8 ms·

Horses and Sparrows: The myth of 'trickle down' economics

79 points by lhoff 5y ago

durnygbur 5y ago
If they don't have bread they can eat brioche, if they don't have housing they can stay in hotel, if the're sick they can go to doctor. That's the trickle down economics.
prox 5y ago
The more data and critical research comes in, the more we can see that the old conservative owned creed of trickle down has many problems and cracks. It’s certainly not an optimum model to work with any longer. It’s however a fickle beast because it’s owned as a belief system and sold as one during elections and beyond. Fair share taxes and right redressing is most important, and how we put value into durable systems that work for everyone should be the debate and the challenge ahead.
leaveyou 5y ago
"In the last 40 years, a "new" type of economic model arose.." Did this model really arose ? Did anyone really create a document arguing for this "model" or was this just a theory, a lame excuse thrown on TV (and reverberated to heavens and back) to the masses by the politicians who got bribed to shower some special interests with easy money? How in the world can someone argue that we should make it much easier for some groups of people to become so rich that they'll get tired of money and the power it confers and they'll become benefactors and throw it more easily to the poor people who work for them ?
- nabla9 5y ago
  Nọ. Trickle down has never been economic theory. It's just political slogan. Sometimes it used to refer supply-side economics.
  - mohanmcgeek 5y ago
    Not sure why this is being downvoted. This is true. Why would someone call their theory "trickle down"
    - willcipriano 5y ago
      Like waterfall/agile, trickle down economics is the name used by critics of supply side economics, not it's creators. It's use instantly reveals you are a critic, not knowing that isn't what it's actually called reveals ignorance on the subject of economics more generally.
      - dlp211 5y ago
        Or as G.H.W. Bush put it, Voodoo economics.
- YesThatTom2 5y ago
  I’m old enough to remember the 1980s. And the time everyone did point to one particular economics paper to “prove” trickle-down would work. I also remember the author of the paper saying his work was being misinterpreted… but GOPers out-shouted him.
- johnchristopher 5y ago
  According to wikipedia the concept dates back to 189X https://en.wikipedia.org/wiki/Trickle-down_economics https://en.wikipedia.org/wiki/Trickle-down_economics Concept as in "an argument to get votes or to put some politics in place".
- ngcazz 5y ago
  Who would've known that trickle-down and greed would have a synergistic effect, right?
- dsr_ 5y ago
  "Trickle down" is the political synthesis of the Chicago School of economics, largely invented by https://en.wikipedia.org/wiki/Milton_Friedman https://en.wikipedia.org/wiki/Milton_Friedman , and the existing authoritarian built in the Republican Party. Remember that their counter-argument is that giving money to people who don't deserve it (proven because they are not the elite) is a waste because they don't "build" anything with it, since they need to spend it. The value of this proposition is to build concentrations of wealth, which are their own proof of virtue. The religious expression of this is the Prosperity Gospel https://en.wikipedia.org/wiki/Prosperity_theology https://en.wikipedia.org/wiki/Prosperity_theology .
  - jiojfdsal3 5y ago
    This is like saying YC should give their money to the poor instead of investing it in privileged entrepreneurs from Ivy League universities
    - lhoff 5y ago
      I think thats the wrong analogy. Trickle down would be to give the money to big successfull corporations and hopen that they are buying and funding startups with it.
    - Can_Not 5y ago
      Why would YC give their hard earned money to the lazy poor startups when they can give it to hard working companies like Microsoft and IBM?
  - rascul 5y ago
    > largely invented by https://en.wikipedia.org/wiki/Milton_Friedman https://en.wikipedia.org/wiki/Milton_Friedman That doesn't seem correct. I'm led to believe that trickle down economics (the concept, if not the name) existed before Milton Friedman was born after looking through https://en.wikipedia.org/wiki/Trickle-down_economics https://en.wikipedia.org/wiki/Trickle-down_economics.
jokoon 5y ago
The larger problem is the verticality, the hierarchy, the dominance of the economic system. https://en.wikipedia.org/wiki/Social_dominance_orientation https://en.wikipedia.org/wiki/Social_dominance_orientation https://en.wikipedia.org/wiki/Social_dominance_theory https://en.wikipedia.org/wiki/Social_dominance_theory Those are really primitive, irrational, traditional values and ideas that are difficult to get rid of, because so many humans just believe in the fatality of social darwinism. Evolutionism has no place in civilized society. Cynics who argue otherwise just want to benefit from their higher status.
- js8 5y ago
