The Rich Must Do Their Share!

Way back in 2017, I wrote a post titled It Trickles Up … Not Down! in which I de-bunked this theory that if you give the rich more money, they will use it to improve the lot of the other 99% of us … it just doesn’t happen that way, folks, for the rich delight in seeing their investment portfolios grow and largely don’t give a damn about the rest of us.  In today’s column, Robert Reich explains it in a bit more detail …


Trickle-down economics doesn’t work but build-up does – is Biden listening?

A new study confirms tax cuts for the rich do not benefit the rest. Recovery from the pandemic is a chance to change course

Robert Reich-4Robert Reich

How should the huge financial costs of the pandemic be paid for, as well as the other deferred needs of society, after this annus horribilis?

Politicians rarely want to raise taxes on the rich. Joe Biden promised to do so, but a closely divided Congress is already balking.

That’s because they’ve bought into one of the most dangerous of all economic ideas: that economic growth requires the rich to become even richer. Rubbish.

Economist John Kenneth Galbraith once dubbed it the “horse and sparrow” theory: “If you feed the horse enough oats, some will pass through to the road for the sparrows.”

We know it as trickle-down economics.

In a new study, David Hope of the London School of Economics and Julian Limberg of King’s College London lay waste to the theory. They reviewed data over the last half-century in advanced economies and found that tax cuts for the rich widened inequality without having any significant effect on jobs or growth. Nothing trickled down.

Meanwhile, the rich have become far richer. Since the start of the pandemic, just 651 American billionaires have gained $1 trillion of wealth. With this windfall, they could send a $3,000 check to every person in America and still be as rich as they were before the pandemic. Don’t hold your breath.

Stock markets have been hitting record highs. More initial public stock offerings have been launched this year than in over two decades. A wave of high-tech IPOs has delivered gushers of money to Silicon Valley investors, founders, and employees.

Oh, and tax rates are historically low.

Yet at the same time, more than 20 million Americans are jobless, 8 million have fallen into poverty, 19 million are at risk of eviction, and 26 million are going hungry. Mainstream economists are already talking about a “K-shaped” recovery – the better-off reaping most gains while the bottom half continue to slide.

You don’t need a doctorate in ethical philosophy to think that now might be a good time to tax and redistribute some of the top’s riches to the hard-hit below. The UK is already considering an emergency tax on wealth.

The president-elect has rejected a wealth tax, but maybe he should be even more ambitious and seek to change economic thinking altogether.

The practical alternative to trickle-down economics might be called build-up economics. Not only should the rich pay for today’s devastating crisis but they should also invest in the public’s long-term wellbeing. The rich themselves would benefit from doing so, as would everyone else.

At one time, America’s major political parties were on the way to embodying these two theories. Speaking to the Democratic National Convention in 1896, populist William Jennings Bryan noted: “There are two ideas of government. There are those who believe that, if you will only legislate to make the well-to-do prosperous, their prosperity will leak through on those below. The Democratic idea, however, has been that if you legislate to make the masses prosperous, their prosperity will find its way up through every class which rests upon them.”

Build-up economics reached its zenith in the decades after the Second World War, when the richest Americans paid a marginal income tax rate of between 70% and 90%. That revenue helped fund massive investment in infrastructure, education, health, and basic research – creating the largest and most productive middle class the world had ever seen.

But starting in the 1980s, America retreated from public investment. The result is crumbling infrastructure, inadequate schools, wildly dysfunctional healthcare and public health systems, and a shrinking core of basic research. Productivity has plummeted.

Yet we know public investment pays off. Studies show an average return on infrastructure investment of $1.92 for every public dollar invested, and a return on early childhood education of between 10% and 16% – with 80% of the benefits going to the general public.

The Covid vaccine reveals the importance of investments in public health, and the pandemic shows how everyone’s health affects everyone else’s. Yet 37 million Americans still have no health insurance. A study in the Lancet estimates Medicare for All would prevent 68,000 unnecessary deaths each year, while saving money.

If we don’t launch something as bold as a Green New Deal, we’ll spend trillions coping with ever more damaging hurricanes, wildfires, floods and rising sea levels.

The returns from these and other public investments are huge. The costs of not making them are astronomical.

