A better image than a rising tide and boats
A while ago I thought of a way to illustrate the difference between injecting money into an economy at the bottom and at the top.
Look at the photo. Injecting money at the top – as with tax breaks for the wealthy – is like picking up the hook and slowly raising it. The little basket moves up, the others remain flat.
Now lift it from the bottom. Everything rises. That’s what happens if we increase poor, working class and middle class incomes. But the top also rises because more purchasing power in the customer base means more profits.
This is how we should work, with the wealthy earning their money from business rather than from taxes.
10/17/2020 @ 2:38 pm
“This is how we should work, with the wealthy earning their money from business rather than from taxes.”
This should read:
“This is how we should work, with the wealthy earning their money from business, AND, paying their fair and equitable share of taxes.”
10/17/2020 @ 3:43 pm
But that’s not what I want to say. That’s a different thought.
10/17/2020 @ 5:03 pm
@Koshersalaami;
I understand what you ‘want to say’.
I just don’t believe that what you want to say goes far enough re wealth and income disparities and inequality…
Your thought is much too open-ended and leaves way too much room for the perpetration and perpetuation of the inequities that have become the hallmark of American ‘free market capitalism’.
10/17/2020 @ 5:45 pm
Not if you actually read the rest of the post. The second paragraph states baldly that tax breaks to the rich don’t work. As to the statement you want to correct, my point is that the concern of the wealthy should be less on tax savings and more on increasing business income. Lots of weird crap happens when you run your businesses looking for deductions instead of business.
If you have something different to say, write a post. I’m not moralizing here, I’m diagnosing. I’m not saying “the rich share is not fair or equitable” though it isn’t; I’m saying “tax breaks to the rich don’t help the economy.”
I’ve probably stated this before, but what the Hell, it probably bears repeating. When you need to hire more Americans, the automatic solution isn’t necessarily to cut taxes on the rich, even though a lot of people think it is. There’s a step missing – the answer to this question:
Why aren’t the wealthy investing more in ventures that hire Americans?
There are two possible reasons, and they determine which approach is logical.
1. Not enough capital available.
If this is the reason, a tax break for the wealthy makes sense because it makes more investment capital available.
2. Not enough perceived Return On Investment.
Why not enough return? The obvious reason is insufficient demand, particularly given that the last I read (and it should be worse now), the poorest 40% of the population collectively owned less than a third of a single percent of America’s wealth. Add the middle 20% (total of 60% of the population) and their collective ownership is less than 5%. If you want return on investment for a business in America, you need the population to have disposable income.
If this is the case, money should be gotten to people at the bottom of the ladder, not the top, so they can spend it, stimulate business, and thereby stimulate hiring.
So, which is it?
There’s a really easy way to tell: Look at the supply of capital. If there’s a shortage, go with the first option. If there’s a surplus, go with the second, because supplying more of a commodity already in surplus will accomplish nothing.
This is exactly what happened with Bush 43’s tax cut: The wealthy didn’t invest the money in hiring Americans and instead pocketed it. We got what was called a Jobless Recovery.
This is also what happened under Trump, but in his case I’m not sure he cares as much as he cares about doing a favor for those he views as business peers. Not that they appreciate him for it at this point; most of them are horrified by his COVID response (and its business consequences) and most of them think he made a total mess out of trade issues with China, stating that he was right about the existence of a problem but he ended up making it worse. The result is that Wall Street is more behind Biden than Trump.
10/19/2020 @ 9:01 am
I was thinking in terms of a single sentence summation…
10/19/2020 @ 10:14 am
Sure, but it does’t sum up what I’m trying to say. I’m not making a moral point, I’m making a business point. I’m not trying to tell people about fair and equitable in this case. There are enough people doing that. If I’m going to shove guilt – which doesn’t generally work on conservatives because they generally look at income/wealth inequality as inevitably Darwinist and natural (and no, that is not my viewpoint at all) – I’m going to do so about a lack of patriotism.
My point is that the rich are rich either way. They can either be rich in a safe prosperous country with an up to date infrastructure or they can be rich in a country shifting to Third World status as the middle class becomes poor. If what they want is to be rich, their first reaction will be to go after taxes and regulations. (Regulations are also good for business, but that’s another discussion.) What I’m saying is that if they’re taxed higher, their income isn’t zero-sum based on taxes; being taxed higher gives their customer base more money to spend with them, so it’s not that their income source shrinks, it’s that it switches.
I’m not interested in getting into a conversation where they think they can dismiss me as Socialist and thereby irrelevant to their values. My point is that what they’re practicing is stupid capitalism.
I know what I intend to say. My wording is deliberate.
10/17/2020 @ 6:08 pm
Trickle down is really trickle up. However, your visual metaphor doesn’t work. I used to have one of those doohickies. When you lift the top baskets, the others move up at exactly the same pace. When you lift from the bottom, what happens is that all three baskets fit into one another, with the metaphor being that the only way to achieve wealth equality is to raise everyone from the bottom first.
The problem with this approach is that as you level the rich and poor, it is inevitable that the rich have to give up much of their wealth.
10/18/2020 @ 12:23 am
I’d have to develop the analogy further. Each basket when flat represents a different wealth bracket. When you pull up from the bottom, the top class rises first. If you don’t pull it up far, the lower baskets remain flat.
10/18/2020 @ 11:07 am
Egads
10/18/2020 @ 5:24 pm
T.B.I.
P.T.S.D.
M.I.C.
. . . maybe acronyms no longer use periods. . . the hour is late….