  I oppose authoritarianism and conservativism, and for a long time, I was puzzled by existence of social hierarchy (especially by the fact that it is widely accepted). I don't find the social darwinism theories of hierarchy very convincing, I subscribe to a theory that hierarchies occur in a civilization as a somewhat unintended consequence of authoritaritarian/conservative values, and these authoritarian values evolved in humans because they provide stability of social groups by keeping them from running too much social experiments (with potentially disastrous consequences). So eventually I came to conclusion that authoritarian/conservative value is far from primitive, but has actually a goal of avoiding social change, in the fear of breaking the society apart. It is probably related to parent-children relationships, we as children believe it is beneficial to trust parents, and learn from them, and we also extend this to people who are in institutional positions of authority, that they "know better" how to run stuff. That's why we submit to them, and that's also why older and more experienced people (who typically get to run institutions) also become more conservative - they want to keep the system that seemed to work (at least for them). It however can get misused by people who want power, and that's where the fundamental problem of this value comes from. Authoritarian/conservative values are also in opposition with liberal values (individual freedom) and socialist/progressive values (inclusion in the collective). So while I agree that social darwinism is fatalistic, I am not sure it is the only explanation (or correct one, for that matter) of why people accept social hierarchies.
  - aloisdg 5y ago
    I think we accept social hierarchies mostly because we were born in it, molded by it. In a vertical, pyramidal, system, we are coerced to compete against each other to reach the top when most of us cant get there. The places are limited. We spend far too more energy against each other. I vastly prefer ideas of horizontal society based on cooperation. One of my favorite pragmatic book who critic social Darwinism in favor of this alternative is Mutual Aid: A Factor of Evolution by Russian naturalist and anarchist philosopher Peter Kropotkin. Here is a wikipedia link: https://en.wikipedia.org/wiki/Mutual_Aid:_A_Factor_of_Evolution https://en.wikipedia.org/wiki/Mutual_Aid:_A_Factor_of_Evolut...
ppf 5y ago
Would you rather buy a high-quality item, and factor in its resale value as part of your decision-making process, or buy a cheap item that will be thrown away when you're done with it? Do you think the purchasers of quality but second hand goods could afford to buy them new?
- scotty79 5y ago
  I always went with the cheap item. I still do, I hate reselling and buying used. I drive my stuff to the ground whatever its quality is. When I began to have more money I just started buying more expensive cheap items. So yes, I could afford to buy new more expensive stuff.
  - wccrawford 5y ago
    In addition, there's been a large shift towards price not actually defining the quality of the item. There are a ton of cheap goods that perform as well or better than more expensive goods of the same kind. And a lot of expensive goods that actually don't perform well at all. The first example that comes to mind is power tools. I can buy a cheap trim router at Harbor Freight and it'll work as well or better than many of the top brands at Home Depot. Not all of them, but if I can't otherwise determine which is the best, it doesn't make sense to spend the extra money. IIRC, I've heard people say the same about shoes on HN, too. And IME, My $50 shoes have lasted just as long as the $110+ shoes that I used to buy, and were as comfortable or better. In addition, like you, I hate reselling things. We had a yard sale a couple months ago and just let everything go really cheap because it wasn't worth the effort to try to get more. At the end of a yard sale, we generally pack the rest up and donate it, anyhow.
    - scotty79 5y ago
      That's pretty much my reasoning for not buying more expensive stuff than necessary. I noticed very little correlation between the price of a thing and the value it provides to me.
    - Ardren 5y ago
splike 5y ago
One factor of this battle against trickle down economics is language. 'Trickle down economics' is term that is intuitive, explains itself well, and is easy to remember. It's a meme in Dawkin's original definition of the word. The alternative term, 'bubble up economics', needs to the popularised more.
- fnord123 5y ago
  I don't think you want to popularize bubble [...] economics. Foundational economics, structured economics, etc where there is a strong base 'at the bottom'.
  - s3tz 5y ago
    Foundational economics?
    - chadk 5y ago
      https://foundationaleconomy.com/introduction/ https://foundationaleconomy.com/introduction/
- TheSpiceIsLife 5y ago
  The complementary term is: Deluge Up Economics Which has the handy property of "due" being the acronym. You've got to pay your dues, buddy.
- prox 5y ago
