Trickle Down Economics

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  1. peoplepower73 profile image90
    peoplepower73posted 10 years ago

    The next time someone tells you that Obama is destroying the economy, remind them that the stock market and corporate profits are at all-time highs.

    When they tell you that this hasn't helped them, remind them they've just admitted Trickle-Down Economics doesn't work.

    All comments are appreciated.

    1. profile image0
      Sooner28posted 10 years agoin reply to this

      Lol.  It's obvious it isn't working because, like you pointed out, corporate profits are at record highs.

      Why are companies not hiring if that is so?

      1. innersmiff profile image66
        innersmiffposted 10 years agoin reply to this

        Remember that there are plenty of arbitrary restrictions on businesses ' ability to hire that exist outside the realm of profit.

        I think what we've established is that the command/mixed economy is not beneficial to the majority - the answer is a truly free-market, without currency manipulation, massive debt and massive government control.

        1. profile image0
          An AYMposted 10 years agoin reply to this

          I think we have plenty of empirical evidence showing us that a truly free-market is not a viable answer.

          The U.S. economy taking a swift punch in the gut in 2009 at the hands of greedy individuals trying to exploit a system for vast profits.  And even if we disregard that whole thing, think of all the restrictions and regulations that have built up over time as a result of the exploitation in a free-market.  I think legislation regarding child labor, businesses not hiring minorities, unequal pay for women, and working hours all suggest that the free-market isn't desirable because humanity isn't responsible enough without supervision.

          1. innersmiff profile image66
            innersmiffposted 10 years agoin reply to this

            Economics is not an empirical science, per se - it is a discipline, using principles and deduction, that can establish who benefits from human action. One can not say that empirically, the free market doesn't work, because it depends on your point of view. The free market doesn't benefit violent individuals, for instance.

            The 2009 collapse was certainly down to greed, but you have to factor in the violent nature of that greed to understand it: the Federal Reserve, an institution that can only exist through violence, allowed the banks to create a housing bubble by fudging interest rates. Once this bubble inevitably burst, everyone blames capitalism and ignores the crucial role of the Fed. With the Fed, there is no free-market. Without the Fed, there is no bubble - without the bubble, there is no crash. It's simply wrong to blame the free-market for the collapse, simply because we haven't had a free-market as long as the Federal Reserve has existed and has manipulated the money supply, interest rates and enslaved future generations to debt that is impossible to pay back.

            And here you are saying that the legislation's existence proves its necessity, which is a fallacy. Is every law ever passed necessary? I doubt any reasonable person would think so. My view is that these laws are most importantly violent, so should not be considered, and secondly counter-productive. [1]

            Finally, I've always found arguments along the lines of 'humanity is inherently bad so needs supervision' paradoxical. Supervision from whom exactly? Aliens? If we are arguing that every human is 'bad' or 'irresponsible', what use is giving these same 'bad' and 'irresponsible' humans super-visional control? Surely that's only going to amplify the badness and irresponsibility?

            [1] If you want a break down of how each of these laws are counter-productive, I point you in the direction of 'Economics in One Lesson' by Henry Hazlitt, which is available to read for free here: … ne-lesson/
            I know the title may seem condescending, but I believe it to be an insightful little book, even for economic veterans, and it can do a much better persuasive job than I ever could.

            1. profile image0
              An AYMposted 10 years agoin reply to this

              I have to admit I find your selected usage of the word "Violent" a bit confusing.

              I don't see how the free-market wouldn't benefit malicious individuals.  An unregulated market allows one to make money on whatever they can, even if it's based in false advertising, exploiting others, and being cut-throat towards anything that stands in your way.

              Legislation's existence does not prove its necessity, nor do I believe every law is necessary.  I do think the majority of us can agree that it's better than having people selling snake oil in the streets and children working cleaning out chimneys.  I find it silly that people think we have too many laws and regulations when we frequently need legislature to help encourage people to be less bigoted.

              I don't think humanity is inherently bad, I just think it's inherently incompetent.  There's nothing paradoxical in saying humanity should have supervision to play nice because that role doesn't go to 1 person (Unless you have a dictatorship and we know how that tends to go).  Isn't the whole point of the foundation of government that we decide as a group the most competent member of the society to direct the rest?  How often to people just go crazy-nuts with rioting/looting/mass chaos when they know there's nobody watching?

