Define when states are enacting Trickle Down economics

[PainRack]

I'm engaged in an online discussion with another Singaporean who's arguing that because Singapore has laid down policies to attract wealth and the rich to Singapore, such as the abolishment of the estate tax and low taxes, it is practising trickle down economics. Afterall, low taxes and simple regulations attract investors, who expand the economy, right?


I'm arguing that trickle down economics isn't about the exact policies, but rests explictly on the expectation that lower taxes will increase revenue. Our rebalancing of the tax code, by increasing sales tax to balance the revenue lost to a reduction in income taxes on the wealthy and businesses show that we aren't.


Since the other person can't debate worth a damn, I'm opening the question up to the board. Just how does one define a state as practising the philosophy of trickle down economics?

[Block]

Putting more wealth into the hands of the rich assuming it will generate more spending that creates jobs for those lower on the food chain is pretty much the definition of trickle down. It has very little to do with revenue coming into the government other than as a secondary benefit of a larger economy.

[PainRack]

How would one differentiate that from reducing taxes for stimulus purposes, or reducing business costs so that they could stay competitive then?

[Stark]

Wait, is trickle down an actual thing that you learn in economics class? I always thought it was an obvious blind to trick the middle class into voting for people who represented the rich.

[PainRack]

Wait, is trickle down an actual thing that you learn in economics class? I always thought it was an obvious blind to trick the middle class into voting for people who represented the rich.

No. But that's the problem isn't it? There's no actual economic definition for the term.

[mr friendly guy]

Wait, is trickle down an actual thing that you learn in economics class? I always thought it was an obvious blind to trick the middle class into voting for people who represented the rich.

Surprisingly yes. Although from what I remember in high school we didn't go into much detail, but what I remember was the idea is that if lots of people get rich, the money would flow down to the poorer people. Presumably they meant in terms of employment, spending by the rich etc.

[Crossroads Inc.]

It was "Taught" in my own Economic class, taught in terms of taking the time to point out what a stupid concept it was..

My Economic teacher was an unabashed progressive, and I remember his lesson on the topic.
The point he drilled in was that during different points in history, under different, sometimes extreme circumstances, virtually every Economic model has "Worked" to a certain degree at some point. Even Communism 'worked' to a certain extent, and Socialism deffinantly can work when governed by sane individuals.

But "Trickle down", as it has been explained by people on the right, has never worked...
The closest we got to the ideal setting for it, little to no government regulations or taxes, was during the 1910 and 20's. During that time Capitalism was king, it could do as it wished. The rich got VERY rich and what did we see from that? Well we saw a LOT of bad things, but no where did we see the rich "lifting up' the poor.


As far as the OP is concerned, Block laid out the central theme already. Which is part of the problem. There IS NO real "rule book" to it, there are no hard laws to follow that says 'this is how trickle down works, and this is what to expect from it'. Which in a nutshell is why it has always been called "Voodoo Economics". All it is saying "If the rich get richer, they invest in the poor and make more jobs"

No one has ever said HOW this is done, only that it happens.

[Dr. Trainwreck]

Let me take a shot.

By letting the rich get richer, you can assume that their growing businesses will make the economy grow as well (as in, increase GDP). By definition, this means that this country will be richer than those around it. It makes sense up to this point.

Then, propenents of this thing realize that a nation's wealth is all about its distribution. They are right to assume that, because businesses and the economy will grow, wages and living costs will increase. But then they trust the market, by itself, to ensure proper distribution of wealth without them lifting a finger. They simply believe that wealth will be passed around, so as to make everyone's wages trump their living costs. This last part is blind faith, which they hope will be confirmed by reality. It is the same as converting to Christianity and then relying on Jesus to save you and make your life better.

They see this faith as a good thing, given that they buy it. I, and anyone who doesn't, see it as inaction leading to misery. If you have to spend 99% of your income to survive, or if your income isn't even enough for that, does it really matter how much money the income is in the first place? Meanwhile, the guys who once were rich by the standards of a poor country are now rich by the standards of a rich country. Libertarian social justice.

[UnderAGreySky]

There is this massive assumption amongst the proponents of trickle-down economics that personal wealth = more jobs. As in, if you let the rich become richer then those around them will do so automatically. It sort of collapses when you point out that rich people - especially today, but mostly all through time - don't invest their own money into building things. And though their consumption is definitely more than the poor, it is generally not a multiple of how much more wealth they have than the poor.

[Mr Bean]

There is this massive assumption amongst the proponents of trickle-down economics that personal wealth = more jobs. As in, if you let the rich become richer then those around them will do so automatically. It sort of collapses when you point out that rich people - especially today, but mostly all through time - don't invest their own money into building things. And though their consumption is definitely more than the poor, it is generally not a multiple of how much more wealth they have than the poor.