  That but also value added economics would be a good idea to introduce, since not all companies, especially in the financial sector produce value to society. Like breaking apart successful companies for example.
- didgeoridoo 5y ago
  The term “trickle-down” is PART of this “battle”. It’s a derogatory term for supply-side policies, invented by a humorist to poke fun at the idea.
peter_retief 5y ago
My take is that because money has become very easy to move about the wealthy move any saving on tax to the best return. The best return is not local small business but rather countries that have slave labour. We really need a new value system that is tied to our well-being as a community rather than allowing the very wealthy to abuse systems that are meant to help everyone.
harshreality 5y ago
Business and tax loopholes used for corps and the ultrarich are not going to encourage them to pay employees [that much] more. It may, however, cause them to stay in your country, right? Countries compete for businesses. Businesses try to optimize their costs and tax bills by pulling every trick the government allows. The government's objective is to be among the most business-friendly countries, without losing money by being too much friendlier than the next one. If a government strays too far from that, while it won't happen overnight, businesses start leaving, UHNW individuals start leaving, employees follow, and the govt has a serious problem. It's a tricky proposition to figure out how much govt can demand from corporations before they've had enough and move. Different companies with different infrastructure and employee requirements will make that decision at different levels of annoyance. Government policy probably errs on the too-friendly-toward-business side, but it's a game of imperfect information combined with non-linear effects and a disastrous endgame if govt chooses wrong. To some extent companies already do this, by offshoring labor or by creative accounting, figuring out how to keep significant portions of their income legally untaxed by their home country, using shell companies and, in some cases, intellectual property licensing deals to funnel the money. Much has been outsourced to Asia or Mexico on the manufacturing side, and on the financial engineering side to Ireland. Stamping that out would be a choice govt could make, but the current negative side effects of those things pales in comparison to what happens if FAANG decides to move to Brazil or India and pays enough of their critical employees to move with them that it becomes viable.
- cedilla 5y ago
  I think this overstates both the willingness of businesses to move and the relative importance of taxes compared to other factors on where businesses will stay. Even with a negative tax, fast fashion wouldn't produce any clothes in the US while high-tech research labs thrive in cities with high taxes and labour costs. Meanwhile, the megacorp holdings already shift earnings, profits and costs around the globe in a way that turns competition into an unwinnable race to the bottom. How could the US ever compete on tax when Ireland is willing to tax Facebook's earnings at basically 0%?
- prox 5y ago
  A new way of that is to introduce bills for large multi nationals who want to leave, so the move costs equal or more than it gains.
nathias 5y ago
the rich and powerful wouldn't just lie for their benefit like that would they?
webreac 5y ago
I do not think the economic effect is big enough to be proved, but I think there is a political virtue in reducing the opposition between the richest and the poorest. For me, it is not economy, but mind manipulation.
m101 5y ago
Ask anyone now whether they would like to go back to live in the days when apparently life was better than it is now.
- cesaref 5y ago
  That's not what is being discussed. The interesting question is what would the world look like today if different policies had been implemented. Of course we can't know, so it is to a certain extent speculation. However, we can certainly question whether the reality met the expectations, and I think we can all agree that things haven't turned out as what predicted. I personally feel that globalisation and the decline in American manufacturing, and the rise of China are massively important factors and may have as much or more to do with how things turned out, but i'm no economist.
- croon 5y ago
  Ask every libertarian if they want to go back to the gold rush. It's a pointless question the answer of which doesn't produce the information you think it does.
williesleg 5y ago
Just rename the site to socialist hacker news and be done with it.
austincheney 5y ago