              We spread the supervision between various layers of government.  Isn't that the whole deal with having 3 branches in our own?

              Thank you for the reference on economics, I will check that out!

              1. innersmiff profile image66
                innersmiffposted 10 years agoin reply to this

                The Federal Reserve is violent because it prevents individuals from freely choosing their own currency, binding them to fake-fiat currency that has no value in real life, enforced by the government. This is not the free-market.

                The free-market doesn't benefit violent individuals, as by its definition: 'free', all contracts are completely voluntary, and it would be counter-productive to be violent. Even if one party has been falsely advertising, they have entered into a voluntary agreement and both must face consequences for doing so on their own terms. The victim never buys from that person again, and the advertiser loses revenue through word of mouth of his scam. Perfectly legal, but he suffers the consequence, and in the long-run it does not pay off. So yes, the free-market does allow people to make money this way, but not for long.

                What you are doing here is presenting general straw-men to defend something so vast and detailed, but I'lll bite anyway because you chose some funny examples. In this era of central-heating, child chimney sweeps are not going to be in high demand - in this sector, free competition in the market has advanced technology to a point where certain jobs are unnecessary. Even luddites would admit that this is a good thing in this case.

                But what you are talking about is child-labour in general. Well, if both parties are entering into it voluntarily, why not? Who are you to say that the child can't earn a living? He can always choose not to, and in this society it is often expected that a child will stay in school til at least 16 before finding a job, making the legislation largely irrelevant. Recent legislation that has prevented farmers using their children on the land is violent, because it is preventing a perfectly voluntary action to take place (if the farmer is being violent or coercive, then that is an entirely different matter).

                But what you are saying is that because some questionable things happen in the free-market, massive legislation is just good. There is no real discernment, just legislation. I'm not going to get into a massive list of unnecessary, ridiculous and downright immoral legislation because there's a lot of it, and we'd be here all day, but think about what argument you are trying to present.

                Are you stupid enough to buy snake oil? If not, why on Earth do you need legislation to stop you?

                If you are saying that legislation should be there to prevent other people from buying snake oil, then what you are saying is that you have the privileged position of being wiser and more responsible than the rest of the population, which goes against what you said: that people are inherently incompetent. Whether that is one person, or 300 of them, they all have this "inherent" incompetence that is bound to affect their judgment. That sounds like 300x more incompetence. But then you say that these elected people have more competence than others. It's not so clear cut now is it?

                Wouldn't it be better if every incompetent person was on an equal keel instead of giving incredible power to some incompetent people over others?

                And I didn't say that people wouldn't be watching - I'm arguing for a free-market, and the end of institutionalised violence.

                1. peoplepower73 profile image90
                  peoplepower73posted 10 years agoin reply to this

                  innersmiff:  I agree with you about the consequences of free market enterprise.  I don't pretend to be an economist.  However there is a form of consequences that is called externalities.  They can be both positive and negative.  If you live in  a community and you paint your house and it causes the value of the community to increase, that is a positive externality.  If your house is in disrepair and it causes the value of the houses in the community to decrease, that is a negative externality.

                  If  egg producers do not comply with FDA regulations and people die as a result of salmonella, that is a negative externality.  It is still free market enterprise, however the consequences are negative.

                  In free market enterprise, if regulations are removed that protect people from negative externalities, the people who are affected negatively have nothing to do with the decision that was made, but they are still affected.

                  In the financial meltdown, people were affected negatively, that had nothing to do with the original decision to remove regulations that protected them.  But it was all done in the name of free market enterprise.

                2. profile image0
                  An AYMposted 10 years agoin reply to this

                  That's silly innersmiff, of course a free market benefits "Violent" individuals in the long run.  Without rules there is nothing to stop you and it's perfectly legal.  If I intentionally put out a bad product for money and people see this and avoid my product, then I can simply change the name and face of my company and start over fresh the next day.  Were I an individual that lacked compunction and ethics, the free market could make me a rich man in weeks.

                  I believe you are focusing too strongly on the individual examples which are more to provide a concept than specific points on which everything hinges.

