Saturday, September 29, 2012

Trickling down

We have a leaky shower. It trickles down all day. I tried to fix it, but failed. So, the trickle lasts as a monument to my faulty plumbing skills.

But I’m not calling a plumber. Not that I expect my skills to improve any time soon, but money’s just too tight right now. I’m hoping for some extra money to come in soon, but until then I will have to wait.

However, my trickling shower helped me realize why trickle down economics will never work.

Leaky showers, delayed repairs, doing without are often the reality of the middle class.

Being middle class means you have enough to live comfortably. You can have a home and a car, usually by making payments on long-term loans. You have enough food and clothing for your family. You can pay for utilities, digital television and even for a fun night out now and then.

And then there’s the activities for kids – sports and youth groups, school fundraisers, Super Saturdays and summer camps – small amounts of money that add up to a sizable pile by the end of the year.

If we had a little more money, we would put it away for vacations or college funds for our kid’s futures.

Don’t get me wrong. This is a good life. And we do what we can for our families, for our kids. But the reality of the middle class is living on a budget. You make sure you have enough to pay for the essentials, and you figure out how to get those little extras that make life worthwhile for you and your kids.

But living on a budget also means doing without a lot of things on your wish list.

Being poor means struggling to get those essentials and rarely getting those little extras. The wish list is often nothing more than a wish.

But what the poor and the middle class have in common is that a little extra money would be put to use.

And that is a trait that we don’t share with the super wealthy.

A little extra money for us would probably first go to paying any essentials that aren’t covered, then would go to a growing wish list of items – fixing the shower, putting more work into the house, getting my eyeglasses updated, maybe even replacing that tooth I lost two years ago.

We all have our wish lists, whether we are middle class or poor.

Fulfilling those wish lists would mean hiring contractors, going shopping, making dental appointments, booking vacations, starting college funds and looking at possible schools.

So, as the money available increases, there’s paying for what we need, then there’s paying for what we would like, and then there’s paying those things that we think would make us happy. (Of course, money doesn’t buy you happiness, but that’s another story.)

Still, each item on that list puts more money into the pocket of someone else in the middle class.  That is the engine that spurs on an economy.

Now, how does making more money available to the super rich help drive the economy?

They’ve already paid for their essentials, they’ve already checked off everything on their wish list, they bought the things they think will make them happy, and they’ve probably paid off their children’s college education when they were toddlers.

What would extra money mean for them?

“Oh, look dear, we got a tax rebate,” says Mrs. Romney.  “Now we can finally build that new stable for our dressage horse that we’ve been putting off.”

C’mon. If they wanted to fix a leaky shower or build a new stable, they would have built it. They aren’t waiting for extra money from their taxes before they spend their wealth.

Where does that extra money for the rich go? Investments.

How does that help drive the engine of the economy, hire plumbers, roofers, carpenters, and pay for dentists, opticians and tree surgeons?

Not only that, but it is this culture of pursuing more wealth through investments that created such entities as Bain Capital, which used its financial power to acquire companies, suck them dry of assets and put all the employees out of work. That’s called “harvesting” as Mitt Romney put it in a video from the 80s.

I’m not against investments, but I am against an economic policy that only serves a group of people who are more concerned with their investments and maintaining their personal wealth than with rebooting this economy.

It is disappointing that trickle down economics – a principle that started under Ronald Reagan in the 1980s – has not yet been sufficiently debunked, and that a major political party is still promoting it.

Let me debunk it for you. I think I’ve laid out the groundwork.

Keeping taxes low for the poor and middle class:

Would allow – say – at least 100 million households to hire contractors or use the services of a small business. Those contractors and other small businesses would then be able to expand their operations and put more money into the economy. That's 100 million homes that are motivated to spend their money.

Keeping taxes low or cutting taxes for the 1 percent:

Gives the wealthy – say 3 million households – no driving incentive to spend that money to hire more contractors, use small business or create jobs. It just gives them more money. That's zero homes given a new incentive to spend their money.

Think about it. Whose policy will really reboot the economy?

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