Defense of trickle down economics coming from unlikely places

Sort of….

Not that long ago, the New York Times ran an article by Motoko Rich which includes these lines:

The economic recovery has been helped in large part by the spending of the most affluent. Now, even the rich appear to be tightening their belts.

Late last year, the highest-income households started spending more confidently, while other consumers held back. But their confidence has since ebbed, according to retail sales reports and some economic analysis.

The same article noted that the richest 5% of America were responsible for 33% of the country's spending and economy. The thrust of the article was that rich people are sitting on all their money and thus it’s their fault things are rough so stop blaming Democrats and vote for them.

Yet in that article the writer admitted that, yes trickle down economics – the much-maligned economic philosophy of fiscal conservatives such as President Reagan – was true: the wealthy drive the economy and their spending is what results in money for everyone.

Recently, a writer at the Associated Press admitted the same thing:

Wealthy Americans aren't spending so freely anymore. And the rest of us are feeling the squeeze.

The question is whether the rich will cut back so much as to tip the economy back into recession—or if they will spend at least enough to sustain the recovery.

The answer may not be clear for months. But their cutbacks help explain why the rebound could be stalling. The economy grew at just a 2.4 percent rate in the April-June quarter, the government said Friday, much slower than the 3.7 percent rate for the first quarter.

Economists say overall consumer spending has slowed mainly because the richest 5 percent of Americans—those earning at least $207,000—are buying less.

Now, again this article is setting up a different narrative: if things get worse, it’s the fault of those evil rich people. Yet the admission is there, perhaps without these writers even being aware of it. The AP article specifically mentions the Bush tax cuts and how letting them lapse would result in greater fiscal restraint by the wealthy, thus damaging the economy.

That, in a nutshell, is the basic theory behind “trickle-down” economics. If you lower taxes on the wealthy, they will spend and invest more, thus creating more jobs, driving the economy, and everyone benefits. Or, as an earlier advocate of this theory named John F Kennedy noted: “a rising tide lifts all the boats.”

By increasing the tax rate on the evil rich, you actually hurt everyone. Because people with more money spend more, invest more, and are the ones who own the companies that hire folks like you and me or buy the goods and services that do. These articles admit this, even though the writers would almost certainly reject the principle of conservative fiscal policy.

Yet this admission hides an ugly truth.

If they recognize all this to be true, yet still want taxes hiked up on the rich, that means their purpose has nothing to do with fairness, economic health, or actually benefiting people in need of jobs. It means their intent is flat out wealth distribution based on envy; that they want to raise the tax rate on the wealthy simply because they are jealous of others having more and want to create a society where no one has “too much,” even if it is devastating to the economy and jobs.

And if you look at the policies and efforts of the Democrats for the last year and a half, it’s impossible to avoid that conclusion. They do not want the economy to improve… they don't want people to get lots of jobs… if it means using non-redistributionist methods. If the economy has to tank and the little people have to suffer and sacrifice a while until the utopia in which everyone is healthy and shares alike, with no one achieving more than anyone else, well that's a price they're willing for others to pay.

I say other people, because guys like Senator Kerry (D-MA) who embrace this philosophy whole-heartedly have made it clear that they aren't willing to be the ones who make the sacrifice.

If you want proof of this, turn no further than a recently proposed idea by Representative Jerrold Nadler (D-NY) who wants to make sure the tax increases caused by letting the Bush Tax cuts lapse won’t hurt his constituents:

Mr. Nadler's bill would “require the IRS to adjust tax brackets proportionally in regions where the average cost of living is higher than the national average.”

In other words, the various tax brackets would apply to residents in certain regions at higher income levels versus other parts of the country. A family with an income of $50,000 or even $1 million in Manhattan would pay less federal income tax than a family with the same earnings in Omaha.

This is nothing less than an admission that raising taxes on the rich hurts the local economy, so he wants to find a way to make it not hurt his constituents as much as others. Coincidentally, his locations where the taxes would all be raised by less would be heavy Democrat-voting districts.

Right now, wealthy investors, business owners, and corporate CEOs are looking at the fiscal and business landscape and aren't happy with what they see. They have a responsibility to their families, their board members, their employees, and their customers to invest wisely and to spend their money carefully.

Most businesses in America were built up by the hard work of one or two entrepreneurs who have earned all their wealth through long hours and personal sacrifice.

When the average businessman looks at the way congress and the president talk, examines the legislation and fiscal policy they have passed, and sees the near future, they aren't happy. They see an explosion of costs with the new health care legislation, they see the potential for new tax increases, and overall they see a federal government hostile toward business and the creation of wealth. None of that encourages them to take risks, invest more, expand their business, or hire. In fact, it actively encourages them to hunker down, shelter their earnings, let a few people go, and hire part-time work.

Unfair and mean spirited is how many want to portray our current economic situation vis-a-vis 'the rich' and business owners. Who among you would be any different if it was your money and your company? It isn't greed that drives this caution, its prudence. The desire to wait until things get better is not strange, but this is not going to happen until the federal government stops treating business as the enemy.

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