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TRICKLEDOWN AND AUSTERITY ECONOMICS

August 21, 2017

TRICKLEDOWN AND AUSTERITY ECONOMICS

Milton Friedman of the so-called Chicago School of Economics advanced the idea of trickledown economics via one of his true believers to a clueless Reagan who took such information down on the back of a napkin and asserted the idea was to become policy and having Treasury and others flesh out the details. The idea is to see to it that public money in one way or another goes to the corporations so that they can build new plant, hire more Americans and make the economy hum due to high demand in the marketplace. Everybody wins!

This was and is, of course, an illusion, and why? Because we do not have an industrial or other such policy that tracks where the money actually goes, among other reasons. The corporations who enjoy this public largesse in many instances have used such trove to go overseas to cheap labor venues with the trickledown money and build plant there to provide goods and services for delivery back here unimpeded with regulation via capital controls and protected from protectionism here due to trade treaties (which corporate lawyers wrote and their friends in Congress passed). The system is clearly rigged. You and I have little to no input in the formulation and carrying out of such policies.

They have also used such corporate welfare funds to buy back their own stock, thus increasing the capital gains potential for their shareholders, given additional raises and bonuses to their executives and in general have treated such gratuitous funding as earned income with no strings attached.

The result is exactly opposite of that promised, that American labor and new plant in America would be assured, but to the contrary, such trickledown policies have worsened both American labor’s wages and economic output as American labor must compete with labor rates imported from Third World countries, thus depressing American wage rates even further, and with such depression domestic demand goes south and economic output follows in lockstep, lost forever, always with the edge of the next recession in view as our domestic economy continues to underperform.

So with such anti-economic growth policies as our guide, what happens to the income side of the ledger? Tax collections are reduced (and trillions earned overseas by corporations that remain there are taxable only upon repatriation) leading to increases in the national debt as a share of GDP. Republicans who gave us this policy in the first place then complain of our high national debt and go on an austerity binge, i.e., cut this, cut that, cut everything. We’re deep in debt; we can’t afford it! Cut education, cut healthcare costs, cut anything and everything that amounts to Big Government spending, the propaganda goes. I note with interest that such anguished calls for cuts do not include the billions in government spending on trickledown expenditures such as tax cuts, redefinition of income categories and other such goodies to the rich and corporate class by a Congress that I further note is always in dire need of additional campaign contributions.

Republicans and their superrich friends have done a good job in framing the issues. Appropriations for food stamps are spending and welfare, but appropriations for trickledown objectives are investment in the American economy and not spending. Bologna! When you don’t collect what you could and should (especially given our substantial national debt) that is spending. There is no difference between spending and not collecting on our Treasury’s books. Both result in deductions from income on our books, so as to policy choice, which is more important, that Americans in poverty eat or that corporations are enriched with ever more capital to bulwark their profits and capital gains structure and to run offshore and further undermine American labor’s wages and economic growth?

I have made my choice between these two, and Keynes (if he were living), Piketty and Stiglitz would agree: That we discard all vestiges of trickledown and austerity economics and adopt Keynesian policies to guide us to a fair and debt-free future by growing our economy instead of running up our debt even further with such corporate welfare to the undeserving rich and corporate class.

Won’t work? Quite the contrary. Trickledown economics has never worked anywhere, while FDR’s Keynesian policies (until Reagan) gave us unprecedented prosperity where wages and profits rose in tandem, where we created a vigorous middle class, where one paycheck was adequate per family, where we built an interstate highway system free of control of privatization, and where we proved that our Keynesian system was superior to that of Russia (resulting in Gorbachev’s breakup of the Soviet Union) etc.

As I wrote recently in another post, we know how to win, so why do we keep choosing to lose? Money? Propaganda? Fear mongering? Corporate power? Yes to all, and more. We have an underperforming economy and an underpaid work force. We know how to end both of these negatives from experience, so what are we waiting for?

We are waiting for the next election, and if we elect those who favor Keynesian policies and go to Washington to work for America and its people and not corporate and other special interests, as we did way back in 1932, and if we persevere, we can in fact make America great again, a hazy slogan used by the current occupant of the Oval Office. What I propose is not hazy; Keynesianism has a very successful track record while trickledown economics has failed everywhere it has been tried – and is again failing here and now. So, to reiterate, what we are waiting for is the next election, but meanwhile it is, I think, incumbent on us to agitate for such a change to set the stage, hence this (and other) posts. We know how to win, so let’s do it.        GERALD       E

 

 

 

 

 

 

 

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