Do trickle-down economic theories work?

[stinkcat_14]

Let’s keep in mind that poor little Oliver was in a GOVERNMENT poor house.

Where free market poor houses any better?

 

[Zoltan_Cobalt]

And, of course, “trickle down” is a meaningless term in an economic sense. It’s just a sarcastic term coined by the left to defame one president’s tax reductions in the absence of a persuasive reason to oppose them.

That just about answers the premise of this thread.

 

[stinkcat_14]

That just about answers the premise of this thread.

I think the thread does however raise a reasonable question, which is: To what extent do policies such as tax cuts provide benefits to those at the lower end of the income spectrum. If I were a person making $1 million a year I could see that theory that giving me a tax cut makes poorer people better off as pretty attractive. The reality is quite a bit more complicated. Some people have clearly benefited from these policies and some clearly have not. There is nothing inherent in capitalism that considers the wellbeing of those worst off in society. On the other hand, some government policies designed to help the poor can very well make the poor worse off.

 

[Zoltan_Cobalt]

Where free market poor houses any better?

LOL, There is no such thing as a “Free Market” poor house. No profit.

However if a true Free Market existed at that time, there would be no need for poor houses.

 

[Zoltan_Cobalt]

I think the thread does however raise a reasonable question, which is: To what extent do policies such as tax cuts provide benefits to those at the lower end of the income spectrum. If I were a person making $1 million a year I could see that theory that giving me a tax cut makes poorer people better off as pretty attractive. The reality is quite a bit more complicated. Some people have clearly benefited from these policies and some clearly have not. There is nothing inherent in capitalism that considers the wellbeing of those worst off in society. On the other hand, some government policies designed to help the poor can very well make the poor worse off.

Capitalism was never designed to provide for the well being of those worst off in society. It provides for the well being of all. Capitalism demands the best of everyone and rewards them accordingly. It leaves everyone free to choose the work they like, to specialize in it, to trade product for the products of others, and to go as far on the road of achievement as their ability and ambition will carry them. A person’s success depends on the objective value of his work and on the rationality of those who recognize that value.

Would poor people exist in a true Capitalist society? Yes. There would be very few compared to any other economic system and they would be legitimately poor. Since the overall standard of living in a Capitalist society is higher than others, more individuals would be able to generously provide for the poor.

 

[nmgauss]

I think the thread does however raise a reasonable question, which is: To what extent do policies such as tax cuts provide benefits to those at the lower end of the income spectrum. If I were a person making $1 million a year I could see that theory that giving me a tax cut makes poorer people better off as pretty attractive. The reality is quite a bit more complicated. Some people have clearly benefited from these policies and some clearly have not. There is nothing inherent in capitalism that considers the wellbeing of those worst off in society. On the other hand, some government policies designed to help the poor can very well make the poor worse off.

The trouble with concentrating on the poor is that it rewards for non-achievement. A poor person need not do anything to receive support. How is that beneficial to society? My father was called a sucker by some welfare recipients because he chose to work for a living. They laughed at him while they lounged around on their front porches getting fat and drinking beer paid for by welfare.

Incentives for achievement are much more justifiable. If one works toward improving himself, that justifies aid. But a leach who sits around getting drunk or smoking dope should not have any aid.

 

[freeRadical]

No, but then neither does anything else.

At least an ‘ordinary’ sort of economy allows for a certain amount of feedback about shortages or surpluses of goods and services via higher or lower prices, but other than that nothing I could say would be anything other than damnation via faint praise.

I have my own private thoughts on what would be best, but they aren’t really something I can espouse on this forum.

Why do you feel you can’t espouse your thoughts on this subject on this forum?

 

[freeRadical]

Capitalism was never designed to provide for the well being of those worst off in society. It provides for the well being of all. Capitalism demands the best of everyone and rewards them accordingly. It leaves everyone free to choose the work they like, to specialize in it, to trade product for the products of others, and to go as far on the road of achievement as their ability and ambition will carry them. A person’s success depends on the objective value of his work and on the rationality of those who recognize that value.

Would poor people exist in a true Capitalist society? Yes. There would be very few compared to any other economic system and they would be legitimately poor. Since the overall standard of living in a Capitalist society is higher than others, more individuals would be able to generously provide for the poor.

What happens when individuals don’t rovide for the poor? Isn’t it the moral responsibility of society to help those who are less fortunate or going through hard times? Isn’t that what the Church teaches?

 

[freeRadical]

The trouble with concentrating on the poor is that it rewards for non-achievement. A poor person need not do anything to receive support. How is that beneficial to society? My father was called a sucker by some welfare recipients because he chose to work for a living. They laughed at him while they lounged around on their front porches getting fat and drinking beer paid for by welfare.

Incentives for achievement are much more justifiable. If one works toward improving himself, that justifies aid. But a leach who sits around getting drunk or smoking dope should not have any aid.

