Something Trickle, This Way Comes
Voodoo Economics: Why Trickle Down Cannot Work
So-called "trickle down economics" has been, for the average person, a complete failure. And I believe it has failed big business as well, though it would be hard to tell around that crowd of instant-gratification addicts. Sure, businesses get more cash up front - especially big businesses - but that doesn't actually accomplish anything useful for the economy as a whole.
President Bush's tax cuts, by far the most massive in American history, have failed to create jobs and stimulate economic growth. And despite this, we continue to see more tax cuts granted to big business. There were even more tax cuts granted in the $700 billion (and counting) bailout Congress just granted Wall Street. The reason given for these tax cuts is always the same: to stimulate economic growth, thereby creating jobs.
One of President Bush's first acts upon gaining power was to start the handouts and give-aways to big business. The Bush Administration has gutted regulation, from environmental to worker safety, from banking to bingo chips. Little of the regulatory infrastructure created after the Great Depression remains, and the result has been terrific damage to our American economy, and the global economy.
And while massive tax breaks and other forms of corporate welfare might be welcomed by those receiving them, they are a short-lived blessing. Simply cutting taxes for businesses does little more than add money to their bank accounts. We can now see that historically, businesses having more money in their coffers does not create jobs. So far in 2008, the economy has lost nearly 1,000,000 jobs, and lost 159,000 in September alone, which was about 25% higher than predicted. Businesses now keep more of the money they bring in, and their bank accounts have grown fatter. So why are these same businesses cutting jobs at a rate unseen since the 1930's?
It's actually very simple. A business does not expand production simply because they can afford to; a business will only expand production if there are customers to purchase the goods and/or services which results from that expansion. If there is no reasonable expectation that customers will make purchases, or expand their purchasing, then there is little incentive for a business to invest in the means of expansion.
Trickle down does not work, because it cannot work. Trickle down is not a logical or realistic interpretation of reality. Trickle down is a theory which has, as its end, only greed and destruction, not growth and prosperity.
However, the one thing which will cause a business to increase production and thereby grow the economy and jobs - is more money in the hands of the end consumer. If a customer base has more money in their own pockets, it is a much more reasonable prediction to suppose they will spend more of it with the business. If a customer base spends more money with a business, the business will have reason to expand, and will thereby create more jobs and better the economy.
The idea that we can grow the economy by taking money out of the hands of consumers and putting it "safely" into the bank vaults of businesses, is fatally flawed. If businesses expanded simply because they could afford to, they would not last long in business, for they would only be spending their capital, and their credit, on unnecessary infrastructure that is of little value to their current business, which offers them virtually no return on the investment. And while businesses do love to lower their expenses, I am not aware of any business of conscience that is willing to do this at the cost of losing current or future customers. It's just not good business.
When consumers have more money, businesses thrive. When consumers are broke, businesses downsize, no matter how much cash they have in the bank. This is not mere speculation - it is historical fact. Trickle down economics - DO NOT WORK.
So-called "trickle down economics" has been, for the average person, a complete failure. And I believe it has failed big business as well, though it would be hard to tell around that crowd of instant-gratification addicts. Sure, businesses get more cash up front - especially big businesses - but that doesn't actually accomplish anything useful for the economy as a whole.
President Bush's tax cuts, by far the most massive in American history, have failed to create jobs and stimulate economic growth. And despite this, we continue to see more tax cuts granted to big business. There were even more tax cuts granted in the $700 billion (and counting) bailout Congress just granted Wall Street. The reason given for these tax cuts is always the same: to stimulate economic growth, thereby creating jobs.
One of President Bush's first acts upon gaining power was to start the handouts and give-aways to big business. The Bush Administration has gutted regulation, from environmental to worker safety, from banking to bingo chips. Little of the regulatory infrastructure created after the Great Depression remains, and the result has been terrific damage to our American economy, and the global economy.
And while massive tax breaks and other forms of corporate welfare might be welcomed by those receiving them, they are a short-lived blessing. Simply cutting taxes for businesses does little more than add money to their bank accounts. We can now see that historically, businesses having more money in their coffers does not create jobs. So far in 2008, the economy has lost nearly 1,000,000 jobs, and lost 159,000 in September alone, which was about 25% higher than predicted. Businesses now keep more of the money they bring in, and their bank accounts have grown fatter. So why are these same businesses cutting jobs at a rate unseen since the 1930's?
It's actually very simple. A business does not expand production simply because they can afford to; a business will only expand production if there are customers to purchase the goods and/or services which results from that expansion. If there is no reasonable expectation that customers will make purchases, or expand their purchasing, then there is little incentive for a business to invest in the means of expansion.
Trickle down does not work, because it cannot work. Trickle down is not a logical or realistic interpretation of reality. Trickle down is a theory which has, as its end, only greed and destruction, not growth and prosperity.
However, the one thing which will cause a business to increase production and thereby grow the economy and jobs - is more money in the hands of the end consumer. If a customer base has more money in their own pockets, it is a much more reasonable prediction to suppose they will spend more of it with the business. If a customer base spends more money with a business, the business will have reason to expand, and will thereby create more jobs and better the economy.
The idea that we can grow the economy by taking money out of the hands of consumers and putting it "safely" into the bank vaults of businesses, is fatally flawed. If businesses expanded simply because they could afford to, they would not last long in business, for they would only be spending their capital, and their credit, on unnecessary infrastructure that is of little value to their current business, which offers them virtually no return on the investment. And while businesses do love to lower their expenses, I am not aware of any business of conscience that is willing to do this at the cost of losing current or future customers. It's just not good business.
When consumers have more money, businesses thrive. When consumers are broke, businesses downsize, no matter how much cash they have in the bank. This is not mere speculation - it is historical fact. Trickle down economics - DO NOT WORK.