                  I bring up child labor as simply the point that in the desire of more wealth, people will exploit others and they will exploit those least likely to defend themselves.  I don't think children working is a bad thing, I think children working in unhealthy conditions is a bad thing.  A lack of regulations lets you cut some corners and save money by shortchanging aspects of work safety and I am of the belief that that would be neglected.

                  I never said all legislation is good.  I'm saying that SOME is good.  I mean to suggest that the free market would be a bad place rather than saying our web of legislation is the porrige that's just right.  I'm of the opinion that striking a balance between the two would be for the best.

                  I think I have a different concept of "Snake Oil" from you.  Your's is also perfectly valid, so I'm going to try and be more clear with my idea.  Let's say I need to do some testing on protein compounds, and I need to buy some Ninhydrin to do so.  Someone could sell me on a bottle of Ninhydrin with some modest and believable improvements compared with other retailers.  I'm not in a position to test that on the spot very well, but there's no reason for me not to trust the info I'm being given.  I could just be receiving a bottle of water, and will have spent my money on nothing.

                  That's what I think of when I think of "Snake Oil".  A product which is concealed behind legitimacy.  Would you have reason to suspect, or be particularly capable, of knowing on the spot that you're not just buying Ninhydrin?  It can come in a spray bottle or in a jar of crystals.  Considering that there is no one form to it, how do I specifically know to trust or not trust what I'm getting?

                  Yes, in your world where everyone has exactly the same potential and behavior, government would function as such.  Luckily we know that to be inaccurate because some people are simply smarter than others, and some people are simply more ethical than others.  The goal (Which obviously isn't frequently achieved) is that we're electing insightful, intelligent individuals less beleaguered by our common failings.

                  You are right in that there is too much legislation regarding economics.  It's insane, and government has grown up into a gigantic amorphous blob.  I don't think a free market is the answer though.  As ridiculous as a lot of our laws are, a great many of them have specific origins in trying to get people to play nice with eachother. (Because we're bad at that)

            2. Hollie Thomas profile image60
              Hollie Thomasposted 10 years agoin reply to this

              Economics is not an empirical science, per se

              Economics is not an exact science but is a science and recognised as such in academia.

      2. JayeWisdom profile image88
        JayeWisdomposted 10 years agoin reply to this

        Sooner28....They aren't hiring in the U.S., but they're sending jobs to China and other Asian countries or Mexico, where they can pay very little in wages, no benefits and rake in the profits for the owners or stockholders, as well as the top executives. In those countries, there are no safety standards, rarely any product quality standards. Employees there are poor people who are exploited.  U.S. citizens who could have these jobs are left jobless.  This is how many U.S. companies avoid having to comply with American employment laws. I think U.S. companies that off-shore jobs should be penalized through taxes. This is why I never buy anything that I know was made in China, and why I do without a lot of things as a result!

      3. kathleenkat profile image74
        kathleenkatposted 10 years agoin reply to this

        The USA doesn't currently have a system of trickle-down economics. The poor get more breaks than anyone in this country; I would call it "trickle up" economics (which aren't working, either). Don't get me wrong, getting breaks while being poor is great. I, for one, loved getting tax returns as a college many tax credits and refunds involved with that. But it didn't help the rest of the economy paying for my tax refunds, did it?

    2. Josak profile image60
      Josakposted 10 years agoin reply to this

      +1 Well put.

  2. peoplepower73 profile image90
    peoplepower73posted 10 years ago

    This is from my source data that I wrote on a hub about the financial meltdown.

    In order to understand the financial meltdown, you have to get in the way back machine and go all the way back to the great depression of 1929.  It is now known that one of the major factors that created the great depression was that commercial banks could act as investment companies and investment companies could act as commercial banks.  What does this mean?  It means that commercial banks could invest in the stock and bond markets and investment companies could loan money to people for house mortgages.

    Well in 1933, the Glass-Stegal act was passed and it put a stop to the commercial bank and investment company rulings. All was well until 1980 when Reagan removed the limit on saving and loan companies as to how much they could loan for mortgages.  There was a 100K, limit, but thanks to Reagan that was removed and the sky was the limit.  Everybody was leveraging houses and finally, the whole thing came crashing down, like a house of cards.  It was known as the savings and loan debacle of the 80’s.

