Trickle Down Economics False, Middle Out is the Best Policy...

[Ben]

It isn't the 1 percent that are making all the staggering income gains. It's actually the 0.01 percent. Or the 1 percent of the 1 percent.
I mean, the so-called Occupy movement should've underscored that. It's the 1 percent of the 1 percent... :)
Cenk Uygur is right. To sustain the economy you need demand. Demand comes from a broad and burgeoning middle class.
Anyway, these policies are designed to fail as noted by Josh Bivens.
The polices in place are rational and serve, again, the interests of the 1 percent of the 1 percent -- :)
Plus when 50 percent of Americans don't vote it's understandable. They've no influence over policy. (It's the bottom 70 percent of Americans who've no influence over policy. None. And the further up the income ladder, well, you get what you want.
Sheldon Adelson does. Bill Gates does.
Just remember: we live in a profound democracy, not a dollarocracy. Keep repeating that to yourself -- ha, ha! :)
http://www.opensecrets.org/resources/dollarocracy/support.php

Trickle Down Economics False, Middle Out is the Best Policy - YouTube (http://www.youtube.com/watch?v=Q5oOLs2ns14)

[trish]

I’ve posted my personal take on this topic before. Trickle down is a metaphor. It draws an analogy between the flow of money and the flow of water down a gravitational gradient. The metaphor assume the direction of the gradient goes downhill from the wealthy to the poor. If that were so, lakes and resevoirs would collect in the poorest neighborhoods, being the “low” points on the gradient.

If one were to press the analogy between the economic gradient and gravity more closely one would immediately see that money and power attract money and power, just like massive bodies attract massive bodies. Money does not flow from wealthy to poor, but in the other direction. The trickle-downers have got ‘up’ confused with ‘down’! The wealthier a family is the more money and power accrete around it making it wealthier and more powerful. Massive bodies accrete more and more matter until they become blacks holes. So it is with wealth. With no external forces to regulate the flow of wealth, it will naturally pool at the lowest points of the economic gradient, i.e. in the wealthiest neighborhoods, with the wealthiest and most powerful families.

So yes, trickle down might be true, but down is in the direction of the most massive body; i.e. in the direction of the wealthiest families, individuals and corporations.

[martin48]

Trickle down - that's rich people pissing on the poor

[fivekatz]

The joke is that no business owner is going to increase the number of people she/he employs based on net income after tax but while always increase payroll based on gross demand for her/his service or product.

The laugher of trickle down was it was a theory called the Laffer Curve. It has now had over a quarter of a century to prove itself out and it has yet to do so. And the current arguments in Washington DC are so ironic because the GOP is preaching the same austerity that has the EU locked in stagnation.

What does trickle down is technological innovation because as a new technology is adopted the cost is and risk reduced, so is the price point and the innovation reaches a point of adoption.

But as a economic policy trickle down has been disproven and harshly so for those on bottom 99% of Laffer's curve.

[Willie Escalade]

We've know this for years...

[robertlouis]

The joke is that no business owner is going to increase the number of people she/he employs based on net income after tax but while always increase payroll based on gross demand for her/his service or product.

The laugher of trickle down was it was a theory called the Laffer Curve. It has now had over a quarter of a century to prove itself out and it has yet to do so. And the current arguments in Washington DC are so ironic because the GOP is preaching the same austerity that has the EU locked in stagnation.

What does trickle down is technological innovation because as a new technology is adopted the cost is and risk reduced, so is the price point and the innovation reaches a point of adoption.

But as a economic policy trickle down has been disproven and harshly so for those on bottom 99% of Laffer's curve.

Quite. And after all, if it was a viable theory, why has it never worked before?

[fivekatz]

What is scary as a US citizen is that the EU has seen that austerity is actually stagnation, yet we have a very powerful minority party here in the US that wants to pursue austerity because it would insure our taxation of the most wealthy US citizens remains far below that of their counterparts in the EU. And Americans by nature want to protect the wealthy, not because they are wealthy but because there is an 0.0001% that they might be.

[buttslinger]

I'm sure there are just as many thieving poor people as rich, the thing is the middle class supports both the rich and the poor, and the health of the nation depends directly on the health of the middle class.