Not to mention when the Rich buy things they tend to buy specialty services. If I own a yard that churns out luxury yachts for rich billionaires and I get an uptick in business I won't expand to meet demand because I know that there is a limited list of people who want my two hundred foot super luxury boats and having a waiting list will gin up more business than expansion will. After all if I'm exclusive it makes my services even more valuable. Likewise with fine wines, jewelry and other stereotypical goods we associate with rich people. If a rich person has a million dollars sitting around and buy a car they might buy an very expensive car but if that same million dollars were instead split a hundred ways to the rich guys workers and they put down 10,000$ on a new car the economic stimulus is far bigger than if the rich guy shells out a million dollars for a McLaren F1.

Or to put it another way the rich don't buy volume like the poor do. If you took it another way, lets say it's a hundred million not a million and lets say your giving away ten thousand dollar bonuses to you best ten thousand employees to send during the next Christmas, what do you think the economic impact would be assume both of you spend a hundred million dollars. Where do you think the Rich guy is going to spend his hundred million dollars vs the workers ten thousand? A new computer, maybe a little bit of stock for the kids, a nice selection of toys for the kids and something nice for a loved one. Meanwhile the Rich guy is probably going to buy anywhere near the same shear volume, his gifts will just be much more expensive. If you spend a hundred million dollars on two kids and a spouse it's probably not going to be on fifty computers for each of them, a thousand toys per child and the spouses weight in jewelry. Yet if we were to compare that economic stimulus between the two parties and you see how lopsided it gets.

[PainRack]

So, how do we know when nations are engaged in reaganomics?

[Mr Bean]

So, how do we know when nations are engaged in reaganomics?

Since what 80% of the first world is socialist we'd have to have a first world country that is not socialist and not be exploited by other first world countries for it's Reaganomic policies. Which is a problem because any country practicing low taxes on rich people is likely to be exploited by rich people from other countries making it hard to get a economic test case.

[Stark]

Yeah, the obvious joke is that the rich have standing fortunes, private jets, ten million dollar birthday parties, twenty thousand dollar shower curtains, etc. Increasing their wealth (usually code for allowing them to exploit the poor) just results in money taken out of the economy. Maybe they'd rather earn a safe 7% than hire anyone? Uh oh, stupid idea is stupid.

Encouraging business and industrial development is a much better idea, but that doesn't need a special name for it.

[LaCroix]

There is this massive assumption amongst the proponents of trickle-down economics that personal wealth = more jobs. As in, if you let the rich become richer then those around them will do so automatically. It sort of collapses when you point out that rich people - especially today, but mostly all through time - don't invest their own money into building things. And though their consumption is definitely more than the poor, it is generally not a multiple of how much more wealth they have than the poor.

Trickle down was a system that works, at least a little, in a growing world with almost no stock market. In that time, rich people who wanted to get richer, had to build new factories and businesses to invest their money.

That only worked because market wasn't saturated as much as it is now. These days, rich people invest their money into money at the stock market, but Reaganomists are blind to the real world and don't realize that it's not the 60/70/80's anymore...

[Dr. Trainwreck]

Trickle down was a system that works, at least a little, in a growing world with almost no stock market. In that time, rich people who wanted to get richer, had to build new factories and businesses to invest their money.

Even then it had massive problems, as this system only ensures that profits will soar over the living cost. Wages, on the other hand, had no such provisions and relied on a capitalist's mercy.

There is this massive assumption amongst the proponents of trickle-down economics that personal wealth = more jobs. As in, if you let the rich become richer then those around them will do so automatically. It sort of collapses when you point out that rich people - especially today, but mostly all through time - don't invest their own money into building things. And though their consumption is definitely more than the poor, it is generally not a multiple of how much more wealth they have than the poor.

That's the case. Trickle-down only creates a chain where rich people make money out of poor people and hand it over to other people who provide services and luxury items, effectively creating another elite of parasites. It only works if you have a people with a lot of money to drain, and even then not for very long.

[Blayne]

The crux of the matter with trickle down economics is that it is not a purely economic theory, its result we can easily see for improving the economy can be better gained through state interventionism and policy. The ultimate reason I believe as to why tricke down has so much traction is that it's also has its roots in a kind of ethical moralism whereas taxing the rich is seen in Libertarian terms as "theft" and that any economic growth from taxation and state management is "economic slavery" and that the only legitimate growth is from the rich and Galtian super awesome smart and talented people providing the jobs. The net utility of more egalitarian policies are "evil" because they ignore whats "ethical".

That's my thinking as to why you have so many people supporting trickle down.