ArtsAutosBooksBusinessEducationEntertainmentFamilyFashionFoodGamesGenderHealthHolidaysHomeHubPagesPersonal FinancePetsPoliticsReligionSportsTechnologyTravel

A rising tide raises all ships, at least in theory - The GOP lie about "trickle down" economics

Updated on January 13, 2018
Reason and Facts profile image

My area of expertise is bringing reason based analysis and clarity to complex issues, something sorely lacking in today's politics.

https://stevensonfinancialmarketing.wordpress.com/2012/06/09/1984-in-2012-an-econopolitical-essay/
https://stevensonfinancialmarketing.wordpress.com/2012/06/09/1984-in-2012-an-econopolitical-essay/
Source

Leading up to the election and afterwards, the political experts and pundits have a consistent and unimpressive track record of uninspired thinking and commentary. Their failure is the assumption that exit poll results indicate deliberate, rational, and informed voter intent.

I propose that the single most important driver of the 2016 presidential election was the anger of working class voters, that the golden age of a prosperous and thriving middle class has ended and is not coming back.

The Pew Research Center polled President elect Trump and Clinton supporters for their views on a wide range of issues. 63% of President elect Trump supporters and 45% of Clinton supporters felt job opportunities for working class Americans are a 'very big problem' in the country today. While an issue like immigration may be the bona fide reason why some voters chose Trump, I'd argue that most of these hot button issues are merely the manifestations of this middle class financial anger.

If we accept the theory that financial safety was ostensibly the sole motivator, did voters correctly direct their anger towards a solution? To assess whether voters were correct, I'll evaluate three criteria. First, were voters misled by impartial commentary or propaganda? Second, did voters have access to and utilize reliable information to separate commentary and propaganda from fact and employ the information to provide an accurate basis for decisions? Lastly, did voters make their decision in a reasonable and rational manner?

Were voters misled by impartial commentary or propaganda? Did voters have access to and utilize reliable information to separate commentary and propaganda from fact? Did voters employ the information to provide an accurate foundation to base decisions?

On the economy, President elect Trump's message was clear and consistent, the failed economy under President Obama is to blame for the shrinking middle class. This charge has a number of very basic flaws in logic which should have led voters to immediately dismiss this notion from any serious consideration.

  • First and foremost, isn't the economy, job creation, and wage growth overwhelmingly determined by free market forces like corporate profits or consumer spending?
  • Subsequently, government actions must then be viewed as a less significant contributor to the financial health of a country's working citizens.
  • For what influence government does play a role, why should the Presidency be isolated as a cause? Voters should also consider the US Congress, US monetary policy, state Governors, state legislatures, and other local municipal factors. The 21st century has established a very strong pattern of deadlock between the President and Congress resulting in very little action, further reducing the impact of the President on free market forces and working class citizens.
  • It is difficult to believe that it is only the 8 years under the Obama administration that has harmed the middle class. For a tectonic shift in lower class, middle class, and upper class wealth and incomes, changes over a much longer time period is a more realistic time period thereby dismissing blame from any one administration or political party.

Setting these conceptual problems aside that Obama's economy is what has harmed the middle class, is there any factual basis to support this charge? As it turns out, economic and financial data provide a very different picture. Not only is this charge lacking a quantified basis, but an alternate explanation quickly emerges on the decline of working class Americans.

The US economy hasn't failed, in fact it has enjoyed steady and strong growth. For example, gross domestic product, which measures the total economic output of a country, has grown at a steady and strong rate. Another measure, earnings per share (EPS) of the Standard and Poor's 500 Index, which measures the net incomes of the 500 largest corporations in the US, has also shown positive overall growth, with some volatility in EPS from year to year. Both have reached record heights clearly demonstrating a strong US economy and business sector. While these two measures aren’t exhaustive on the topic, they certainly counter the sentiment that the economy has failed thereby eliminating it as the source of the decline of the middle class.