[Ben]

The Amount of Money Hoarded by the Über Elite Will Astound You

https://www.youtube.com/watch?v=Pl2zeCKVSlQ

Cash Abroad Rises $206 Billion as Apple to IBM Avoid Tax:

http://www.bloomberg.com/news/2014-03-12/cash-abroad-rises-206-billion-as-apple-to-ibm-avoid-tax.html

[Ben in LA]

Let me get this straight. You mean putting more money into the hands of the middle class may actually increase disposable income which may actually increase consumption of goods which may increase demand which may increase employment which may increase production?

[trish]

http://www.slate.com/articles/technology/technology/2014/04/thomas_piketty_capital_in_the_twenty_first_century _surprisingly_entertaining.html

[natina]

'Trickle Down Doesn't Work. Never Did'

Elizabeth Warren Simplifies Thomas Piketty: 'Trickle Down Doesn't Work. Never Did'

The No. 2 author on Amazon's best-seller list, Sen. Elizabeth Warren, weighed in Thursday night on the No. 1 book, identifying overlapping themes.

The No. 2 author (http://www.huffingtonpost.com/2014/04/24/elizabeth-warren-amazon_n_5208807.html) on Amazon's best-seller list, Sen. Elizabeth Warren, weighed in Thursday night on the Capital in the Twenty-First Century: Thomas Piketty, Arthur Goldhammer: 9780674430006: Amazon.com: Books@@AMEPARAM@@http://ecx.images-amazon.com/images/I/41ASis1P3hL.@@AMEPARAM@@41ASis1P3hL (http://www.amazon.com/Capital-Twenty-First-Century-Thomas-Piketty/dp/067443000X/ref=zg_bs_books_1), identifying overlapping themes.

At a reading at the Harvard Book Store, (https://www.youtube.com/watch?v=oKvEQfPjNIg) the Massachusetts Democrat, author of [url][url][url]A Fighting Chance (http://www.amazon.com/A-Fighting-Chance-Elizabeth-Warren/dp/1627790527), was asked about Thomas Piketty's new book, Capital in the Twenty-First Century, and specifically about its contention that trickle-down economics "definitively do not work."
Warren cut in. "Can we say that part again? 'Definitely do not work,'" she repeated. "Not as in that's somebody else's opinion or this comes out of a long-held political opinion. The data don't lie on this. He's got good historical data, and boy, what it shows is trickle down doesn't work. Never did, doesn't work. Just so we're all clear on the baseline. I just saved you 1,100 pages of reading." (The book is shorter than that; Warren may have assumed the audience would also read the online technical index.)
Warren, whose own book was going to be titled Rigged but ultimately went out with a more hopeful title, said that while Piketty's book could elicit despair, she found a hopeful note in it, too.
"You can read his book and you just wanna say, 'Ugh.' Because it says over and over -- look, I'll tell you the basic theme: The rich get richer," Warren said.
Piketty argues that the 200-plus years of income and wealth data complied by him and a team of researchers demonstrates that returns on capital (r) significantly outstrip growth in the real economy (g), which relentlessly drives up inequality. His basic equation -- r>g -- has upended the way economists understand wealth and income distribution.
"Here's the hopeful part in Piketty's book: Piketty makes the point that although the data keep documenting this happening, it's not like an act of nature. It's not like gravity and you can't fix it," Warren said. "Piketty's book makes the point that how much equality there is ... is a matter of the policies you choose to follow and that, for example, progressive taxation and investment in everyone's education helps to level the playing field."
Warren pointed to the period from the Great Depression up through the deregulatory era that began in the 1980s as reason for hope -- a period that she noted Piketty found to be an aberration in many ways.
"It is a time when we made those investments that built America's great middle class and we made those decisions -- not we in this room, but our parents, our grandparents, they made those decisions. They said, 'You put a cop on the beat so nobody steals your pension, you do that on Wall Street.' But they also said, 'You tax progressively and then you make those investments.' For those who made it big, God bless 'em, that's great, but they've gotta pay a piece of that forward so the next kid has a chance to make it big and the kid after that and the kid after that. That's what defines America."
Piketty indeed credits high marginal tax rates on wealth in the middle of the 20th century as a driver of flattening U.S. inequality during that period, although he also cites the destruction of capital from the world wars and the anomalously high economic growth rates that carried into the late 1960s and, in some countries, into the 1970s. He describes that high growth as "catch up" and suggests it will be difficult to repeat such a phenomenon in the 21st century.
Piketty proposes a steeply progressive wealth tax, which Warren referenced favorably on Thursday. The suggestion was widely panned by the political class, but it is already earning dividends. On Friday, New York Times columnist David Brooks suggested that conservatives respond by embracing a "beefed up inheritance tax" (http://www.nytimes.com/2014/04/25/opinion/brooks-the-piketty-phenomenon.html?ref=davidbrooks&_r=0) and "progressive consumption taxes."
Warren also joked with the audience that they may find her book a bit more digestible. "Have you seen Piketty's new book?" she asked. "His book has tables and graphs; this book doesn't. It's one of my first books with no graphs in it, just pictures."



