://politicalvelcraft.org/2014/02/17/dead-bankers-you-the-coup-against-the-united-states-of-america/

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  81. Ryan Sproull (7,033 comments) says:

    Reid, that site is brilliant.

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  82. Reid (15,954 comments) says:

    Yeah I like it. Sufferers of cognitive dissonance need not apply.

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  83. BlairM (2,287 comments) says:

    The economic arguments around tax cuts at the top end have never been justified by reason of “the money trickles down”. Top end tax cuts are justified for two reasons: 1) Wealthy people with extra money don’t tend to spend that money on luxury yachts as much as they tend to reinvest it (that’s how they got wealthy in the first place). So that is extra money floating around creating jobs instead of being wasted by an inefficient government. 2) Having created jobs and industry through that extra cash, money then TRICKLES UP to the wealthy people, and because they have less incentive to avoid tax, they pay tax on that money. Paradoxically, the lower taxes increase government revenue.

    There’s no “trickle down” in that equation. A created job is not a “trickle down”.

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  84. cha (3,779 comments) says:

    There’s no “trickle down” in that equation.

    So Stockman was wrong?.

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  85. Weihana (4,496 comments) says:

    BlairM (2,233 comments) says:
    February 20th, 2014 at 7:08 pm

    The economic arguments around tax cuts at the top end have never been justified by reason of “the money trickles down”. Top end tax cuts are justified for two reasons: 1) Wealthy people with extra money don’t tend to spend that money on luxury yachts as much as they tend to reinvest it (that’s how they got wealthy in the first place). So that is extra money floating around creating jobs instead of being wasted by an inefficient government.

    What is wrong with spending money on a luxury yacht? Fairly sure building a yacht is a job. Apparently kiwis are quite good at that job too. :)

    But more importantly it isn’t a zero-sum game where it’s either the “job creators” or “inefficient bureaucrats”. How many private investments are based on using the internet, a network that exists as a result of a government research project? How many investments take advantage of a skilled and educated workforce? Government and private industry can be complimentary.

    Paradoxically, the lower taxes increase government revenue.

    To a point. Tax rates at 0% and 100% both return zero revenue.

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  86. Yoza (1,545 comments) says:

    I always thought ‘trickle down’ was one of those sound bites used to sell an unpalatable policy to a cynical population. I mean the wealthy can not maintain their grip on society by telling people they are going to introduce policies which strip wealth out of the rest of society for the personal enrichment of the well heeled few.
    Any conman will tell you the mark must be convinced they are going to profit from the scam, hence the entire ‘trickle down’ propaganda campaign.
    As the ‘trickle down’ scam has exhausted the pool of victims from which it derived its validity it must be discarded and those who were its most ardent patrons now pretend it never existed, all while dreaming up the next scam.
    It would be like Bernie Madhoff getting out of prison and denying he ever ran a ponzi scheme while offering a miracle investment opportunity returning 20% a year.

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  87. Andronicus (219 comments) says:

    As far as I can tell the term “trickle down economics” was invented by the US Democrats when Ronnie Reagan and his chum Maggie Thatcher were both in power.

    Interesting that while DF denies its existence the Forbes website, http://www.forbes.com, takes it seriously.

    Of course it exists. Its only failure is that it doesn’t work.

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