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So Trickle Down Economics Really Works Best?
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| wolverine16 |
So we have posts like those from Denny Shibby (who has never come back to prove any of his "I saw someone say it on Fox News" points) and Capitalizt, both suggesting how easy upward mobility is and that liberals actually want to hurt future poor generations by providing safety nets, because big business will make life so much better for them if only we wouldn't tax them (even though they don't pay their fair share as it is (and by fair share I'm refering to the fact that they pay less than even what people in lower tax brackets pay)). I thought I'd post a couple articles noting that the actual data & what's really happening show that this is untrue. I couldn't find the exact quote, but I remember very well an assertion made that more people in poverty probably are in the top tax bracket 10 years later than are still poor. Oh, really?:
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It's not so easy to move up in U.S., economists find
May 15, 2005
BY DAVID WESSEL
The notion that the United States is a special place where any child can grow up to be president, a meritocracy where smarts and ambition matter more than parenthood and class, dates to Benjamin Franklin. The 15th child of a candle-and-soap maker, Franklin started out as a penniless printer's apprentice and rose to wealth so great that he retired to a life of politics and diplomacy at 42.
The promise that a child born in poverty isn't trapped there remains a staple of America's self-portrait. President Bush, though a riches-to-riches story himself, revels in the humble origins of some in his Cabinet. He notes that his Cuban-born commerce secretary's first job for Kellogg Corp. was driving a truck; his last was chief executive.
Stuck at '70s pace
But the reality of mobility in America is more complicated than the myth. As the gap between rich and poor has widened since 1970, the odds that a child born in poverty will climb to wealth -- or a rich child will fall into the middle class -- remain stuck. Despite the spread of affirmative action, the expansion of community colleges and other social change designed to give people of all classes a shot at success, Americans are no more or less likely to rise above, or fall below, their parents' economic class than they were 35 years ago.
Although Americans still think of their land as a place of exceptional opportunity, evidence suggests otherwise. And scholars have, in the last decade, come to see America as a less-mobile society than they once thought.
Slower movement charted
As recently as the late 1980s, economists argued that not much advantage passed from parent to child, perhaps only 20 percent. By that measure, a rich man's grandchild would have barely any edge over a poor man's grandchild.
''Almost all the earnings advantages or disadvantages of ancestors are wiped out in three generations,'' wrote Gary Becker, the University of Chicago economist and Nobel laureate, in 1986. ''Poverty would not seem to be a 'culture' that persists for several generations.''
But in the last 10 years, better data and more number-crunching have led economists and sociologists to a new consensus: The escalators of mobility move much more slowly. A substantial body of research finds that at least 45 percent of parents' advantage in income is passed along to their children, and perhaps as much as 60 percent. With the higher estimate, it's not only how much money your parents have that matters -- even your great-great grandfather's wealth might give you a noticeable edge today.
U.S., Britain 'least mobile'
Economists and sociologists say that in recent decades, the typical child starting out in poverty in continental Europe has had a better chance at prosperity. Miles Corak, an economist for Canada's national statistical agency, tweaked dozens of studies of the United States, Canada and European countries to make them comparable.
''The U.S. and Britain appear to stand out as the least-mobile societies among the rich countries studied,'' he finds. France and Germany are somewhat more mobile than the U.S.; Canada and the Nordic countries are much more so.
Even the U. of C.'s Becker is changing his mind: ''I do believe that it's still true if you come from a modest background, it's easier to move ahead in the U.S. than elsewhere, but the more data we get that doesn't show that, the more we have to accept the conclusions.''
Wall Street Journal
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Egalitarian spirit vanishing in Israel
May 15, 2005
BY AMY TEIBEL
JERUSALEM -- The fissures in Israeli society have traditionally been defined by religion, ethnicity and how to make peace with the Arabs. Now economics are threatening to create an even wider divide.
New free-market policies have swollen the underclass, and for many who remember the egalitarian ethos on which the Jewish state was founded, the tonic of welfare cuts, mass layoffs and conspicuous consumption is hard to swallow.
The government's National Insurance Institute, which handles welfare payments, reported recently that shrinking social spending, coupled with tax cuts that have primarily benefitted the wealthy, are widening Israel's social gap. Between 2002 and 2004, social security payments sank 16 percent in inflation-adjusted terms, fueled mostly by a 40 percent drop in allowances paid to families with children and a 43 percent decline in unemployment benefits.