http://www.huffingtonpost.com/2014/04/25/elizabeth-warren-thomas-piketty_n_5213690.html

[Prospero]

The backlash against the Piketty analysis is well underway, even though top economists such as the Nobel laureate Paul Krugman have lavished praise on it. Nasty pieces in today's rightwing press in the UK. Predictable that the capital-rich 1% and their fawning Murdoch press would seek to discredit him. Meanwhile I'm reading the book - but it is LONG!. Seems to far to offer a powerful analysis.

[Stavros]

Will Hutton offered a condensed view of the book a few weeks ago in, of course, The Guardian. I don't know if Piketty discusses it, Hutton does not, but a substantial component of economic growth in the industrial revolution in Europe and North America was formed by manufacturing jobs, the very jobs that have gone, taking opportunities for non or low-skilled workers with them and thus a huge source of taxes and consumer spending (given that low wage workers save less); and we can see it in our high streets -or Malls depending on where you live.

In the town where I live when I arrived I knew of three men's hairdressing salons within walking distance of each other; there are now seven, four of which opened in the last 18 months, one of which is almost permanently empty and is now into its second renter, as the couple concerned don't (and can't) own the property. A french-themed patisserie/cafe became one of approximately 20 cake/coffee shops of which more than ten have opened in the last five years. It has now closed after barely a year, and has been replaced by -a french-themed patisserie/cafe, while yet another 'artisan baker' has opened around the corner making it one of at least four in the town, presumably cashing in on the BBC baking competition programme. I am not knocking anyone brave enough to open a small business in a town which might offer a sweetheart deal on rents and rates for the first year, but it seems when reality comes crashing in after the honeymoon the business goes with it. Unless they can build a customer base in that short space of time. But where are the jobs for school leavers with no academic skills, who can't spell or do simple arithmetic? Once upon a time the dreaded factory floor was available, now even that has gone. Or where it does exist, automation has replaced 100 workers, and production units can get by on a staff of 25. Not sure Piketty has a theory for a post-industial economy that is wholly different from the ones in his models.

This is Hutton's review:

Suddenly, there is a new economist making waves – and he is not on the right. At the conference of the Institute of New Economic Thinking in Toronto last week, Thomas Piketty's book Capital in the Twenty-First Century got at least one mention at every session I attended. You have to go back to the 1970s and Milton Friedman for a single economist to have had such an impact.



