Thursday, February 19, 2015

Trickle Down Economics: 101 (Beginners Course)

* This is a political commentary, not an economic thesis...

We're all aware that the Republican leadership hates "government" (except of course, when members of their own party can personally benefit from government). So sometimes it seems almost pointless and a waste of time to repeatedly point out all the ways that the Republican party have assaulted organized labor, the poor, the working-class and what's left of the middle-class and their safety net — while at the same time, advocating for policies that primarily benefit the very wealthy and large corporations (and not small businesses, as they have always falsely claimed).

After all, going back as far as most living people can still remember, all of the GOP's past efforts and achievements — as well as their current and future aspirations and motives — have all been well-documented and publicized for years; and so therefore, are well-known. So whenever we hear on the news that the Grand Old Party (or the Tea Party) has done "such-and such", no one should ever be surprised or shocked — much less, outraged. That's just in the Republicans' DNA.

But yet, far too many American voters still vote for them (and against their own best interests). Why is that? For me, it's a riddle, wrapped in a mystery, inside an enigma.

So the best reason for my constantly ranting against the GOP's "anti-people" actions ("people" meaning, those who are only trying to "live", but aren't in the top 0.01% income bracket), is to enlighten those who may not yet be aware — such as people who still might not know what "trickle-down economics" is all about — or if they do, doesn't know that "trickle-down" doesn't, and never did. (The term had been first attributed to humorist Will Rogers, who said during the Great Depression that "money was all appropriated for the top in hopes that it would trickle down to the needy.")

Trickle down doesn't

Shortly after leaving the White House in 1970, LBJ remarked to a Texas businessman: "When I took over the presidency, Jack Kennedy had left me a stock market of 711. When I left the White House, it was over 900. Now look at it. That's what happens when the Republicans take over — not only Nixon, but any of them. They simply don't know how to manage the economy. They're so busy operating the trickle-down theory, giving the richest corporations the biggest break, that the whole thing goes to hell in a handbasket."

Below are the Dow's closing prices during the LBJ/Nixon era:

11/22/1963711.49When LBJ takes office
01/20/1969931.25When Nixon takes office
05/26/1970631.16The lowest under Nixon (Maybe when LBJ was quoted.)
01/11/1973 --1,051.70The highest under Nixon
08/09/1974777.30When Nixon resigned

To put these stock prices in context, here's an historical chart of the Dow Jones stock market from the Great Depression to the Great Recession (click to enlarge).

Historical stock prices

Most people who don't know that the Republicans primarily advocate for policies that mostly benefit the very wealthy and large corporations, probably don't know because they are too busy going to work, or looking for a job (or a second job), and/or raising their children — and in general, are just too concerned with trying to survive their day-to-day lives. Maybe they don't have the time or inclination to do research, study history, read in-depth political analysis, or educate themselves on opposing economic theories. Or even if they did have the spare time and the willingness to try and understand, maybe they couldn't comprehend — because these can be very complicated subjects (and IMHO, why a short and simple explanation is being posted here).

Maybe most people (who might only get short blurbs from headline news, or only hear short sound bites from the cable news shows) most likely don't have any real knowledge of just how much damage the Republicans have caused average American workers and their families over the last several decades. Maybe they vote for Republicans because their parents or grandparents have always voted that way in the past. But that was then, this is now. African-Americans would have voted for a Republican president in 1860 (if they could have voted). And in 2016, many registered Democrats today might vote for another Dwight D. Eisenhower (a Republican), rather than Hillary Clinton (a "third way" Democrat).

Wiki: Throughout his presidency, Eisenhower adhered to a political philosophy of dynamic conservatism. He continued all the major New Deal programs still in operation, especially Social Security. He expanded its programs and rolled them into a new cabinet-level agency, the Department of Health, Education and Welfare — while extending benefits to an additional ten million workers. He also implemented integration in the Armed Services in two years, which had not been completed under Truman. As the 1954 congressional elections approached, and it became evident that the Republicans were in danger of losing their thin majority in both houses, Eisenhower was among those blaming the Old Guard for the losses, and took up the charge to stop suspected efforts by the right wing to take control of the GOP. Ike then articulated his position as a moderate, progressive Republican: "I have just one purpose ... and that is to build up a strong progressive Republican Party in this country. If the right wing wants a fight, they are going to get it ...either this Republican Party will reflect progressivism or I won't be with them anymore."