That economic model has been dispelled numerous times often using basic personal accounting. One example I remember is the owner of a pillow making industrial business. This business owner lived pretty plain driving a regular car, wearing regular jeans, eating regular meals, and nothing unique about the quantity or size of his spending habits. This owner made around $30 million per year but spent money equivalently to somebody earning $60 thousand per year. He inherited his business from his father and thus didn’t need tax assistance to create job as the jobs were already there. The factory employees were mostly hourly labor. There was nothing special here aside from having a business that generates a profit and his personal earnings were the result of that profit. There was nothing for money to trickle down to. Ultimately, none of that matters until you speak to tax policy. As I have learned in a recent HN thread about tax policy people are generally internally conflicted about what they want taxed. The general nature I could gleam from the comments is that wealth should be taxed, but nobody could define wealth. Taxes should be fair unless you are wealthy or poor. Tax policy should be simple until your personally identified special interest group is impacted at which point there must be all kinds of exceptions. Land value should be disproportionately taxed at a higher rate, but only if owned by wealthy people. Some forms of taxing are superior because they are more efficient except for automation. Everything read like a self-contradictory nightmare where people really wanted to feel rational.
- Aeolun 5y ago
  I guess the only thing we can mostly agree on is that some taxation is better than no taxation.
- jiojfdsal3 5y ago
  "There was nothing for money to trickle down to." Wasn't the money reinvested to create those jobs in the first place?
- hackeraccount 5y ago
  What do you think he did with the money in excess of the 60,000 he spent? Maybe he was like Scrooge McDuck and had a giant vault full of gold coins that he'd take a dip in periodically? My guess is that that's not the case. He probably had the money invested in some project. The real question in my mind is this. How do you want to figure out where resources are going to be invested? We can do it democratically - everyone votes on what they want to spend money on. Or we can have everyone invest their own money. The later is tricky. People will only invest their own money if they think the investment will make still more money - and some of that return is going to be spent on things that have zero return i.e. a new Porsche in the driveway. The former also has a few issues. What's stopping everyone from voting themselves a check? How much care is spent when you're spending other people's money?
doggodaddo78 5y ago
No it's not a myth, just a different metaphor: the warm, golden shower-kind where money flows uphill and something else rolls down.
ddxxdd 5y ago
>As the reader can see, job cycles in the post-supply-side world (which began in the 80s) are significantly weaker than *job cycles in conditions in which the wealthy paid a higher percentage of their income in taxes [presumably in the 50s and 60s]*. - >This bottom-up model, Keynesian economics, provides public support for the neediest, which keeps "subsistence" funds in the general economy, for things like energy, food, shelter, and medicine. *But Keynesian economics is also concerned with expanding and raising up the broad middle class so that we can move beyond subsistence and into a gradually increasing standard of living*. These two statements demonstrate that the author is not an economist; the high mid-century tax rates was targeted towards a small handful of billionaires and left most people untouched, and proper Keynesian economics is only valid during periods of sub-zero interest rates.
- o_p 5y ago
  >These two statements demonstrate that the author is not an economist Thank god, I was worried it was going to be a waste of time
- willcipriano 5y ago
  > high mid-century tax rates was targeted towards a small handful of billionaires and left most people untouched Tax evasion was much simpler pre modern computing, the internet, credit cards, etc. The rate of tax is high on paper but the effective rate of tax was much lower. Not only that the tax code was (and is) riddled with loopholes. I'd say they had a high rate of tax for honest millionaires and millionaires who aren't friendly with some congressmen.
doggodaddo78 5y ago
TDE was a libertarian-flavored ideological myth Reagan bought into because it supported his warped and uneducated worldview (he, after all, was a know-nothing Hollywood celebrity who exploited politics because Nancy). "Just make the billionaires happy and everything will be fine." Yeah, except for one problem without regulations and taxes: greed. Billionaires don't just spread cash around willingly. It's still trotted-out occasionally by out-of-touch Republicans and conservatives just to be debunked by folks like Thom Hartmann. If it ever makes a resurgence with the level of inequality at present, we're more than doomed.
CryptoPunk 5y ago
There is a pervasive inverse correlation between government spending, as a percentage of GDP, and the rate of economic growth: https://web.archive.org/web/20170821004405/http://ime.bg/uploads/335309_OptimalSizeOfGovernment.pdf https://web.archive.org/web/20170821004405/http://ime.bg/upl... A tax cut that isn't matched by a spending cut translates to more government borrowing, where the rich take that money they save on taxes, and lend it to the government.

