The 2014 article by Faiza Shaheen concludes:
”The trickle-down approach has been bad economics. Not only has it failed to deliver on its own terms but also it has actively damaged the health of our economy, society and political system. It has supported growing inequality which, rather than boosting economic performance, has deflated it. The UK grew more when we were a more equal country during the post-war, pre-Thatcher era than after. Its damaging social effects are also mounting. High levels of inequality are increasingly seen as harmful to individual well-being and health, social cohesion and social mobility.
“Obama’s attack on trickle-down economics, echoed by Labour Leader Ed Miliband offered hope that our leaders are finally engaging in the possibility of dethroning this damaging philosophy, but the recent response to a potential increase in income tax shows that the theory still festers. We must continue to counter an approach that has created a tide of inequality that lifts up the yachts while leaving the rest of us paddling harder. By pulling the rug out from under trickle-down economics other damaging myths can be exposed, such as the argument for high executive pay.”
Read too Elizabeth Warren demolishes the myth of “trickle-down”. “That is going to destroy our country, unless we take our country back”
. She is an academic and Democrat senator.
For Liberal skeptics here is the coup de grace
in United Fair Economics
in an article Trickle-down economics: Four reasons why it just doesn’t work,
written in 2003 during the Bush era:
- Cutting the top tax rate does not lead to economic growth
- Cutting the top tax rate does not lead to income growth
- Cutting the top tax rate does not lead to wage growth
- Cutting the top tax rate does not lead to job creation.
The article supports these assertions with graphic evidence, and concludes:
”Overall, data from the past 50 years strongly refutes any arguments that cutting taxes for the richest Americans will improve the economic standing of the lower and middle classes or the nation as a whole. To be sure, the economic indicators examined in this report are dependent on a variety of factors, not just tax policy.
“However, what this study does show is that any attempt to stimulate economic growth by cutting taxes for the rich will do nothing – it hasn't worked over the past 50 years, so why would it work in the future? To put it simply and bluntly, Bush's top-bracket tax cut is an ineffective attempt at stimulus that will not cause any growth - unless, of course, if you're talking about the size of the deficit.
If we now look at the Coalition’s 2016 budget, much of it is based on the trickle down concept that tax breaks or other economic benefits provided to businesses and upper income levels will inevitably benefit poorer members of society by improving the economy as a whole.
That is what is behind the monotonously repeated ‘jobs and growth’ mantra. Superficially appealing, the Coalition posits that to increase jobs those who employ people must be given tax breaks and other incentives. This is most flagrantly demonstrated by the Coalition’s plan, beginning on 1 July, to reduce company tax progressively from 28.5% now to 25% over the next decade, not just for small and medium businesses with a turnover of less than $2 million, but to extend eligibility to businesses with turnovers of up to $10m, and the lower rate will be gradually phased in for larger businesses until it covers all companies
The Liberal manifesto Lowering company tax
, boldly asserts:…if you are against cutting company tax, you are against economic growth. If you are against economic growth, then you are against jobs.”
In other words, the benefits of cutting company tax will trickle down to the workers at the bottom. Arthur Sinodinos was the first confidently to expound this a few weeks back.
PM Turnbull and Treasurer Morrison were reluctant to admit the cost to revenue of this measure, but Treasurer Secretary John Fraser let the cat out of the bag during a Senate Estimates hearing with the figure of $48.2 billion over ten years. Clearly, the Coalition has such fervent belief in the stimulatory effects to ‘jobs and growth’ of giving a large tax break to businesses, even to multinationals, that it is prepared to forego over $48 billion in revenue!
Another manifestation of preferentially feeding the horses is the Coalition’s push for lower penalty rates on Sundays. Their belief is that if this were to occur, more businesses would open on Sundays, and employ more people. Trickle down again. That those depending on Sunday rates would suffer seems immaterial to them.
There are other instances in the 2016 budget of giving to the rich but not to the poor, such as a tax cut to those earning over $80,000 by raising the marginal tax threshold for this second top bracket from $80,000 to $87,000. But there is no tax break for those earning below this magic figure; indeed they will suffer cuts in entitlements. The horses will get the oats; the sparrows will need to fossick in the manure to get their share.
Progressives: Labor and the Greens, know the trickle down concept is a charade. They believe that to stimulate an economy that is slowing, and thereby drive jobs and growth, stimulatory measures are needed. Time and again, better wages have been shown to increase economic activity because people have more money in their pockets to buy the things other people make or do. Using government funds to support infrastructure development also has been shown to stimulate economic activity and increase jobs. This Keynesian approach has a long track record of success when applied where private economic activity is lagging, but the Coalition doesn’t want to know.
I need go on no further.
Almost every slogan, almost every utterance of the Coalition is premised on an entrenched, unshakeable belief in trickle down economics, despite this concept having been debunked for a century. Zombie-like though it is, the Coalition embraces it with fervour. Why? Because it suits their political purpose: to shore up the top end of town, to please those who fund and support it.
Don’t expect them to ever believe that trickle down thinking breeds inequality, because with all PM Turnbull’s talk of ‘fairness’, ‘equality’ is unimportant to them. They believe that inequality is simply part of the natural order of things, and should remain that way.
What do you think?
We are looking for your comments.
What do you think of the Turnbull/Morrison budget?
Do you see how trickle down thinking has permeated the budget, and how it will lead to more inequality?
Inequality will be a hot button election issue
Ad astra, 13 April 2016
Who could ever forget Scott Morrisonís astonishing statement when he became our nationís treasurer: Australia doesnít have a revenue problem; we have a spending problem! Balanced economists were aghast.
What can we expect in the coming election?
Ken Wolff, 17 April 2016
Apart from the obvious statements, we can also tell there is an election in the air as, after six months of inactivity, the Turnbull government has engaged in a flurry of policy announcements — or in some cases what should be termed policy ‘thought bubbles’.
Divining the federal budget
Ad astra, 30 April 2016
Some of you may question the purpose of trying to divine what will be in the May 3 federal budget when the Turnbull Ship of State seems to be all at sea, wallowing towards an uncertain destination, facing strong headwinds, its sails flapping, its hull leaking, with a dithering Captain at the helm, a loquacious and at times incoherent First Mate insisting he knows where he’s going, and a motley crew.