Wednesday, April 22, 2015

Nobody has ever endorsed "trickle-down economics"

...despite the fact that huge swaths of the left seem so dead set on arguing against it. That makes it pretty much the dictionary definition of a straw man. The brilliant British MEP Daniel Hannan explains why here. Some excerpts:

Explaining how the term is actually a leftist invention:

The case against trickle-down, then, is pretty clear. But who exactly is making the case for it? Where are the economists, the politicians, the commentators, arguing that we should give more to the rich? Who avers that the best way to stimulate the economy is for plutocrats to have more to spend on their Lamborghinis and swimming pools? 
Well, here’s an odd thing: I can’t find anyone. Which is, when you think about it, pretty astonishing. One of the consequences of the Internet has been to ensure that even the most eccentric points of view generally turn out to have some advocates. But my online searches, while turning up hundreds of people debunking trickle-down, have not discovered a single person defending it. Could it be that the whole thing is a socialist fantasy, a false creation proceeding from the heat-oppressed brain of Left-wing polemicists? 
In a 2012 paper for the Hoover Institute, the brilliant American writer Thomas Sowell showed that phrase was first used by FDR’s speech writer, Samuel Rosenman...
Explaining basic Laffer curve economics, with good statistical evidence:

In 1921, when Americans earning over $100,000 were expected to pay an eye-watering 73 per cent in federal income tax, they accounted for 30 per cent of a total tax yield of $700 million. By 1929, when the top rate had been cut to 24 percent, the federal government collected more than a billion dollars in income taxes, of which 65 percent came from those earning over $100,000. 
It works every time. Reduce the tax rate, and the rich end up paying more in both absolute and proportionate terms. Between 1980 and 2007, the US cut taxes at all income levels. Result? The wealthiest one per cent went from paying 19.5 per cent of all taxes to 40 per cent. In Britain, after the top rate of income tax was lowered in stages from 98 per cent in the late 1970s to 40 per cent by 1988, the share of income tax collected from the wealthiest percentile rose from 14 to 27 per cent.
And finally, proposing a better title:

What free-marketeers in fact advocate is not trickle-down, but trickle-up. The way to become rich, in a competitive economy, is to offer a service to the broad mass of consumers. I am typing these words using software that I bought from Bill Gates. The transaction enriched him – adding fractionally to his net wealth – but it also enriched me, making my life more convenient. Bill Gates became wealthy, in other words, by persuading a great many poorer people to buy something from him. In doing so, he made us considerably better off, too. Trickle-up, you see.

European free marketeers are rare, but when you find them, they usually know their stuff.

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