On Friday, I had a economic advancement conversation with dear old dad which ended the same way many of our conversations do. With me professing my liberalism and him professing his love for Ronald Reagan (sort of).
"Eh well, the economy's gonna tank next year, so we're gonna put all our stocks and 401ks in bonds." Announced dad.
This I agree with, because I do not believe that we will see any kind of economic rebound until their is a segment of the economy to grow: which will be manufacturing. That's a completely different blog...so I digress.
"I agree, I also think that 10% unemployment is the new normal. Our economy has effectively been reset to what it should have behaved like prior to 1999-2000." I concurred, in my snottish way.
"That's okay though...we'll have a slight improvement when the conservatives get back in office in November."
Dear old dad doesn't give a shit that I don't agree with him. He speaks of the ideologies I disagree with as if he were talking to himself. I think he takes this tone because it's the only alternative to sounding like he's attacking me. He knows I'm sensitive about my smarts. I'm not very good looking, so it's all i've got.
"When the conservatives get back into office, I'm getting the fuck out of here." I know this isn't a new stance, and it may not come true, but do I ever wish it were financially viable.
"Hah! You're funny." He cackled.
I know some day I'll miss these exchanges, but for now, it leads me to one thing: the Trickle-Down Theory.
Clearly what my dad means about a "slight improvement" in the economy is directly related to knowledge that conservatives will attempt to lower taxes. In 2011, the Bush tax cuts are set to expire and new taxes to pay for health care reform will be put into place. Yes, this will be a little bit painful, but a lot necessary.
Dad, and many other Americans and politicians, believe that zero taxes equal tons of growth. They don't take into consideration what I will call, the Greed Factor.
The wealthy, by definition, have far more than they need. In terms of resort homes, fancy fucking cars, downpayment money, y'know, shit that I will never have because I am "a poor".
I'd like to take this time to mention that my dad is fairly well off. However compared to the wealthiest in this country, who would be responsile for making the Trickle Down Theory work, he is also "a poor".
If the wealthy have, and keep, far more than they need to survive, or even to make them happy, then they are greedy. This is the Greed Factor. This excess would be better off distributed to those of us poors so that we could live our lives without struggle and spend money on luxuries, rather than the bare bones necessities at the 99 Cent Store.
So this set me off thinking: is there any proof that the Trickle Down Theory works? It seems illogical to me, but what do I know. I may be a marketing manager at a very large company but still, I am "a poor".
First, my journey took me to Wikipedia. In 2006, the Pacific Research Institute published the US Economic Freedom Index. The index ranked states according to how friendly their tax policies were to "free enterprise". The study showed that per capital personal income grew 31% fasterin the most "economically free" states than it did in the 15 states that were the least economically free. Employment growth was 216% higher in the most free states.
Well, this doesn't help my cause all that much. This whole anti-tax thing sounds pretty tasty. Sounds like it's just what Dr. Obama should order, eh?
I still won't drink the Kool-Aid. Yes, because I am ravenously liberal, but also because the city that exists around me dictates that this cannot be true. My peers and I, who make decent money, cannot buy a house. We cannot invest in anything that promises to be a good investment in the future. We barely have enough money to buy cars. If we were to go after these things, with credit (which is unwise) we would be locking ourselves up perpetually in the debtors prison. Our wages will never allow us to pay these things off, if we glomb onto them.
The research by the Pacific Research Institute is the only example I could find of the Trickle Down Theory working as it is supposed to.
Reagan decreased the tax rate for the richest Americans from 70% to 28% in the early 1980s. This article from the New York Times discusses why there is no proof that this was helpful. In fact, it harmed the middle class by widening the wealth gap. Check out these statistics that make me want to go on a murderous rampage in Bel Air:
- The median wage, adjusted for inflation, is now lower than it was in 1980.
- The top tenth of 1 percent of earners today make about four times as much as in 1980.
- Chief executives in Japan earn less than one-fifth what their American counterparts do and face substantially higher marginal tax rates, Japanese executives do not work shorter hours.
- In the 1950s, American executives earned far lower salaries and faced substantially higher marginal tax rates than they do today. Yet most of them competed energetically for higher rungs on the corporate ladder.
During the Great Depression, tax rates for the wealthy were raised to 90%. Yet somehow, those bastards survived.
Why is it that the wealthiest nation in the world can't provide its citizens universal healthcare? Can't provide proper policing in cities that don't generate the most property tax? Is about to lay off teachers if congress doesn't approve an emergency $50 billion?
The Greed Factor is the reason why.
The average American household makes $60,000 per year. Depending on the city (assuming it's not San Francisco or New York or Los Angeles) this seems fairly reasonable. For individuals making, oh let's say, a measly $5 million per year more than this, so a total of $5,060,000, the incremental $5,000,000 isn't technically necessary.
Even if this hypothetical beast is taxed at 70%, as they were pre-Reagan, they will still have $1,518,000 at their disposal. Gee, must be nice.
But the thought of letting that additional money go is just too much to bear. So painful, that even a potentially bullshit theory is enough to send the rich, and the fearful into a conservative-voting shitfit.
At this point it's appropriate to note that the greatest period of economic growth in American history came before Reagan. Between 1945 and 1973. It was that horrible time when health care was affordable, Americans families could live on single incomes, Americans could afford homes, and unemployment was low. It was the time when the wealthiest of Americans were taxed at 70% and more. It was a time when the Trickle Down Theory hadn't been used as a hope and fear tactic and didn't matter.
Taxation shouldn't be used as a tool to spur economic growth. Taxation should be even for an extended period of time, and flat for all individuals. Economic growth should come from the product we create, not hoping that the love of greed will wear off of the rich and all of a sudden they become their own Robin Hood. It's not going to happen. It never has.