79 points by lhoff 5y ago

If they don't have bread they can eat brioche, if they don't have housing they can stay in hotel, if the're sick they can go to doctor. That's the trickle down economics.

prox 5y ago

The more data and critical research comes in, the more we can see that the old conservative owned creed of trickle down has many problems and cracks. It’s certainly not an optimum model to work with any longer. It’s however a fickle beast because it’s owned as a belief system and sold as one during elections and beyond. Fair share taxes and right redressing is most important, and how we put value into durable systems that work for everyone should be the debate and the challenge ahead.

leaveyou 5y ago

"In the last 40 years, a "new" type of economic model arose.." Did this model really arose ? Did anyone really create a document arguing for this "model" or was this just a theory, a lame excuse thrown on TV (and reverberated to heavens and back) to the masses by the politicians who got bribed to shower some special interests with easy money? How in the world can someone argue that we should make it much easier for some groups of people to become so rich that they'll get tired of money and the power it confers and they'll become benefactors and throw it more easily to the poor people who work for them ?

nabla9 5y ago
Nọ. Trickle down has never been economic theory. It's just political slogan. Sometimes it used to refer supply-side economics.
- mohanmcgeek 5y ago
  Not sure why this is being downvoted. This is true. Why would someone call their theory "trickle down"
  - willcipriano 5y ago
    Like waterfall/agile, trickle down economics is the name used by critics of supply side economics, not it's creators. It's use instantly reveals you are a critic, not knowing that isn't what it's actually called reveals ignorance on the subject of economics more generally.
    - dlp211 5y ago
      Or as G.H.W. Bush put it, Voodoo economics.
YesThatTom2 5y ago
I’m old enough to remember the 1980s. And the time everyone did point to one particular economics paper to “prove” trickle-down would work. I also remember the author of the paper saying his work was being misinterpreted… but GOPers out-shouted him.
johnchristopher 5y ago
According to wikipedia the concept dates back to 189X https://en.wikipedia.org/wiki/Trickle-down_economics https://en.wikipedia.org/wiki/Trickle-down_economics Concept as in "an argument to get votes or to put some politics in place".
ngcazz 5y ago
Who would've known that trickle-down and greed would have a synergistic effect, right?
dsr_ 5y ago
"Trickle down" is the political synthesis of the Chicago School of economics, largely invented by https://en.wikipedia.org/wiki/Milton_Friedman https://en.wikipedia.org/wiki/Milton_Friedman , and the existing authoritarian built in the Republican Party. Remember that their counter-argument is that giving money to people who don't deserve it (proven because they are not the elite) is a waste because they don't "build" anything with it, since they need to spend it. The value of this proposition is to build concentrations of wealth, which are their own proof of virtue. The religious expression of this is the Prosperity Gospel https://en.wikipedia.org/wiki/Prosperity_theology https://en.wikipedia.org/wiki/Prosperity_theology .
- jiojfdsal3 5y ago
  This is like saying YC should give their money to the poor instead of investing it in privileged entrepreneurs from Ivy League universities
  - lhoff 5y ago
    I think thats the wrong analogy. Trickle down would be to give the money to big successfull corporations and hopen that they are buying and funding startups with it.
  - Can_Not 5y ago
    Why would YC give their hard earned money to the lazy poor startups when they can give it to hard working companies like Microsoft and IBM?
- rascul 5y ago
  > largely invented by https://en.wikipedia.org/wiki/Milton_Friedman https://en.wikipedia.org/wiki/Milton_Friedman That doesn't seem correct. I'm led to believe that trickle down economics (the concept, if not the name) existed before Milton Friedman was born after looking through https://en.wikipedia.org/wiki/Trickle-down_economics https://en.wikipedia.org/wiki/Trickle-down_economics.

jokoon 5y ago

The larger problem is the verticality, the hierarchy, the dominance of the economic system. https://en.wikipedia.org/wiki/Social_dominance_orientation https://en.wikipedia.org/wiki/Social_dominance_orientation https://en.wikipedia.org/wiki/Social_dominance_theory https://en.wikipedia.org/wiki/Social_dominance_theory Those are really primitive, irrational, traditional values and ideas that are difficult to get rid of, because so many humans just believe in the fatality of social darwinism. Evolutionism has no place in civilized society. Cynics who argue otherwise just want to benefit from their higher status.