Like Friedman, Piketty is a man for the times. For 1970s anxieties about inflation substitute today's concerns about the emergence of the plutocratic rich and their impact on economy and society. Piketty is in no doubt, as he indicates in an interview on today's Observer New Review, that the current level of rising wealth inequality, set to grow still further, now imperils the very future of capitalism. He has proved it.
It is a startling thesis and one extraordinarily unwelcome to those who think capitalism and inequality need each other. Capitalism requires inequality of wealth, runs this right-of-centre argument, to stimulate risk-taking and effort; governments trying to stem it with taxes on wealth, capital, inheritance and property kill the goose that lays the golden egg. Thus Messrs Cameron and Osborne faithfully champion lower inheritance taxes, refuse to reshape the council tax and boast about the business-friendly low capital gains and corporation tax regime.
Piketty deploys 200 years of data to prove them wrong. Capital, he argues, is blind. Once its returns – investing in anything from buy-to-let property to a new car factory – exceed the real growth of wages and output, as historically they always have done (excepting a few periods such as 1910 to 1950), then inevitably the stock of capital will rise disproportionately faster within the overall pattern of output. Wealth inequality rises exponentially.
The process is made worse by inheritance and, in the US and UK, by the rise of extravagantly paid "super managers". High executive pay has nothing to do with real merit, writes Piketty – it is much lower, for example, in mainland Europe and Japan. Rather, it has become an Anglo-Saxon social norm permitted by the ideology of "meritocratic extremism", in essence, self-serving greed to keep up with the other rich. This is an important element in Piketty's thinking: rising inequality of wealth is not immutable. Societies can indulge it or they can challenge it.
Inequality of wealth in Europe and US is broadly twice the inequality of income – the top 10% have between 60% and 70% of all wealth but merely 25% to 35% of all income. But this concentration of wealth is already at pre-First World War levels, and heading back to those of the late 19th century, when the luck of who might expect to inherit what was the dominant element in economic and social life. There is an iterative interaction between wealth and income: ultimately, great wealth adds unearned rentier income to earned income, further ratcheting up the inequality process.
The extravagances and incredible social tensions of Edwardian England, belle epoque France and robber baron America seemed for ever left behind, but Piketty shows how the period between 1910 and 1950, when that inequality was reduced, was aberrant. It took war and depression to arrest the inequality dynamic, along with the need to introduce high taxes on high incomes, especially unearned incomes, to sustain social peace. Now the ineluctable process of blind capital multiplying faster in fewer hands is under way again and on a global scale. The consequences, writes Piketty, are "potentially terrifying".
For a start, almost no new entrepreneurs, except one or two spectacular Silicon Valley start-ups, can ever make sufficient new money to challenge the incredibly powerful concentrations of existing wealth. In this sense, the "past devours the future". It is telling that the Duke of Westminster and the Earl of Cadogan are two of the richest men in Britain. This is entirely by virtue of the fields in Mayfair and Chelsea their families owned centuries ago and the unwillingness to clamp down on the loopholes that allow the family estates to grow.
Anyone with the capacity to own in an era when the returns exceed those of wages and output will quickly become disproportionately and progressively richer. The incentive is to be a rentier rather than a risk-taker: witness the explosion of buy-to-let. Our companies and our rich don't need to back frontier innovation or even invest to produce: they just need to harvest their returns and tax breaks, tax shelters and compound interest will do the rest.
Capitalist dynamism is undermined, but other forces join to wreck the system. Piketty notes that the rich are effective at protecting their wealth from taxation and that progressively the proportion of the total tax burden shouldered by those on middle incomes has risen. In Britain, it may be true that the top 1% pays a third of all income tax, but income tax constitutes only 25% of all tax revenue: 45% comes from VAT, excise duties and national insurance paid by the mass of the population.
As a result, the burden of paying for public goods such as education, health and housing is increasingly shouldered by average taxpayers, who don't have the wherewithal to sustain them. Wealth inequality thus becomes a recipe for slowing, innovation-averse, rentier economies, tougher working conditions and degraded public services. Meanwhile, the rich get ever richer and more detached from the societies of which they are part: not by merit or hard work, but simply because they are lucky enough to be in command of capital receiving higher returns than wages over time. Our collective sense of justice is outraged.
The lesson of the past is that societies try to protect themselves: they close their borders or have revolutions – or end up going to war. Piketty fears a repeat. His critics argue that with higher living standards resentment of the ultra-rich may no longer be as great – and his data is under intense scrutiny for mistakes. So far it has all held up.
Nor does it seem likely that human beings' inherent sense of justice has been suspended. Of course the reaction plays out differently in different eras: I suspect some of the energy behind Scottish nationalism is the desire to build a country where toxic wealth inequalities are less indulged than in England.
The solutions – a top income tax rate of up to 80%, effective inheritance tax, proper property taxes and, because the issue is global, a global wealth tax – are currently inconceivable.
But as Piketty says, the task of economists is to make them more conceivable. Capital certainly does that.

http://www.theguardian.com/commentisfree/2014/apr/12/capitalism-isnt-working-thomas-piketty

[trish]

The book is apparently selling like hotcakes. Amazon no longer has them in stock. I have to wait to get my copy.