Trickle-down economics is a cruel hoax, while the benefits of build-up economics are real. At this juncture, between a global pandemic and the promise of a post-pandemic world, and between the administrations of Trump and Biden, we would be well-served by changing the economic paradigm from trickle down to build up.

58 thoughts on “The Rich Must Do Their Share!

  1. In your earlier piece “It Trickles Up Not Down”, this line caught my attention :

    “First, tax cuts reduce the revenue of the federal government”

    This ignores the reality of incentives. Higher taxes on upper income brackets usually does not lead to correspondingly higher tax revenues (as is too frequently assumed). The problem with progressive tax increases is that they disincentivize investment in areas where investment is needed. Instead of investing in say, a promising new oil company, one may instead go for a tax-exempt security. It all depends on which is likely to be more profitable.

    Liked by 2 people

    • Higher taxes on the wealthy gives the government additional funding which can be used to help stimulate the economy, raise wages for the working poor, provide healthcare and education for those with fewer opportunities, etc. The wealthy are accumulating and hoarding massive wealth, while the rest of us are teetering on the brink of poverty and starvation. Income disparity is at an all-time high. How is this right, my friend?

      Liked by 1 person

  2. For once I’m not going to apportion blame here. I’m just going to say it’s high time politicians thought about the people who put them into power, and why. For sure it isn’t just to line their own pockets or those of the corporate monsters who buy them. A redistribution of wealth is way overdue and some should be going to those who help create it with their labour. Mc Donalds is a wealthy firm as are Walmarts and they should not be expecting the Government to be picking up a shortfall in wages. Raising the minimum earnings would be a good start.
    Cwtch

    Liked by 2 people

    • Ah, there is plenty of blame to go ’round, starting with the politicians (both parties, but more on the Republican side) and the Supreme Court who gave corporations the right to essentially buy members of Congress with large campaign donations in their Citizens United v FEC ruling. But to the point, you are right … if we don’t reduce the income disparity, this nation cannot survive as a democratic republic. Raising the minimum wage is a definite need, as is a universal healthcare system and affordable college, but there are forces at work who own members of Congress and will not willingly allow any of this to happen, for it could cut into their profits. I’ve long said that if I had a billion dollars, I would have only $50,000, for I would give away all but enough to live a year or two on. I’d get far more joy from helping others than from buying a damn yacht or a mansion.
      Cwtch

      Liked by 1 person

  3. we really need to abolish the income tax and instead have a universal sales tax of 18%. just pay a tax on stuff people buy. no income tax to prepare each year…just tax on whatever people buy.

    Liked by 3 people

    • Then how would world governments finance their pet project slush funds, military, endless wars, regime change operations, state funded ngo’s and MSM propaganda machine? I’m sure i left out 1001 other wasteful expenditures.
      There’s so much gov’t waste, I’m sure citizens would spend their hard earned dollars more efficaciously.
      I totally agree that a universal sales tax would be a good start, as well as universal basic income and medicare for all. Green new deal is primary b/c our collective future is at stake. We’re all on the Earth Titanic and our politicians, wealthy elite whom they cater to are oblivious to impending doom. We may be the last “civilization” on Earth.

      Liked by 2 people

    • Well, the problem with that, Suze, is that about 40% of the people in this nation would not even be able to afford to buy food, let alone a few toys for their kids at Christmas. I think that, applied properly, the income tax has the potential to be the most fair way of determining who pays what. Unfortunately, it is used as a pawn in the game of political warfare. Sigh.

      Liked by 1 person

      • no..i dont think i explained it. no more income tax at all, not even state. a flat tax on what we buy, groceries are not included in that. we already pay over 18% of our income between fed, state, county etc taxes plus retail taxes. this would put property taxes and income taxes in the we dont pay these anymore and just reduce everything to a flat rate on purchases……… had an economist explain it with numbers and we’d pay off the deficit in less than ten years and everyone would benefit……and yea. i suck at financial explanations…lol

        Liked by 2 people

        • Heh heh … I rather liked your financial explanation! Sigh. Unfortunately, like most things, there is no panacea, not nice easy solution. First things first, however, we need to take the money out of political campaigns. Right now, the big corporate donors literally own the votes of half the members of Congress, thanks to the Citizens United ruling that ruled corporations are people too, and should be able to support a candidate financially. Trouble is, then that candidate owes a debt to the corporate donor and will vote in his favour, else risk losing donations next time he/she is up for re-election. Second thing is to get rid of the Electoral College so that every vote counts equally. Sigh. Never gonna happen, but I can dream, can’t I?