js8 5y ago
I oppose authoritarianism and conservativism, and for a long time, I was puzzled by existence of social hierarchy (especially by the fact that it is widely accepted). I don't find the social darwinism theories of hierarchy very convincing, I subscribe to a theory that hierarchies occur in a civilization as a somewhat unintended consequence of authoritaritarian/conservative values, and these authoritarian values evolved in humans because they provide stability of social groups by keeping them from running too much social experiments (with potentially disastrous consequences). So eventually I came to conclusion that authoritarian/conservative value is far from primitive, but has actually a goal of avoiding social change, in the fear of breaking the society apart. It is probably related to parent-children relationships, we as children believe it is beneficial to trust parents, and learn from them, and we also extend this to people who are in institutional positions of authority, that they "know better" how to run stuff. That's why we submit to them, and that's also why older and more experienced people (who typically get to run institutions) also become more conservative - they want to keep the system that seemed to work (at least for them). It however can get misused by people who want power, and that's where the fundamental problem of this value comes from. Authoritarian/conservative values are also in opposition with liberal values (individual freedom) and socialist/progressive values (inclusion in the collective). So while I agree that social darwinism is fatalistic, I am not sure it is the only explanation (or correct one, for that matter) of why people accept social hierarchies.
- aloisdg 5y ago
  I think we accept social hierarchies mostly because we were born in it, molded by it. In a vertical, pyramidal, system, we are coerced to compete against each other to reach the top when most of us cant get there. The places are limited. We spend far too more energy against each other. I vastly prefer ideas of horizontal society based on cooperation. One of my favorite pragmatic book who critic social Darwinism in favor of this alternative is Mutual Aid: A Factor of Evolution by Russian naturalist and anarchist philosopher Peter Kropotkin. Here is a wikipedia link: https://en.wikipedia.org/wiki/Mutual_Aid:_A_Factor_of_Evolution https://en.wikipedia.org/wiki/Mutual_Aid:_A_Factor_of_Evolut...

ppf 5y ago

Would you rather buy a high-quality item, and factor in its resale value as part of your decision-making process, or buy a cheap item that will be thrown away when you're done with it? Do you think the purchasers of quality but second hand goods could afford to buy them new?

scotty79 5y ago
I always went with the cheap item. I still do, I hate reselling and buying used. I drive my stuff to the ground whatever its quality is. When I began to have more money I just started buying more expensive cheap items. So yes, I could afford to buy new more expensive stuff.
- wccrawford 5y ago
  In addition, there's been a large shift towards price not actually defining the quality of the item. There are a ton of cheap goods that perform as well or better than more expensive goods of the same kind. And a lot of expensive goods that actually don't perform well at all. The first example that comes to mind is power tools. I can buy a cheap trim router at Harbor Freight and it'll work as well or better than many of the top brands at Home Depot. Not all of them, but if I can't otherwise determine which is the best, it doesn't make sense to spend the extra money. IIRC, I've heard people say the same about shoes on HN, too. And IME, My $50 shoes have lasted just as long as the $110+ shoes that I used to buy, and were as comfortable or better. In addition, like you, I hate reselling things. We had a yard sale a couple months ago and just let everything go really cheap because it wasn't worth the effort to try to get more. At the end of a yard sale, we generally pack the rest up and donate it, anyhow.
  - scotty79 5y ago
    That's pretty much my reasoning for not buying more expensive stuff than necessary. I noticed very little correlation between the price of a thing and the value it provides to me.
  - Ardren 5y ago

splike 5y ago

One factor of this battle against trickle down economics is language. 'Trickle down economics' is term that is intuitive, explains itself well, and is easy to remember. It's a meme in Dawkin's original definition of the word. The alternative term, 'bubble up economics', needs to the popularised more.