Sources: GDP from US Bureau of Economic Analysis, S&P 500 EPS from Standard and Poor's
Sources: GDP from US Bureau of Economic Analysis, S&P 500 EPS from Standard and Poor's

The second part of the charge is that the era of a prosperous middle class has ended. Data provided by the US Census Bureau shows median net worth divided into quintiles in 2000 and 2011, using constant 2011 dollars. The first three quintiles, approximately the 10th, 30th, and 50th percentiles, show declines in net worth of -$5,124, -$7,056, and -$5,072, respectively. It is not until the fourth and fifth quintiles that the median net worth increases by +$18,433 and +$61,380, respectively. These findings support the sentiment that low income and middle income households aren't gaining wealth or even breaking even. The majority of American households are in fact losing wealth.

Dollar figures in 2011 constant dollars.   Median net worth statistics within quintiles of the net worth distribution are at the 10th, 30th, 50th, 70th, and 90th percentiles.
Dollar figures in 2011 constant dollars. Median net worth statistics within quintiles of the net worth distribution are at the 10th, 30th, 50th, 70th, and 90th percentiles. | Source

Income data, also provided by the US Census Bureau, paints a similar picture as the changes in net worth. The top quintiles, especially the fifth quintile enjoyed the largest gains in income growth. The first three quintiles enjoyed some growth, but at a much lesser rate. The chart and table below show income gains for mean incomes of five quintiles and the top 5%. From 1970 to 2015, income gains were +$1,603, +$3,228, +$9,484, +$25,291, +$84,251, and +$169,516, respectively.

Examining the percent share of aggregate income paints a more telling tale of how the majority of working class Americans have not benefited from a strong and growing US economy. Income data was again divided into quintiles and the top 5%. The percent share of aggregate income decreased for the bottom four quintiles with increases isolated to the top quintile and top 5%. The changes were -1%, -2.6%, -3.1%, -1.3%, +7.8%, and +5.5%.

Did voters make their decision in a reasonable and rational manner?

As shown above, the premise that the economy is responsible for the erosion of the middle class isn't supported by the data. The data suggests that there has in fact been economic growth, but the financial gains have been overwhelmingly allocated to the top quintiles leaving the majority of Americans with a decrease in net worth. As the title indicates, while a rising tide should raise all ships, the data shows that this is not occurring and has not in quite some time.

Quite disappointingly, this line of inquiry hasn't had a champion nor a voice. Trump perhaps came the closest, clearly recognizing and vocalizing this pain but as demonstrated above, he identified the wrong cause. The left has cited the income and wealth gap, falling short in two main ways. They haven't pressed the issue for fear of being labeled as socialists or anti-capitalists. I think this is due to the right's expertise on offense and the left's inability to fight unfounded labels and a shocking lack of ability formulating a cogent counter argument. Second, the left falls short in demonstrating the importance of the income and wealth gap, leaving voters with the sentiment that it's just 'not fair'.

The right on the other hand does an excellent job in two ways. Unfortunately I don't believe either will actually bring the golden age of the middle class back. First, they provide an easy target to transfer the anger working class Americans feel onto the US entitlement system. For many, the entitlement system represents rewarding the poor. This primal sense of unfairness provides a wonderful target, regardless of whether it is founded or not. Second, they provide a remedy; provide tax cuts or at least allocate capital to employers which will create economic growth which in turn will ultimately benefit all working Americans. This is often labeled trickle down economics and sadly, the wealth and income data above shows that wealth has not trickled down. For the shrinking middle class, this is your culprit and a solution that will only worsen the problem.

The bottom line

The fundamental nature of America is to value self determination and accept the challenge of a meritocracy. This is why the anger of working class Americans is so poignant. Despite hard work and an unyielding determination to earn individual success, it feels like the game is rigged with no way to win.

I am saddened that we lack leaders with the courage to take this issue head on. I am saddened that voters are forced to choose between two bad answers. I am saddened that tremendous amounts of effort are put into persuading voters into mistruths. I believe in democracy. I believe in the purity of citizen self government. What goes unspoken and what cannot ever be compromised is democracy and self government only work when voters are accurately informed and make their decisions in a reasoned and rational basis.

Sources: US GDP Bureau of Economic Analysis inflation adjusted using constant 2009 dollars.  Standard & Poors for S&P 500 Earnings.  EPS is 12-month real earnings per share, inflation adjusted using constant September 2016 dollars.
Sources: US GDP Bureau of Economic Analysis inflation adjusted using constant 2009 dollars. Standard & Poors for S&P 500 Earnings. EPS is 12-month real earnings per share, inflation adjusted using constant September 2016 dollars.