          Liked by 1 person

  4. It is not so long since I estimated the wealthy in America could send each citizen of America, from all their coffers and not just that made since the start of the pandemic, cheques for $300,000 or more, and they would still be ridiculously wealthy. Meanwhile, average Americans could live a much healthier and less worrisome life.
    But they will never do this, even though they have so much they can never spend their wealth before they die.
    However we can decide to do this for them! A redistribution of wealth is necessary onq a very large scale. It the wealthy will not do this on their own, them they must be forced to do so.
    This is no longer about individual success, the ability to share is there for all to see, willing or not. As for the economy, with money in the hands of those who will spend it and not HOARD it, the Dow will double every year.
    Is it really too hard to understand this?

    Liked by 3 people

    • Well, $300,000 may be pushing it a bit, but obviously we have a serious problem with income inequality and the wealthy are hoarding for no reason other than … what? Ego? I have no idea why anybody thinks they need a billion dollars in their investment portfolio … or even a million for that matter. But, it seems to be a matter of bragging rights, rather like penis size, and they are not about to voluntarily give it up. Sigh.

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      • If we were talking world population, it would be lower, but then many of the richest people in the world are not American, much to the chagrin of wealthy Americans.
        I cannot say this for sure, but the Catholic and Mormon churches probably have more wealth stored away than any individual, or royal family. Were a good chartered accountant to study where the wealth of the world lies, and how much is actually stored away doing nothing but earning more money, there would be an upheaval of Marxian proportion.
        Don’t kid yourself, Jill, or anyone who reads this, there is more monetary value stored away than even I can imagine, and my imagination is no slouch.
        But until people start believing this, and resenting those who are keeping them living hand to mouth at best, nothing is going to get done about it. We have become sheep, worthless cogs in the machinery of capitalism. Marx tried to warn us but he went about it wrong. He did not recognize how truly powerful the uber-wealthy are. It will take a worldwide revolution to change things, or a pandemic worse than covid.

        What I would love to see, for the purpose of change only, not for the death and destruction that would accompany it, but I would love to see a worldwide breakdown of electricity, everywhere at the same time.
        99% of the world’s wealth is stored electrically, and what is actual money would become worthless overnight. That would finally make everyone truly equal!
        This is just a dream, of course, and an unspeakably disastrous one at that.
        But it has an advantage over nuclear war, most non-human life would survive, and non-humans deserve to survive. They have done nothing to warrant the end of the world as we know it.

        Liked by 2 people

        • Oh, I have no doubt that you are right about the churches. Heck, even some of the evangelical churches must be damn wealthy, for their leaders own mansions, private planes, yachts, and more.

          Be careful what you wish for, my friend, for one of my nightmares is a nation-wide power failure that would last for months … or longer. EMPs are a very real thing, and Russia & others have had the capability for years to knock out much of the United States’ power grid. Yes, it would be disastrous and likely lead to the gun nuts in this nation using their firepower to take what they need/want, killing those of us who don’t believe in guns. People would die of starvation, of lack of life-saving medicine, and of violence. Please, let us not wish for that. Sigh.

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      • Jill Dennison, perfect equality is only possible if everyone had a 0% level of wealth. I am happy to pay my share of taxes, however, all of the bites that various taxes and fees take from our paychecks seems to be a little excessive. Just my thoughts.

        Liked by 1 person

    • Hello, ragnarsbhut. I have no thoughts on the estate tax, because, not being American, I have no idea what it is. But I can presume from your other comments it is quite high, and objectionable to you.
      But there is a problem with the way you see people looking for handouts–what do you call people who sue others for millions of dollars over some little impropriety, like blaming McDonald’s for being responsible for some person’s stupidity. There are hand-out seeking people out there, I will not say there are not. But they are in the minority. There are literally millions of Americans (Canadians, Brits, Aussies, and especially citizens of shithole countries) who live below the poverty lines. Apparently you think they don’t deserve better lives. I DO!

      Liked by 1 person

          • Rawgod, I only deal in hot sauce and peppers on my blog. I will not allow comments on other topics. Mainly because the other topics are not relevant to my blog and I will also not tolerate profanity on my blog. If comments are clean, they get approved, if not, then I will delete them.