What about the people who are legitimately poor, through no fault of their own? Or the people who are going through rough times, just lost their job, etc. What about the single mother who is having trouble raising her children?

I agree that the current way we go about welfare in this country is just plain bad but that doesn’t mean that we shouldn’t provide some kind of welfare to the poor and to people who are going through hard times.

 

[freeRadical]

I think the thread does however raise a reasonable question, which is: To what extent do policies such as tax cuts provide benefits to those at the lower end of the income spectrum. If I were a person making $1 million a year I could see that theory that giving me a tax cut makes poorer people better off as pretty attractive. The reality is quite a bit more complicated. Some people have clearly benefited from these policies and some clearly have not. There is nothing inherent in capitalism that considers the wellbeing of those worst off in society. On the other hand, some government policies designed to help the poor can very well make the poor worse off.

Correct me if I am wrong but I think the evidence is pretty slim that tax cuts help people at the lower end of the income spectrum. What are your thoughts on taxes in general? What kind of taxes do you favor? For example, are you for or against an income tax?

I think the current way we go about welfare in this country is just bad. I don’t see the reason to have so many different welfare programs and i don’t see the reason for the government to administer them. However, I do believe that as a wealthy and civilized society we can afford and should provide some kind of social welfare.

 

[nmgauss]

What happens when individuals don’t rovide for the poor? Isn’t it the moral responsibility of society to help those who are less fortunate or going through hard times? Isn’t that what the Church teaches?

Isn’t there a moral responsibility for the poor to improve themselves in return for being helped. If the church concentrated more on obligations of the poor toward benefactors, it would not be so lop-sided in its teaching. There are too many bleeding hearts whose only concern is love without realizing that there is more to life than love.

In the story about Oliver Twist, we see a child beggar who beseeches for “More!” He doesn’t demonstrate being grateful for his food. There is no demonstration of what the child beggar is prepared to do in return for “More!”.

 

[freeRadical]

Isn’t there a moral responsibility for the poor to improve themselves in return for being helped. If the church concentrated more on obligations of the poor toward benefactors, it would not be so lop-sided in its teaching. There are too many bleeding hearts whose only concern is love without realizing that there is more to life than love.

In the story about Oliver Twist, we see a child beggar who beseeches for “More!” He doesn’t demonstrate being grateful for his food. There is no demonstration of what the child beggar is prepared to do in return for “More!”.

It seems to me you are reading something in my post that isn’t there. It seems to me you are also generalizing all poor people as lazy, incompetent, greedy, ungrateful, freeloaders. That’s not very charitable.

BTW, I’m anything but a “bleeding heart” liberal. Have you seen my other posts?

 

[nmgauss]

It seems to me you are reading something in my post that isn’t there. It seems to me you are also generalizing all poor people as lazy, incompetent, greedy, ungrateful, freeloaders. That’s not very charitable.

BTW, I’m anything but a “bleeding heart” liberal. Have you seen my other posts?

You seem to think in absolutes. If what I say is not all true, then their is no element of truth in it whatsoever. Instead of poking holes in my point of view, a better approach would be to present supporting evidence. Since you seem to not agree with anything I have said, then we are in diametrically opposite corners.

 

[sallybutler]

Isn’t there a moral responsibility for the poor to improve themselves in return for being helped. If the church concentrated more on obligations of the poor toward benefactors, it would not be so lop-sided in its teaching. There are too many bleeding hearts whose only concern is love without realizing that there is more to life than love.

In the story about Oliver Twist, we see a child beggar who beseeches for “More!” He doesn’t demonstrate being grateful for his food. There is no demonstration of what the child beggar is prepared to do in return for “More!”.

I take it you have never heard of Noblese Oblige or There but for the grace of God go I.

At some point in your life, you could end up with nothing and no way to get anything. Imagine being out of work, no savings, no job prospects. Yes, it could happen to you.

Many people used to believe that their wealth obliged them to help those less fortunate.

 

[freeRadical]

You seem to think in absolutes. If what I say is not all true, then their is no element of truth in it whatsoever. Instead of poking holes in my point of view, a better approach would be to present supporting evidence. Since you seem to not agree with anything I have said, then we are in diametrically opposite corners.

It seems you are the one thinking in absolutes when it comes to the poor. Provide supporting evidence of what? That not all poor people are lazy and ungrateful?

 

[stinkcat_14]

Capitalism was never designed to provide for the well being of those worst off in society. It provides for the well being of all. Capitalism demands the best of everyone and rewards them accordingly. It leaves everyone free to choose the work they like, to specialize in it, to trade product for the products of others, and to go as far on the road of achievement as their ability and ambition will carry them. A person’s success depends on the objective value of his work and on the rationality of those who recognize that value.

