Supply Side Economics or "Trickle Down" economics as it's more commonly known is the economic theory that if you give rich people "Job Creators" tax breaks and credits this will fuel the economy and trickle down to the poor. Makes sense right?
More like "Trickle Down" your leg. Rather than explain why this economic theory is so flawed I think a series of scenarios, and fictional characters will explain it better. "Trickle Down" has been around since the Reagan era. I was all for it, I have to admit I thought it was such a brilliant idea that when I met David Stockman (Reagan's economic advisor) I had a full on crush, oh how this man made my blood boil. Being a young impressionable young 20 year old in 1986 I did everything in my power to get him to notice me including listening to him go on and on in a bar in Milwaukee down the street from the hotel he was staying at called Bogies. Well he wasn't into me but I got an ear full. I have always been interested in economics, economic theory, the greats Adam Smith, Maynard Keynes, Milton Freidman and here I am in audience with David Stockman! Wow!
Ok so with that being said (I always want to be transparent with to show I know my stuff, I am not your brother-in-law trying to entice you into the newest latest stock) now on to our scenarios:
Mary 20: A waitress at a coffee house.
Clayton 30: Unemployed black man Coal Miner who went back to school just graduated
Susan 30: College graduate married to Stock Broker, 1 daughter
Greg 30: Gay man college graduate
Marsha 40: Divorcee, going back to work after 10 years
Donald 50: Business owner of vacuum cleaner store
John Everett 3rd 60: Millionaire after dad left him 100 million dollars owns vacuum cleaner factory
Harriet 70: Retired husband was Coal Miner
Ruby 80: Elderly black woman with health issues lives off her Social Security check and Medicaid in retirement home. Clayton's grandmother
Chad Ellington 90: Billionaire
Income / Tax rate (initially same 25% for all people):
Mary 20: $25000
Clayton 30: $0
Susan 30: $0
Greg 30: $0
Marsha 40: $0
Donald 50: $200,000
John Everett 3rd 60:$20,000,000
Harriet 70: $25,000
Ruby 80: $25,000Chad Ellington 90: $200,000,000
Everyone needs a vacuum cleaner They are $1,000 a piece, very the best in the world the only vacuum cleaner still made. The Government decides to lower tax rate on anyone making $200,000 a year or more to 10% next year; Susan, Clayton, and Greg all compete for the same $50,000 job all in their field, resumes being equal, Susan gets the job cause her boss thinks her husband and her make such a lovely all American couple they are like Laura and Rob Petrie. Clayton starts pan handling and Greg takes a fast food job at minimum wage. Due to cost increases Ruby's nursing home raises rates beyond what Medicaid will pay she needs to make up difference, there has been a recession and Mary makes only 50% of the tips she was making last year.
Susan 30: 1 vacuum cleaner
Donald 50: 1 vacuum cleaner (FREE!!!!)
John Everett 3rd 60: 1 vacuum cleaner (FREE!!!!)
Ruby 80:Chad Ellington 90: 1 vacuum cleaner
Incomes thanks to Trickle Down or other economic factors; benefit those in bold:
Sales are so bold that John Everett hires Clayton to make vacuum cleaners. See trickle down economics works! Does it? The increase in vacuum cleaner sales was based on previous economic policies. Lets say that each of these folks have the same yearly living expenses to survive and lets for purposes of keeping things easy make that $25,000 lets see how our folks are doing now in the second year with their salaries:
Mary 20: $12,500 / Tax 25% / Net worth= $9,375
Clayton 30: $30,000/ Tax 25% / Net worth= $22,500
Susan 30: $50,000 / Tax 25% / Net worth= $37,500
Greg 30: $16,120 / Tax 25%/ Net worth= -$12,910
Marsha 40: $0 / Decided not to work
Donald 50: $300,000/ Tax 10% / Net worth= $470,000
John Everett 3rd 60:$30,000,000 / Tax 10% / Net worth= $147,000,000
Harriet 70: $25,000 / Tax 25% /Net worth= $18,750
Ruby 80: $25,000 / Tax 25% /Net worth= $18,750Chad Ellington 90: $200,000,000 / Tax 10% / Net worth= $1,379,999 ,000
So Donald, John Everett and Chad Ellington benefited by having the 15% tax break in the total loss in taxes to to the government of: $30,495,000.00 everyone who could afford a vacuum cleaner bought one, Mary, Clayton, Greg, Harriet, Ruby still cannot afford one until next year since they need $25,000 to live on next year. Marsha kept her old one. Harriet dies she can not afford her prescriptions gets infection from dirty house. So no vacuum cleaners were sold under "Trickle Down" tax policy, Donald lost his store, John Everett closed the factory. If we continue, the rich continue to get the tax break, eventually only Chad Ellington & John Everett have any type of income which they have no reason to spend to create jobs. Mary's tips continue to go down because no one is eating out. Ruby is forced to move in with Clayton they can no longer afford retirement home. Greg is pan handling outside his old job at fast food place. Marsha needs a job now no one is hiring. Get it?
Now reverse, take the same scenario give the tax break to the poor and keep the tax rate the same on the rich what happens, Mary can afford a new house because her tips increase since everyone is eating out now that they have disposable income. Greg becomes manager at fast food place because the owner opens second store and needs a manager, Ruby can stay at the retirement home, Clayton takes her to Mary's restaurant and they both buy a vacuum cleaner, This helps Donald and John Everett eat out more often at Mary's restaurant and at Greg's fast food place. Susan is able to save and put her kid through college, Harriett lives to be 90 since she can now afford the prescription drugs she needs and bought a vacuum cleaner. Marsha goes to work for Donald since the vacuums are selling so fast he opens a second store. John Everett doubles his profits at factory and decides to buy the little league team new uniforms set up scholarships for college and build the city a stadium to attract a major league baseball team. Chad Ellington? Never in the economic picture? He bought a vacuum right? Then he died. The state took his fortune but that's another article!
Bottom line you need to give money to the poor who need to buy things, which stimulates the economy, Chad Ellington after he bought the vacuum needed nothing. Why was the government giving him money in the form of a tax break? Yes, you are right because he pays their salaries. Mary and Greg do not.
In 40 years since "Trickle Down" economics have been in place the middle class Donald, Susan, and John Everett have continued to lose wealth, Mary and Greg are homeless, Harriet and Ruby both died early cause they cannot afford healthcare. John Everett's factories have closed down and gone over seas, Donald's stores have been taken over by Walmart, in our example represented by Chad Everett, one family with more wealth than the bottom one half of the country. The current tax plan will give them a tax break so large $50 billion dollars, Trump could actually pay for his wall. The American people do nothing because Mary, Clayton, Greg, Susan, Harriet, Ruby and Marsha have no time to notice they are bailing water but not getting anywhere but each year further and further behind and in debt.
What? You have a question? What about Harriet's husband's Coal Mining Pension, oh the company declared bamkruptsy and took it so she is living off Social Security, that $3,000 he worked 30 years for as part of his pay and died for so Harriet would be comfortable in her old age, stolen like those real life employees of Delta, Worldcom, and Enron. Why did Clayton go back to school since Trump is bringing back all the Coal Mining jobs?
I have a question for you are you going to school to become a Milkman?