Comments

    0 of 8192 characters used
    Post Comment

    No comments yet.

    working

    This website uses cookies

    As a user in the EEA, your approval is needed on a few things. To provide a better website experience, hubpages.com uses cookies (and other similar technologies) and may collect, process, and share personal data. Please choose which areas of our service you consent to our doing so.

    For more information on managing or withdrawing consents and how we handle data, visit our Privacy Policy at: "https://hubpages.com/privacy-policy#gdpr"

    Show Details
    Necessary
    HubPages Device IDThis is used to identify particular browsers or devices when the access the service, and is used for security reasons.
    LoginThis is necessary to sign in to the HubPages Service.
    Google RecaptchaThis is used to prevent bots and spam. (Privacy Policy)
    AkismetThis is used to detect comment spam. (Privacy Policy)
    HubPages Google AnalyticsThis is used to provide data on traffic to our website, all personally identifyable data is anonymized. (Privacy Policy)
    HubPages Traffic PixelThis is used to collect data on traffic to articles and other pages on our site. Unless you are signed in to a HubPages account, all personally identifiable information is anonymized.
    Amazon Web ServicesThis is a cloud services platform that we used to host our service. (Privacy Policy)
    CloudflareThis is a cloud CDN service that we use to efficiently deliver files required for our service to operate such as javascript, cascading style sheets, images, and videos. (Privacy Policy)
    Google Hosted LibrariesJavascript software libraries such as jQuery are loaded at endpoints on the googleapis.com or gstatic.com domains, for performance and efficiency reasons. (Privacy Policy)
    Features
    Google Custom SearchThis is feature allows you to search the site. (Privacy Policy)
    Google MapsSome articles have Google Maps embedded in them. (Privacy Policy)
    Google ChartsThis is used to display charts and graphs on articles and the author center. (Privacy Policy)
    Google AdSense Host APIThis service allows you to sign up for or associate a Google AdSense account with HubPages, so that you can earn money from ads on your articles. No data is shared unless you engage with this feature. (Privacy Policy)
    Google YouTubeSome articles have YouTube videos embedded in them. (Privacy Policy)
    VimeoSome articles have Vimeo videos embedded in them. (Privacy Policy)
    PaypalThis is used for a registered author who enrolls in the HubPages Earnings program and requests to be paid via PayPal. No data is shared with Paypal unless you engage with this feature. (Privacy Policy)
    Facebook LoginYou can use this to streamline signing up for, or signing in to your Hubpages account. No data is shared with Facebook unless you engage with this feature. (Privacy Policy)
    MavenThis supports the Maven widget and search functionality. (Privacy Policy)
    Marketing
    Google AdSenseThis is an ad network. (Privacy Policy)
    Google DoubleClickGoogle provides ad serving technology and runs an ad network. (Privacy Policy)
    Index ExchangeThis is an ad network. (Privacy Policy)
    SovrnThis is an ad network. (Privacy Policy)
    Facebook AdsThis is an ad network. (Privacy Policy)
    Amazon Unified Ad MarketplaceThis is an ad network. (Privacy Policy)
    AppNexusThis is an ad network. (Privacy Policy)
    OpenxThis is an ad network. (Privacy Policy)
    Rubicon ProjectThis is an ad network. (Privacy Policy)
    TripleLiftThis is an ad network. (Privacy Policy)
    Say MediaWe partner with Say Media to deliver ad campaigns on our sites. (Privacy Policy)
    Remarketing PixelsWe may use remarketing pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to advertise the HubPages Service to people that have visited our sites.
    Conversion Tracking PixelsWe may use conversion tracking pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to identify when an advertisement has successfully resulted in the desired action, such as signing up for the HubPages Service or publishing an article on the HubPages Service.
    Statistics
    Author Google AnalyticsThis is used to provide traffic data and reports to the authors of articles on the HubPages Service. (Privacy Policy)
    ComscoreComScore is a media measurement and analytics company providing marketing data and analytics to enterprises, media and advertising agencies, and publishers. Non-consent will result in ComScore only processing obfuscated personal data. (Privacy Policy)
    Amazon Tracking PixelSome articles display amazon products as part of the Amazon Affiliate program, this pixel provides traffic statistics for those products (Privacy Policy)