Re: Do you believe in "Trickle Down Economics"?
There are multiple factors to be considered, and it's difficult to give a simple answer to this.
Originally Posted by Ƒālconer
First, while one can ask the question: "Does trickle-down economics work?" ... it's a sublime implication that economics, itself, doesn't work.
Here's the inverse: "Does government taxation work?"
Business and economics, as a whole, tend to have greater endurance than most governments on the planet. Governments rise and fall and impose varying taxes and fees on businesses that operate in the region (and have been operating since before that government was recognized/formed).
So, yes, economics works. Money flows through the system without the government's involvement.
That said - tax cuts do not always mean an improved economy. The fact of the matter is that a lot of the money wealthy people 'save' in a tax cut ends up in a bank account. This is because they can literally survive off of the interest of their accounts and any of its earnings are taxed separately from their income (capital gains taxes are flat and affect the largest stock players to the stock tinkerers equally). In the debt/credit-heavy society we lived in through the early 2000s, this drove interest rates on accounts and made such investments very profitable. Thus "trickle down" was just not happening in the way the theory described (though the economic benefit from increased credit purchases was felt - though this was all part of the bubble that was developing and would later come back to bite us.... trickle-down didn't cause the bubble - but the bubble absorbed the 'trickle' and altered how it was distributed).
In economies more like today - "trickle down" works a little more effectively. Lending is not being driven nearly to the extremes it was - interest rates on accounts and in the stock market are fairly low and more 'normal' (closer to the mean economic growth). Savings transferred by tax cuts are invested more wisely - accounts don't offer nearly the interest rates they used to, the stock market is providing fewer short-term investment gains, and people are slowly shifting towards a preference for paying in full as opposed to on credit. The flow of "trickle" has been altered. It no longer goes straight into bank accounts or the stock market. It may sit in a bank account for a time - but as part of an intended cash purchase of a commodity.
Which isn't really 'helping' our economy in terms of returning it to its former 'glory' (which was riding a fractional reserve banking bubble... so it was all an illusion of grandeur, anyway). We are rebounding to a more stable and cautious economy. We won't (and hopefully never should) return to the same lending-based bubble-filled economy that we were enjoying.
That said - the "trickle" is there. The less money acquired by the government from our pay-checks, the more that can be spent in the economy (and the more eventually will be spent in the economy).
The government spends money, too - and its role in that should not be overlooked (governments, when properly executed, complement the free market). The problem is that our current government model wastes far too much money. Medicare is estimated to have spent over 100 billion dollars annually to fraudulent claims and other wasteful practices. That's something like 20x NASA's annual budget and 1/3 the cost of annual upkeep on our military (not counting active wars, which drive it up another 400 billion dollars).
I've seen where a lot of welfare ends up. It ends up in homes of people who, at best, sit around and wait for the check in the mail. More commonly, they appear to collect the check then run cash it so they can purchase their next hit of meth.
Which is why I am not supportive of the idea that the government should be entrusted with the responsibility of taking money from people and assigning its use to other people.
Pull the government out of business and get them back to a concept of minimal regulation and we'll see a lot of the mega-corporations fragment into smaller businesses with fewer executives and fewer bonuses. Smaller industries will take off and use innovation to forge new markets and exploit gaps in the current market supply. If "welfare" is given - it should be to businesses to help them afford to comply with environmental codes and alleviate start-up costs in industries where the costs of compliance are exceedingly high (which means that "only the big boys" can play in those industries - and when those same large companies control the lobbyists for government regulations... it's an obviously fascist system opposed to the idea of the free market).
In the end - the economy; the flow of wealth, is the flow of productivity. Taxes are, generally speaking, not an investment in production. Any purchase made by an individual for a good or service, however, is an investment in production. You cannot use the government to improve the wealth of any group through welfare. The only way to use the government to improve productivity is to use the government as a tool for the community it represents to help initiate business ventures that can produce new goods or services (that usually serve to improve the productivity of another group, business, etc).
Which is why my response to: "Does trickle-down economics work?" is the question: "Does government taxation work?"
Because the implication is that if trickle-down economics doesn't work... we are therefor justified and saying that a person should have more money taken away from him/her for "our" benefit. Which is, when you think about it, a form of pack-predation and theft. That person hasn't decided what their wage is (in most cases) - they merely accepted a wage offered to them that just so happened to be mind-bogglingly large. Now you want to come along and tell them that, because you don't have nice things - you deserve more of their income. If they don't - then you'll garnish their wages and/or send armed men to deny them of freedom and possibly property.
So I don't buy into this whole demonization of the wealthier classes, either. Nor do I buy into the idea that the government (or any group of people) owns or has privilege over another person's income. In other words - I don't believe that tax cuts can be said to 'cost' the government - that implies that the government owns your pay-check and is gracing you with the opportunity to freely spend it at their loss.
But, I think I've beat that horse to death. I am not a big fan of powerful governments.