Posted by Tina Grazier
The term trickle-down has been floating around Post Scripts over the past couple of days. A few of our readers refer to it with contempt. They invoke with equal contempt what they call the failed economics of the Reagan years. But it is a myth that Reagans trickle down (supply side) economics failed. The lie was, and is, a tactic of the left to discredit the opposition; the end game was, and is, to steal the issue.
When I read the following quote from Barack Obama I knew his words were something that needed to be shared with all of you. He was defending his tax policy and his statement about spreading the wealth around. Ive kept the quote in context for clarity but I highlighted the part that is most significant, in terms of trickle-down:
Obama’s New Attack on Those Who Don’t Want Higher Taxes: Selfishness Jake Tapper ABC News
* “The point is, though, that — and its not just charity, its not just that I want to help the middle class and working people who are trying to get in the middle class — its that when we actually make sure that everybodys got a shot when young people can all go to college, when everybodys got decent health care, when everybodys got a little more money at the end of the month then guess what? Everybody starts spending that money, they decide maybe I can afford a new car, maybe I can afford a computer for my child. They can buy the products and services that businesses are selling and everybody is better off. All boats rise. Thats what happened in the 1990s, thats what we need to restore. And thats what Im gonna do as president of the United States of America. *
The main difference between Barack Obama and Ronald Reagan is that Obama (like Clinton) wants to be the hero in everyones story…Ronald Reagan believed that people should be the heroes of their own story.
For those of you interested in a little history on the subject I found a very good website that explains trickle down, or supply side economics, and the importance of low tax rates on wealth producers. Excerpts from the page clearly demonstrate that trickle down is not new nor has it been a failed policy. It has worked in both Democrat and Republican administrations.
Trickle Down Economics and Ronald Reagan, – Jim Blair
* …from Professor A. R. Whitaker: In reply to Jim Blair’s thoughtful challenge, I would like to give three-not two but three!- examples. *** The best example is President Kennedy’s tax cut in the early 1960’s. It is not fashionable or politically correct to call that trickle-down economics, but that’s what it was. It was also supply-side economics, although Herbert Stein had not yet put the term into the language. *** Investment tax credits stimulated businesses to invest (remember, they didn’t get a tax break unless they invested-or aren’t you old enough to remember? :-)) in producing what they thought we wanted. In view of the fact that they are in business to make profits, and have learned how to do it, they invested wisely, so that spending, production, and employment increased. Thus did the handout to the rich result in a benefit which trickled down to the unemployed. *** Perhaps you also remember that after a couple of years, Congress killed the goose that had laid the golden egg and eliminated this shameful welfare for the rich- that is, they eliminated the tax break, catching many businesses only a year or two into five-year expansion programs. Many top management careers were destroyed by what proved to be the poor judgement of trusting Congress. *** Moving right along, let us consider President Reagan in a similar situation in 1981. He tried the same tactic, but it was slow in working because the top managers of the 1980’s were the lower management of the 1960’s who remembered all too well what had happened to their bosses a mere 20 years earlier. It’s safe for a politician or a journalist to say that history is bunk, but when a business career lasts 40 years, it’s better not to forget. (as an example: Our youngest son had finished a tour with the Marines and was working in industrial management for Honeywell. His plant was running 24 hours a day, but they were not considering expanding because they felt Congress would soon increase taxes and they would be stuck with idle capacity). *** “The combination of a budget debt and a reduction of the government’s income seemed to be economic heresy, but Kennedy and the liberal economists saw it as a sophisticated move to increase the prodcutive power of our industrial society, which it did successfully, giving the United States in the 1960s the longest stretch of peacetime prosperity that the country had enjoyed since the boom days of the 1920s” *
* After WWI the top income tax bracket was a high 73%. But the Revenue Acts lowered it to 25% in a set of reductions starting in 1921 and completed in 1926. This was done because it was argued that high taxes were restricting economic growth. Tax revenue surged during the 1920’s from $719 million in 1921 to $1.16 billion in 1928, an increase of over 61%. This was a time of almost no inflation. *** This from Calvin Coolidge: (as taken from Jude Wanniski’s Supply Side U lesson #6, Spring 1998) *** In my book, I quoted from Andrew Mellon’s best student, President Calvin Coolidge, who clearly helped his pupil write his February 12, 1924 speech to the National Republican Club in New York City. It appeared in Mellon’s book of the same year, Taxation, the People’s Business, which is a terrific collection of essays on taxation that is still available in better libraries, but which appears to be out of print. *** The proposed bill maintains the fixed policy of rates graduated in proportion to ability to pay. The policy has received almost universal sanction. It is sustained by sound arguments based on economic, social and moral grounds. But in taxation, like everything else, it is necessary to test a theory by practical results. The first object of taxation is to secure revenue. When the taxation of large incomes is approached with that in view, the problem is to find a rate which will produce the largest returns. Experience does not show that the higher rate produces the larger revenue. Experience is all in the other way. When the surtax on incomes of $300,000 and over was but 10 percent, the revenue was about the same as when it was at 65 percent. There is no escaping the fact that when the taxation of large incomes is excessive, they tend to disappear. In 1916 there were 206 incomes of $1,000,000 or more. Then the high rate went into effect. The next year there were only 141, and in 1918, but 67. In 1919, the number declined to 65. In 1920 it fell to 33, and in 1921 it was further reduced to 21. I am not making argument with the man who believes that 55 percent ought to be taken away from the man with $1,000,000 income, or 68% from a $5,000,000 income; but when it is considered that in the effort to get these amounts we are rapidly approaching the point of getting nothing at all, it is necessary to look for a more practical method. That can be done only by a reduction of the high surtaxes when viewed solely as a revenue proposition, to about 25 percent. *** I agree perfectly with those who wish to relieve the small taxpayer by getting the largest possible contribution from the people with large incomes. But if the rates on large incomes are so high that they disappear, the small taxpayer will be left to bear the entire burden. If, on the other hand, the rates are placed where they will get the most revenue from large incomes, then the small taxpayer will be relieved. The experience of the Treasury Department and the opinion of the best experts place the rate which will collect most from the people of great wealth, thus giving the largest relief to people of moderate wealth, at not over 25%. *
There are four things the rich can do with money besides literally burning or eating it: 1. They can spend it, in which case they are contributing to the means by which others make money and have jobs. 2. They can invest or save it, in which case businesses grow and expand to create more jobs or loans from savings can be made to others who create more jobs. Loans for buyers of homes and cars are also possible because the wealthier among us save and invest. 3. They can donate to charity, invest in hospitals, universities and the arts. 4. They can stuff their millions in the mattresses and keep it all to themselves…this is usually done only in movies and books.
So you see, money always trickles down to the lower tiers of society. In a growing and thriving economy all boats do indeed float.
Barack Obama understands trickle down. Barack Obama is a millionaire who lives in a home valued at well over a million and a half dollars. But Barack Obama also has close relatives, a half brother and an aunt, who are living in poverty!. We can apparently take Obama at his word. He does believe very strongly that people like his aunt should be uplifted by strangers through the tax system rather than through their own efforts and the efforts of family. If he didnt he would have let some of his own wealth trickle down.
Barack Obama had a few more words today, “John McCain and Sarah Palin they call this socialistic. You know I dont know when, when they decided they wanted to make a virtue out of selfishness.”
Hmmm…I think Barack Obama could stand to take a good long look in the mirror when it comes to selfishness but in any case, there’s no mistaking it…he does get trickle down he just wants control over how it trickles.