Franklin Delano Roosevelt (a "progressive" Democrat) was elected to be our President 4 times by a vast majority of the American people — and by every single Southern State — before many of the old Democrats broke off from the party to become Dixiecrats in the 1940s (who are now today's Tea Party).

Of course, it hasn't always been just the Republicans' fault for the decline of the middle-class and for our current problems. Because when the Democrats do nothing, and/or act like innocent bystanders, then the Republicans prevail (The only thing necessary for the triumph of evil is for good men to do nothing.) When the Democrats had both chambers of Congress and the White House in 2009 and 2010, they could have passed real tax reform — and they could have also raised the federal minimum wage to a measly $10.10 an hour. They could have accomplished many other things as well, besides just passing Obamacare. But they didn't. Now many Democrats only pretend to be "economic populists" (such as Hillary Clinton). As Harry Truman had said in 1952:

"I've seen it happen time after time. When the Democratic candidate allows himself to be put on the defensive and starts apologizing for the New Deal and the fair Deal, and says he really doesn't believe in them, he is sure to lose. The people don't want a phony Democrat. If it's a choice between a genuine Republican, and a Republican in Democratic clothing, the people will choose the genuine article, every time; that is, they will take a Republican before they will a phony Democrat."

It wasn't until the Occupy Wall Street movement (that began on September 17, 2011 in Zuccotti Park in New York City) before many people were even aware of income and wealth inequality — or that real wages (after inflation) have been stagnant for the last 30 years — or that the real median household income is lower today than it was in the 1980s (and that most households now depend on two or more incomes) — or that CEO salaries are up over 300% during that same time. But most Americans remember that their fathers or grandfathers told them that the rich were getting richer while everyone else was getting poorer — meaning, while everyone else gets the economic shaftunless you're born into wealth. It seems some things never change, but income and wealth inequality has also exponentially accelerated (growing wider and faster) over the last couple of generations.

Even most of the Democratic leaders had ignored this issue of income inequality (or were unaware), and didn't jump on the "economic populist" band-wagon until just prior to the last presidential election in 2012. Now the GOP has also recently attempted to appeal to the poor and middle-class (which some people find almost laughable). But many Americans suspect that politicians on both sides of the aisle are only now pretending, and mostly because of politically motivated ambitions 1) to get themselves elected or re-elected, 2) to keep their political party in power, and/or 3) to try to be (or remain) a relevant political force.

And of those Democrats who are (and might have been all along) genuinely concerned, many have done a very poor job of political messaging, while others have also sent conflicting messages. For example: Obama railed against the offshoring of jobs overseas, but at the same time, he also wants fast track to pass more bad trade agreements (like the TPP). This is from a recent post by Robert Reich (who used to believe in trade agreements):

"Suppose that by enacting a particular law, we’d increase the U.S. Gross Domestic Product. But almost all that growth would go to the richest 1 percent. The rest of us could buy some products cheaper than before. But those gains would be offset by losses of jobs and wages. This is pretty much what 'free trade' has brought us over the last two decades."

Historically speaking, average American workers could never trust any politician. They used to sell snake oil to us, now they're trying to peddle "economic populism". Many of the "most likely" voters, and/or those who do follow and study the issues (on both the left and right), have become very leery and weary of both major political parties — and now many self-identify as "Independents". And they all have very good reasons for not trusting either major party — because most of our politicians keep giving them plenty of reasons not to (e.g. wishy-washy, no true convictions, goofy, opportunistic, hypocritical, contradictory, narcissistic, fake, drug users or dealers, phony, tax evaders, tax avoiders, self-serving, dishonorable, manipulative, unempathetic, dishonest, false heroics — and sometimes, even sociopathic.)