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            • Ah, we are back to the ugly Ragnar, I thought as much. I write a blog on spirituality, but people can make whatever comments they want on whatever subject they are inspired to write about. I have only ever deleted one comment, which was written in a foreign language which when I tried to translate it, it made no sense at all.
              It shows the difference between us. I have no need to control my world. You obviously do.

              Like

  5. Jill, well done. There have actually been four previous studies that reached the same conclusion. The last one I am aware of was done by the nonpartisan Congressional Research Service, conpleted in 2012. The New York Times reported that Senator Mitch McConnell had the report buried prior to the 2012 election, so as not to harm Mitt Romney’s chances. McConnell denies this.

    The state of Kansas tried the trickle down approach, but it failed miserably almost bankrupting the state. They might have benefitted from said buried report.

    I am glad you included the Horse and Sparrow reference as it is more vivid. I was listening to an economist on NPR who noted the COVID stimulus went too much to public traded companies who did not need the money and far too little to small businesses. So, the stock market success masks the troubles of small businesses and the many people employed by them. We would have been better served if small businesses were given funds to keep their payrolls. Keith

    Liked by 3 people

    • Thanks Keith! I am continually amazed by how easy it is for the Republicans to fool the masses. They tell them something, and it suddenly becomes the truth, the reality in the minds of nearly half the people in this country. Has our education system so failed that people no longer question what they are told, no longer think for themselves? I do recall McConnell suppressing that report, though I don’t think I knew it was in order to help Mitt Romney.

      Yes, I thought the horse and sparrow reference was very telling and should make it clear as a bell to any who hear it. I knew that much of that first stimulus went to all the wrong people, some even to Trump’s own businesses. I doubt this next one will be any different. The stock market no longer reflects the health of the nation, for it is manipulated by those with a vested interest. A better indicator of our economic well-being is the poverty rate and the unemployment rate. Or, right now, the best measure of the success of our government is the death toll from the pandemic … 3,000+ per day. Remember when we were horrified to have 1,000 in a day? Sigh.

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      • Jill, what has been missing is governance over the bailout fund process. During Katrina, there was detailed governance to make sure people were not gaming the system. Here some companies got money that did not need it. Keith

        Liked by 1 person

  6. Brilliant post. Thank you. Most of us have known at a personal level that trickle down economics doesn’t work. It’s nice to finally have some real data that proves it. Whether any of the Western democracies will have the courage to turn this Titanic around is yet to be seen. I hope so, I really do.

    Wishing you a safe Christmas and a better New Year, hugs from Downunder.

    Liked by 3 people

    • Thank you, Andrea! Yes, I’ve known for years it was all just another ploy to get the masses to agree to such things as rolling back regulations on corporations and reducing corporate tax rates. Thing is, the masses are perfectly willing to buy into the theory of ‘trickle down economics’, for they know no better and aren’t particularly eager to educate themselves. Even though they are losing their medical insurance, and even though the minimum wage has remained the same for 13 years, while the cost of living has steadily increased, these people still believe the b.s. they are fed by the republican politicians. Sigh.

      A safe and Merry Christmas to you, also, my friend. Next year has to be better … doesn’t it?

      Liked by 1 person

      • We have an awful lot of people doing the exact same thing here, Jill, and I’ve never understood /why/. Why go against your own self-interest? I mean, everybody can be fooled once or twice, but to be fooled consistently over decades?

        Yes, the propaganda is good, and yes, education does play a part, but not all Republicans are poor or poorly educated. Ditto the so-called Liberals here. In fact, some of the smartest, wealthiest people hold the same views.

        It hurts my brain, but I think the answer lies in the idea of self. If ‘you’ are similar to me in some core way, ‘you’ are part of ‘us’. If not, you’re the ‘other’ and even if logic dictates that what you say is right, ‘I’ won’t listen because you’re not like me and therefore I don’t trust you.

        I think some very canny manipulators have been working on that basic human fact to drive the wedge between ‘us’ and ‘them’ further and further until now, it feels as if we’re two completely different species.

        I’d like to think that next year will be better, but covid has shone a harsh spotlight on who we are as a species. And it ain’t pretty.

        Liked by 1 person

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