    In 1999, Clinton, under duress from congress and bank lobbyists passed the Grahm-Leach-Bliley Act, which allowed banks to be investment companies and investment companies to be banks.  This was done so that everybody could buy a house. The banks and investment companies developed all kinds of exotic instruments that would allow people to buy houses and mitigate the risk for the lenders.

    They developed sub-prime mortgage which allowed people to get a very low interest rate mortgage initially, but after a certain period, it would increase tremendously. You did not have to even qualify for the loan or show that you had any income at all.  They would fake the documents for qualification.  Now these loans were pooled together and sold to investors as mortgage backed securities.

    Now derivatives were the next step.  If I bet on the point spread of a football game that is a derivative, it is derived from the game, itself.  If an investor wanted to bet on a security going up in value or down in value, they would take out a derivative.

    To further mitigate the risk, there are rating agencies that rate the investments as high risk, medium risk, and low risk.  A credit default swap is an insurance that insures the investor in case the investment goes bad and is based on the amount of risk in it.  By the way, last year, this was a 60 billion dollar market world wide.

    So now we have everybody in the market, home buyers are buying houses, the investment companies are making great gains and everybody is happy.  What happens next?  The loans reset to the next interest rate.  Now people can’t afford those homes, so they walk away from them.  The insurance companies like AIG can’t cover their loses and everything comes tumbling down like a house of cards.  The loans that are not covered become toxic assets.

    Under the Bush Administration, the TARP program is announced.  It’s a 700 billion dollar program to bail out the financial markets.  But the people who made great money for banks and savings and loans have to get their bonuses.  So they get paid.  In the mean time the economy is going down the tubes.  Companies that used to get short term loans from the banks to run their business can no longer get them.  So they close their doors.

    Today Obama is pushing for regulation of the markets, to bring back the Glass-Stegal act.  The banks don’t want it and pay lobbyists big money to block it.  Nothing has been done to regulate them.  They are still playing in the derivative market and will not loan money to anybody, because they can make more money playing in these markets.

    1. readytoescape profile image60
      readytoescapeposted 10 years agoin reply to this

      Sorry, but to trace the downfall of the current economy, you really do not have to go back any further than the Community Reinvestment Act started in the Carter years then bolstered and signed in to law by Bill Clinton.

      Follow that with the investment market downturn that occurred with John McCain's clinching of the Republican nomination and the presumed election of Barrack Obama with a presidency of liberal progressive agendas, regulations and taxation and you have a formula for economic failure.

      Proof is the last fours years of record unemployment, record food stamp particpation, record SSI applications for benefits, record foreclosures, record numbers of homeless families; must I go on?

      How about the highest prices in history for: gas, food, utlities, insurance, housing, medical care, none of which are supported by normal supply and demand principles.   

      We need an adult in the room and Obama ain't it, he's like a militant and petulant generation X'er with rock star status and an axe to grind against the "establishment."

      1. profile image0
        An AYMposted 10 years agoin reply to this

        You're right, everyone knows the president has an "ECONOMY BETTER" button.  I hear the more you push it, the better the economy gets, but the less you push it the worse it gets over time.

        We should all write in letters to make sure he knows to push the button since the economy hinges on easily reconcilable factors that the government could just magically whisk away if they really wanted to.

      2. tammybarnette profile image61
        tammybarnetteposted 10 years agoin reply to this

        jumped straight from Clinton to Obama...Hmmm....who was that guy in between there, I haven't seen him for a long time...what was his name again...Oh Yea George W. Bush, that was the man in power when the house of illegal mortgage cards tumbled down...Where is (W)aldo smile

        1. kathleenkat profile image74
          kathleenkatposted 10 years agoin reply to this

          Clinton pushed banks to grant mortgage loans to low-income people. There was this idea that everyone should be able to afford a home.

          That made banks, and people with mortgages they wouldn't normally be able to afford, vulnurable to the economic downfall caused during Bush's administration. Low income housing lenders and recipients only fueled the fire more.