fnord123 5y ago
I don't think you want to popularize bubble [...] economics. Foundational economics, structured economics, etc where there is a strong base 'at the bottom'.
- s3tz 5y ago
  Foundational economics?
  - chadk 5y ago
    https://foundationaleconomy.com/introduction/ https://foundationaleconomy.com/introduction/
TheSpiceIsLife 5y ago
The complementary term is: Deluge Up Economics Which has the handy property of "due" being the acronym. You've got to pay your dues, buddy.
prox 5y ago
That but also value added economics would be a good idea to introduce, since not all companies, especially in the financial sector produce value to society. Like breaking apart successful companies for example.
didgeoridoo 5y ago
The term “trickle-down” is PART of this “battle”. It’s a derogatory term for supply-side policies, invented by a humorist to poke fun at the idea.

peter_retief 5y ago

My take is that because money has become very easy to move about the wealthy move any saving on tax to the best return. The best return is not local small business but rather countries that have slave labour. We really need a new value system that is tied to our well-being as a community rather than allowing the very wealthy to abuse systems that are meant to help everyone.

harshreality 5y ago

Business and tax loopholes used for corps and the ultrarich are not going to encourage them to pay employees [that much] more. It may, however, cause them to stay in your country, right? Countries compete for businesses. Businesses try to optimize their costs and tax bills by pulling every trick the government allows. The government's objective is to be among the most business-friendly countries, without losing money by being too much friendlier than the next one. If a government strays too far from that, while it won't happen overnight, businesses start leaving, UHNW individuals start leaving, employees follow, and the govt has a serious problem. It's a tricky proposition to figure out how much govt can demand from corporations before they've had enough and move. Different companies with different infrastructure and employee requirements will make that decision at different levels of annoyance. Government policy probably errs on the too-friendly-toward-business side, but it's a game of imperfect information combined with non-linear effects and a disastrous endgame if govt chooses wrong. To some extent companies already do this, by offshoring labor or by creative accounting, figuring out how to keep significant portions of their income legally untaxed by their home country, using shell companies and, in some cases, intellectual property licensing deals to funnel the money. Much has been outsourced to Asia or Mexico on the manufacturing side, and on the financial engineering side to Ireland. Stamping that out would be a choice govt could make, but the current negative side effects of those things pales in comparison to what happens if FAANG decides to move to Brazil or India and pays enough of their critical employees to move with them that it becomes viable.

cedilla 5y ago
I think this overstates both the willingness of businesses to move and the relative importance of taxes compared to other factors on where businesses will stay. Even with a negative tax, fast fashion wouldn't produce any clothes in the US while high-tech research labs thrive in cities with high taxes and labour costs. Meanwhile, the megacorp holdings already shift earnings, profits and costs around the globe in a way that turns competition into an unwinnable race to the bottom. How could the US ever compete on tax when Ireland is willing to tax Facebook's earnings at basically 0%?
prox 5y ago
A new way of that is to introduce bills for large multi nationals who want to leave, so the move costs equal or more than it gains.

nathias 5y ago

the rich and powerful wouldn't just lie for their benefit like that would they?

webreac 5y ago

I do not think the economic effect is big enough to be proved, but I think there is a political virtue in reducing the opposition between the richest and the poorest. For me, it is not economy, but mind manipulation.

m101 5y ago

Ask anyone now whether they would like to go back to live in the days when apparently life was better than it is now.

cesaref 5y ago
That's not what is being discussed. The interesting question is what would the world look like today if different policies had been implemented. Of course we can't know, so it is to a certain extent speculation. However, we can certainly question whether the reality met the expectations, and I think we can all agree that things haven't turned out as what predicted. I personally feel that globalisation and the decline in American manufacturing, and the rise of China are massively important factors and may have as much or more to do with how things turned out, but i'm no economist.
croon 5y ago
Ask every libertarian if they want to go back to the gold rush. It's a pointless question the answer of which doesn't produce the information you think it does.

williesleg 5y ago

Just rename the site to socialist hacker news and be done with it.