There are a couple of problems here. First, capitalism does not work very well where you don’t have much capital. One of the reasons capitalism works so well in the US is that we have well developed capital markets. It is much easier to make a million dollars if you can borrow a million from someone else or get it from an investor. A shoeshine boy in a LDC who makes $2 a day does not have a chance to really accumulate the capital that makes capitalism work. Also there are institutions that affect the productivity of capital, such as our credit reporting system in the US and our education system. People who have more access to education do better and part of the reason they earn more is because they have access to education. And capitalism does not provide education well, it is primarily provided by the nonprofit sector. The market won’t produce much education on its own.

Would poor people exist in a true Capitalist society? Yes. There would be very few compared to any other economic system and they would be legitimately poor. Since the overall standard of living in a Capitalist society is higher than others, more individuals would be able to generously provide for the poor.

How would we establish whether or not that is true, given that there are no truly capitalist countries?

 

[stinkcat_14]

Correct me if I am wrong but I think the evidence is pretty slim that tax cuts help people at the lower end of the income spectrum.

I think directly, tax cuts have relatively little effect on those at the bottom since people at the bottom pay little in taxes anyway. One can argue that if a tax cut stimulates the economy it could provide more jobs in general and those on the lower end could benefit. Of course the trick is really determining the cause and effect, since in most years the economy grows anyway. So it is easy to naively say that we cut taxes and see how much it affected the economy, when we really don’t know.

What are your thoughts on taxes in general? What kind of taxes do you favor? For example, are you for or against an income tax?

I think Glenn Hubbard who used to be Bush’s Chairman of the Council of Economic Advisors has said, if we want the level of government spending that we have now, taxes will have to go up. Now of course, a lot of people say they want lower government spending, but don’t touch the Medicare part B subsidy. I would prefer a flatter tax system with fewer deductions. For example, the mortgage interest deduction does little for poor people but is great for high income people who want to buy a big house. When you take into account the standard deduction the mortgage interest deduction is almost worthless for the person with a $100k house but something significant for the person with a million dollar home. I thought Reagan’s 86 tax reform was a very good thing, but we have made taxes more complicated since then. There is something wrong with society when a businessman’s best use of his time is to find ways to reduce his tax liability.

I think the current way we go about welfare in this country is just bad. I don’t see the reason to have so many different welfare programs and i don’t see the reason for the government to administer them. However, I do believe that as a wealthy and civilized society we can afford and should provide some kind of social welfare.

I agree that we really do need to find another way, we have an obligation to the poor, but clearly our entrenched bureaucracies are not good either.

 

[freeRadical]

I think Glenn Hubbard who used to be Bush’s Chairman of the Council of Economic Advisors has said, if we want the level of government spending that we have now, taxes will have to go up. Now of course, a lot of people say they want lower government spending, but don’t touch the Medicare part B subsidy. I would prefer a flatter tax system with fewer deductions. For example, the mortgage interest deduction does little for poor people but is great for high income people who want to buy a big house. When you take into account the standard deduction the mortgage interest deduction is almost worthless for the person with a $100k house but something significant for the person with a million dollar home. I thought Reagan’s 86 tax reform was a very good thing, but we have made taxes more complicated since then. There is something wrong with society when a businessman’s best use of his time is to find ways to reduce his tax liability.

What do you think about doing away with income taxes and switching to a consumption tax? Also, what do you think about property taxes?

 

[stinkcat_14]

What do you think about doing away with income taxes and switching to a consumption tax? Also, what do you think about property taxes?

I think the consumption tax has some desirable properties, such as it encourages savings by not taxing interest and dividend income. It would also probably have lower compliance costs in the aggregate. Although, some might argue that it could be regressive, it would not be too difficult to design it in such a way to reduce the regressivity of it.

I think that the property tax is probably one of our more efficient taxes in that most of the money is spent locally and the tax rates and spending (mostly school quality) affect real estate values, so there is more of an incentive here to be efficient.

 

[freeRadical]

I think the consumption tax has some desirable properties, such as it encourages savings by not taxing interest and dividend income. It would also probably have lower compliance costs in the aggregate. Although, some might argue that it could be regressive, it would not be too difficult to design it in such a way to reduce the regressivity of it.

I think that the property tax is probably one of our more efficient taxes in that most of the money is spent locally and the tax rates and spending (mostly school quality) affect real estate values, so there is more of an incentive here to be efficient.

I agree that the property tax is efficient and it is good that it is spent locally but I don’t like that it taxes people’s personal improvements to property that they make with their own money. I’m much more in favor of a land value tax on the value of unimproved land then I am for a property tax just because I don’t like what the property tax actually taxes.

All in all, I guess there are only two types of taxes I would support:

1.) A land value tax on the value of unimproved land
2.) Consumption taxes

I also would rather have most tax money go to local governments and spent by local governments. I don’t understand why so much tax money needs to be sent to Washington.