But the corporate media (6 companies that control 90% of the media) seems to prefer the current status quo — at least, to some extent. They appear to marginalize (what could be) very viable Third Party candidates — and mostly classify the more progressive politicians (e.g. Elizabeth Warren or Bernie Sanders) as "far-left" (even though they are more to the center, just as FDR was); or "far right" like Ted Cruz or Raul Ryan (who hate government, unless of course, they personally benefit from government, or are a part of the government). The GOP leadership always claim they support our Vets, but their actions always speak much louder than mere words — but the media rarely points this out as well.

It's not the Democrats, but the Republicans, who always insist on feeding the rich while starving the poor. Yet, the mainstream media doesn't come right out and tell you that either, because they hobnob with those same people at the White House Correspondents Dinner every year. They're all part of the same elite club, where only members of the top one percent are invited — models, musicians, movie stars, politicians, CEOs, casino owners, comedians, billionaires, media moguls and cable TV talking heads — those that many of us love to admire, emulate, idolize and worship.

And aside from the "morality issues" (e.g. abortion, gay marriage, birth control, religion, civil rights, etc.) most Americans (although, not "most-likely" voters, judging by the last mid-term elections) seem to all agree on most other economic and social issues (e.g. fair wages, raising the minimum wage, taxing the rich their fair share, prohibiting trade agreements that offshore American jobs to foreign low-wage countries, corporate cronyism and bank bailouts, and saving and strengthening Social Security so that it's there for them when they'll need it.)

But the Democrats, primarily being the party of the working-class and poor, are seen by many Republican voters as being the party of minorities (and this is reflected in the demographic make-up of both political parties). But even though a greater percentage of minorities may be poor, by the numbers, most poor Americans are white. So it appears that many GOP voters don't realize that when they vote for a party that they believe represents them (the white party representing the interests of white people), they think they are voting in their own best interests. But they couldn't be more wrong. They don't realize they are voting against their own best economic interests.

And if GOP voters are aware, but still vote their way based only on moral issues — such as abortion — then that is an entirely different subject altogether. The Republican leadership is perfectly aware of this "moral divide" — and exploits this divide by using the aforementioned "morality issues" to further the divide (and conquer) the American people — just to push their own agenda: to gain political power and to advocate policies that mostly benefit wealthy people in this country (and by proxy, the largest corporations, their revenue-stream generators).

The GOP has also been using the strategy of "generational warfare" to divide older and younger voters on issues such as Social Security and Medicare. Try to remember when Tea Party protesters were saying: "Keep your hands off my Medicare!" Now Tea Party members of Congress will be going after Medicare, Social Security, disability insurance, unemployment benefits, TANF, food stamps, and anything else in our New Deal social safety net that 99% of all Americans will need at some time in their life.

Timeline of Trickle-Down Economics: From the Roaring Twenties — to the Great Depression — to the Great Recession — to the Present