austincheney 5y ago

That economic model has been dispelled numerous times often using basic personal accounting. One example I remember is the owner of a pillow making industrial business. This business owner lived pretty plain driving a regular car, wearing regular jeans, eating regular meals, and nothing unique about the quantity or size of his spending habits. This owner made around $30 million per year but spent money equivalently to somebody earning $60 thousand per year. He inherited his business from his father and thus didn’t need tax assistance to create job as the jobs were already there. The factory employees were mostly hourly labor. There was nothing special here aside from having a business that generates a profit and his personal earnings were the result of that profit. There was nothing for money to trickle down to. Ultimately, none of that matters until you speak to tax policy. As I have learned in a recent HN thread about tax policy people are generally internally conflicted about what they want taxed. The general nature I could gleam from the comments is that wealth should be taxed, but nobody could define wealth. Taxes should be fair unless you are wealthy or poor. Tax policy should be simple until your personally identified special interest group is impacted at which point there must be all kinds of exceptions. Land value should be disproportionately taxed at a higher rate, but only if owned by wealthy people. Some forms of taxing are superior because they are more efficient except for automation. Everything read like a self-contradictory nightmare where people really wanted to feel rational.

Aeolun 5y ago
I guess the only thing we can mostly agree on is that some taxation is better than no taxation.
jiojfdsal3 5y ago
"There was nothing for money to trickle down to." Wasn't the money reinvested to create those jobs in the first place?
hackeraccount 5y ago
What do you think he did with the money in excess of the 60,000 he spent? Maybe he was like Scrooge McDuck and had a giant vault full of gold coins that he'd take a dip in periodically? My guess is that that's not the case. He probably had the money invested in some project. The real question in my mind is this. How do you want to figure out where resources are going to be invested? We can do it democratically - everyone votes on what they want to spend money on. Or we can have everyone invest their own money. The later is tricky. People will only invest their own money if they think the investment will make still more money - and some of that return is going to be spent on things that have zero return i.e. a new Porsche in the driveway. The former also has a few issues. What's stopping everyone from voting themselves a check? How much care is spent when you're spending other people's money?

doggodaddo78 5y ago

No it's not a myth, just a different metaphor: the warm, golden shower-kind where money flows uphill and something else rolls down.

ddxxdd 5y ago

>As the reader can see, job cycles in the post-supply-side world (which began in the 80s) are significantly weaker than *job cycles in conditions in which the wealthy paid a higher percentage of their income in taxes [presumably in the 50s and 60s]*. - >This bottom-up model, Keynesian economics, provides public support for the neediest, which keeps "subsistence" funds in the general economy, for things like energy, food, shelter, and medicine. *But Keynesian economics is also concerned with expanding and raising up the broad middle class so that we can move beyond subsistence and into a gradually increasing standard of living*. These two statements demonstrate that the author is not an economist; the high mid-century tax rates was targeted towards a small handful of billionaires and left most people untouched, and proper Keynesian economics is only valid during periods of sub-zero interest rates.

o_p 5y ago
>These two statements demonstrate that the author is not an economist Thank god, I was worried it was going to be a waste of time
willcipriano 5y ago
> high mid-century tax rates was targeted towards a small handful of billionaires and left most people untouched Tax evasion was much simpler pre modern computing, the internet, credit cards, etc. The rate of tax is high on paper but the effective rate of tax was much lower. Not only that the tax code was (and is) riddled with loopholes. I'd say they had a high rate of tax for honest millionaires and millionaires who aren't friendly with some congressmen.

doggodaddo78 5y ago

TDE was a libertarian-flavored ideological myth Reagan bought into because it supported his warped and uneducated worldview (he, after all, was a know-nothing Hollywood celebrity who exploited politics because Nancy). "Just make the billionaires happy and everything will be fine." Yeah, except for one problem without regulations and taxes: greed. Billionaires don't just spread cash around willingly. It's still trotted-out occasionally by out-of-touch Republicans and conservatives just to be debunked by folks like Thom Hartmann. If it ever makes a resurgence with the level of inequality at present, we're more than doomed.

CryptoPunk 5y ago

There is a pervasive inverse correlation between government spending, as a percentage of GDP, and the rate of economic growth: https://web.archive.org/web/20170821004405/http://ime.bg/uploads/335309_OptimalSizeOfGovernment.pdf https://web.archive.org/web/20170821004405/http://ime.bg/upl... A tax cut that isn't matched by a spending cut translates to more government borrowing, where the rich take that money they save on taxes, and lend it to the government.