          1. tammybarnette profile image61
            tammybarnetteposted 10 years agoin reply to this

            The housing bubble began in 2001 due to low interst rates put in place in reaction to the dotcom bubble...fully grown by 2005

            1. kathleenkat profile image74
              kathleenkatposted 10 years agoin reply to this

              Still, Clinton laid the stepping stones. There is no way that Bush accomplished all that in the first year of his term.

  3. Wayne Brown profile image81
    Wayne Brownposted 10 years ago

    Obviously you did not see the stock market dive 200 points last Friday when less than expected corporate earnings were announced.  That sink continued today.  Obama cannot create a trickle down economy putting stimulus money in the places he sent it....everywhere but the main business stream of America.  That money was not a was piped back to the people it was intended is the "Chicago Way" boost me up, I pay you back.  Obama is the voodoo doll which surprisingly fell into the laps of Bill Ayers and his commie dad back in the early 80's. Obama claims that he is just a guy in the neighborhood but Ayers has been right there holding Obama's hand all the way to the White House.  Ironically, when the deed is done, Ayers and company will toss him and Michelle in a dumpster somewhere around the southside of Chicago to figure out along with the rest of his people how it feels to be used.  ~WB

    1. Josak profile image60
      Josakposted 10 years agoin reply to this


      Stimulus went to the biggest companies in the US that were floundering. Stock market is up more than 70% since Obama took office.

      Oh and sure Bill Ayers a professor is now the orchestrator of the American government tongue get a grip.

    2. peoplepower73 profile image90
      peoplepower73posted 10 years agoin reply to this

      Readytoescape and Wayne Brown: The root cause of the financial melt down was deregulation of the banks and wall street that allowed all the greed and corruption to take place, not too much regulation.  They didn't take the stimulus money. They took the 700 million TARP money that Bush and Hank Paulson put into place and covered the banks and wall street losses so that the fat cats could be paid their bonuses and commissions. The Gramm-Leach-Bliley Act in 1999 caused the removal of Glass-Stegal which was the regulations that would have prevented this from happening.  This is verifiable fact.  What you guys are talking about is just right wing rhetoric about liberals.  What I'm telling you involves both democrats and republicans.

      1. cprice75 profile image91
        cprice75posted 10 years agoin reply to this

        I believe that the timing of the repeal of Glass-Stegal is significant.  I would argue that the repeal was not a viable option while there were many people who remembered the bad old days of the Great Depression in Congress.  There were Democrats AND Republicans who would have had a problem with removing the regulations because they understood that it was in the country's best interest to have them.  As the twentieth century came to a close, fewer and fewer of these people were around to let people know that banks don't do a good job of regulating themselves, and that's when the law was rescinded.  Less than 10 years later, we have a similar economic situation. Extreme laissez-faire leads to huge booms and busts.  People act like this latest recession was a result of Keynsian economics, but they fail to realize that massive depressions happened about every 15-20 years under the "free market of the Gilded Age.  The 1920s was a return to the same economic policies--another massive Depression.  It basically lasted with little improvement for 3.5 years with little government intervention before FDR even took over.  It's interesting that the 1940s to the 1970s were some of the most regulated eras in American history, yet there were no huge depressions with 20+% unemployment for years and years on end. The standard of living for Americans also improved greatly.

    3. peoplepower73 profile image90
      peoplepower73posted 10 years agoin reply to this

      I did see the stock market dive 200 points, but its still above 13,000.

  4. kathleenkat profile image74
    kathleenkatposted 10 years ago

    A truly, 100% free market would be detrimental.

    However, a relatively free market with some guidelines to ensure the safety and fairness of workers would work great. I think that's what unions are for; ultimately to establish fair guidelines.

    Some people are mentioning child labor. Here, it's not okay. But in some countries it is. For instance; children will grow up on a farm, and are expected to pitch in during harvest time. In other countries (actually this varies between US states, too), the working age is lower than it is here. If a 12 year old is making scarves and getting paid for that in their country by their laws, I think it's completely fine for us to purchase goods from them.

    1. profile image0
      An AYMposted 10 years agoin reply to this

      The point regarding child labor was that I think that group would be exploited in a truly free market since you could save on matters of worker safety/wages.  I agree that I don't think there's anything wrong with a child working if they want to.


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