  • In 1921 The Revenue Act of 1921 was passed. Near the end of the first Gilded Age (currently we live in the Second Gilded Age) a Republican tax reduction was pushed by then-Secretary of the Treasury (and banker) Andrew Mellon, who had argued that a significant tax reduction was necessary in order to spur economic expansion. (Sound familiar?) Mellon obtained a repeal of the wartime excess profits tax. The top marginal tax rate on wealthy individuals fell from 73 to 58 percent — and the preferential treatment for capital gains was first introduced at a rate of 12.5 percent. This was when Calvin Coolidge was our President (a Republican small-government conservative) who ushered in the Roaring Twenties before Herbert Hoover (another Republican President) was elected, who ushered in the Great Depression.
  • From 1933 to 1945: FDR - The New Deal and the Glass–Steagall Act (regulating the banks).
  • From 1963 to 1969: LBJ - The War on Poverty and The Great Society (Social Security, Medicare, Medicaid, etc.)
  • In 1971 (during Richard "Tricky Dick" Nixon's time in office) we had the Powell Memo, which was "a call to arms" for corporations, and was first published on August 23rd.
  • In 1979, both union membership and manufacturing jobs had peaked (as did the American middle-class). That year Jimmy Carter drastically lowered the capital gains tax rate from 39% to 28%. Some say it was he who really started "Reaganomics".
  • In 1981 Ronald Reagan further reduced the capital gains tax rate from 28% to 20%, decreased the top marginal tax rate on wages from 70% to 50% (now at 36.9%) and increased the estate tax exemption — which is currently over $10 million per couple, for those who wish to perpetuate the lazy fortunes of their trust fund babies. (Ronnie later raised the tax on capital gains back to the 28% rate in 1987 to help pay for "Star Wars".)
  • In 1989 Kodak began outsourcing.
  • In 1994 Bill Clinton gave us the NAFTA trade agreement = lots of lost jobs.
  • In 1998 Bill Clinton lowered the capital gains tax rate from 28% to 20%
  • In 1999 Bill Clinton deregulated the banks, repealing much of the Glass–Steagall Act.
  • In 2000 Bill Clinton gave us PNTR with China. Since then, our trade deficit has soared — which cost us more than another 3 million lost jobs.
  • In 2001 we got the Bush tax cuts (that lowered the capital gains tax rate to 15% in 2003) and the U.S. taxpayers got two unfunded wars in return.
  • In 2005/06 the housing bubble peaked and the market began a slow decline, before later, finally crashing (deregulated banks, financial derivatives, sub-prime mortgages, etc.)
  • In 2007, just seven months before the Great Recession "officially" began, The Fair Minimum Wage Act of 2007 was passed (It went up to a poverty-level $7.25 an hour as of 2008).
  • In 2008 (under George W. Bush) federal extended benefits were created for the long-term unemployed. Later that year the credit default swaps (derivatives) and the sub-prime mortgages hit the fan and crashed the stock market. The DOW went from 14,093.08 in October 2007 to 6,626.94 in March 2009. (As of this post, it's near another all-time record high at 18,000.28)
  • In 2009 (June) the government told us that the Great Recession was over. But since that time, 11 million more Americans have left the work force; and we still have 9 million more who are counted as "unemployed". Many of the new jobs have been part-time, or low-paying, or temporary, or as “independent contractors”. 65% of college grads end up living with their parents because they can’t find work. Meanwhile, all the economic gains since the recession was "officially" over went to the top one percent.
  • In 2010 Obama renewed the Bush tax cuts (that were set to expire by January 2011) for two more years as a "compromise" with the GOP to extend federal unemployment benefits (that G.W. Bush first enacted) for one more year. Also during that year, a very weak Dodd–Frank Wall Street Reform and Consumer Protection Act was passed — and it still hasn't been fully enforced, and it's still under attack (mostly by the GOP, but with too many fake Democrats on board.)
  • In 2012 Mitt Romney said: "I'm not too concerned for the very rich, they're doing just fine." (Kodak filed for bankruptcy that year. And this year might have been when most housing prices finally hit rock bottom).
  • In 2013 the Bush tax cuts finally expired and the capital gains tax rate went back to 20% with a 3.8% surtax added to expand Medicaid for the poor under Obamacare (which is still far below the tax rate of 39.6% for regular wages). Also that year: By the end of December Congress allowed extended federal unemployment benefits to expire for over one million jobless Americans.
  • In 2014 the American people decided that they no longer wanted FDR's or LBJ's programs — and that big corporations and the very rich were taxed too much already — and that they were already very happy with the wages they earned — so they voted for Republicans in Congress (and also as state legislators and governors.)
  • In 2015, one of the very first acts of the new GOP Congress was to immediately begin attacking Social Security. And Obama is still pursuing "fast track" to pass another bad trade deal that has been described as Clinton's "NAFTA on steroids". And another fake Democrat (Hillary Clinton) may run for president next year as an "economic populist".

Trickle down economics at work

As I noted before in another post, American workers only want a fair wage to survive on. The GOP's "job creators" are spending billions of dollars every year on mergers and acquisitions, but yet, very little (if any) of their profits are being invested in (domestic) employee wages — because (the CEOs say) raising wages would slow hiring, reduce worker hours, cause layoffs, raise consumer prices, destroy the economy, and end life as we know it on Earth. But what the "job creators" never tell us is, if they did raise workers’ wages, these same CEOs might also have to buy one less beachfront mansion, a smaller private jet or a shorter luxury yacht. Yet, our political "leaders" like Rep. Paul Ryan claim that all our reasonable demands for "living wages" and taxing the rich "their fair share" is nothing more than "class warfare" — and that we feel this way because we "envy the rich". (Voters last year must have believed him, because the Republicans won by landslides in the elections).

That's why, taken all together, sometimes it seems almost futile (and a waste of time) to point out any of this to anyone — because "grown-ups" should know by now. That's why many people who are involved in the political process would like to appeal to the younger generation, because it is they who will eventually be governing this country. And the GOP has their sights set on them as well — such as teaching creationism instead of evolution in school (despite "separation of Church and State" issues) so that in the future this "moral divide" can also be used by the GOP. I'm all for "freedom of religion", but I don't want the Bible Belt governing the nation. Then we'd have a theocracy, and not a democracy which is already seriously at risk.

The GOP is, and always has been — at least, going back as far as most living people can remember (maybe President Hoover just prior to the Great Depression) — relentless in pursuing their pro-corporate (and now) anti-government agenda. (Odd, considering our Founding Fathers created this government). But the moment we stop pointing out all the different ways that the Republicans are assaulting labor, the poor, the working-class, and what's left of the middle-class (and their safety net), then that's the day when we will have lost the class war that was perpetuated by the rich and their GOP enablers. So never vote for (while you can still vote) a Republican. And never surrender to the GOP's persistent deception, manipulation and propaganda either. But don't allow a fake Democrat to fool you either:

Washington Post: "In an extraordinary report that has not yet been fully digested, the Wall Street Journal tells us that the Bill, Hillary & Chelsea Clinton Foundation has received millions from foreign governments including Qatar, a prominent backer of Hamas."

Wall Street on Parade recently reported that the Swiss banking unit of HSBC had assisted the ultra rich in hiding assets and providing advice on how to evade domestic tax authorities. The next day it was reported that seven clients of the Swiss HSBC bank had cumulatively donated $81 million to the Bill, Hillary and Chelsea Clinton Foundation. (Remember when HSBS had to pay a big fine for laundering drug money?)

New York Times: "Hillary Clinton held a private meeting with Senator Elizabeth Warren in December, seeking to cultivate the increasingly influential senator and to grapple with issues raised by a restive Democratic left, such as income inequality ... The two met at the Northwest Washington home of the Clintons, without aides and at Mrs. Clinton’s invitation ... Mrs. Clinton solicited policy ideas and suggestions from Ms. Warren ... For Mrs. Clinton, it was a signal that she would prefer Ms. Warren’s counsel delivered in person, as a friendly insider, rather than on national television or in opinion articles ... Both Mrs. Clinton and her husband appeared eager to keep a close eye on Ms. Warren; Bill Clinton has appeared sensitive to her oblique criticism of his deregulation of financial institutions."

I think Hillary Clinton is just trying to avoid having to debate Elizabeth Warren by making her a confident (or part of her “team”). Hopefully we'll be able to vote for Elizabeth Warren or Bernie Sanders next year. Or better still, maybe we can have them both (as Prez and VP).

Bernie and Liz


  1. Great post Bud. If you haven't already read this book, i'd like to mention the book "Deer Hunting with Jesus" by the the late Joe Bageant. I read it about 4 or 5 years ago and it helps to understand southerners (in particular) continually voting against their best economic interests.

    1.'s looks interesting, according the reviews at Amazon.