But Finance Minister Benjamin Netanyahu is sticking with his policies of the last two years, saying market economies are ''the greatest tool for social justice.''
''Things have gotten tougher since Bibi came to power,'' said one woman, using Netanyahu's nickname.
Marcel Seri-Levy, a divorced 33-year-old mother of three, says her family lives on $380 a month from alimony payments and $330 from welfare. The latter amount is nearly half of what the family had been receiving. Seri-Levy has also lost other benefits, including discounts at nursery schools and on medical co-payments.
Children in poverty
In 1998, 17.5 percent of all Israeli families were living below the poverty line -- defined as $400 a month for an individual and $1,000 for a family of four, according to National Insurance Institute statistics in November. Five years later -- the latest figures available -- the proportion was up to 19.3 percent.
In 2003, 30.8 percent of all children in Israel were living in poverty, up from 22.8 percent five years earlier.
Netanyahu looks at these bleak statistics against the backdrop of an economy whose state was dire when he inherited it two years ago.
Under Netanyahu, the economy has indeed rebounded, growing 4.3 percent in 2004. But although the business community is thrilled with his policies, ordinary Israelis are uneasy.
Netanyahu's approach caps a slow-moving revolution away from the egalitarian community the country's founders aspired to.
Today, fancy homes are no longer isolated to tiny enclaves. Israelis dine at fancy restaurants and drive expensive cars, and marinas burst with yachts. Bank presidents earn more than $1 million a year, and technology has produced a new economic aristocracy.
Elderly face difficulty
Under Netanyahu, even mass layoffs -- a notion that once couldn't even be broached because unions were so strong -- have become part of the Israeli experience. Most prominently, 4,500 teachers recently received dismissal notices.
Lines at soup kitchens have grown longer, and as the aged population grows, more and more elderly are forced to decide whether to spend small incomes on food or on medication.
Traditionally, poverty has tended to be associated with Israeli Arabs and immigrants from Middle Eastern and North African countries, said Barbara Epstein, director of the not-for-profit Community Advocacy program in Jerusalem. But as the population ages, the circle has widened.
A recent study by two researchers in Jerusalem showed 40 percent of all Holocaust survivors in Israel live below or just above the poverty line. Women who head nearly all single-parent families also figure heavily in the poverty figures.
According to Epstein, the statistics show that Netanyahu isn't on the right track.
''His theory of the way the market economy works is that if you give money to rich people, it'll trickle down to poor people. They'll make jobs, and that will make the economy move,'' she said. ''And that hasn't proven itself to be right.''
AP
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Donde esta Denny? |
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| Capitalizt |
Can the confiscation of wealth benefit those it is doled out to? This is a big 'DUH!' for everyone here. Of course socialist policies can lift people out of poverty, and it may make you feel great to promote them...but these things always come at a cost. There are no "solutions" in politics...only tradeoffs. You can either have a free-market society with a rising general prosperity (unevenly distributed)...or you can have a welfare state, with much more equality between the classes, but a lower general standard of living. There is a tradeoff involved. You choose the latter; I choose the former. I see socialism as the "equal" and "fair" distribution of misery among everyone, and free market capitalism as the only (theoretical) system that gives people a chance to reach their true potential.
I notice that you seem believe it is acceptable to make "the rich" suffer in the name of the common good...You believe we can extract the wealth they have created through voluntary exchange in the free market, and put it to better use via the bureaucrats in government. I simply disagree. Not only do I see the idea as immoral, but your goal itself as impossible.
I believe as fallible human beings, the best we can do is to leave people FREE in their own pursuits, and this means keeping government force/coercion/interference to an absolute minimum in all areas of life, including the economy. Left wing policies require dramatic intrusions into the economy, including the confiscation of wealth from those engaged in productive activities. When you cap/tax profits or income to fund your social programs for the poor/unemployed, not only do you stagnate the economy and stifle innovation, but you are also hurting those who COULD BE EMPLOYING the very people you claim to care so much about!!
Now I've never claimed you were *deliberately* trying to hurt society by promoting socialist ideas. Your intentions may be very noble, but they are absolutely irrelevant in the grand scheme of things.
I still maintain that if you truly care about humanity, and you really want people to work and prosper, the best way to do it is to dramatically reduce the government BURDEN people face for working and succeeding.
I think the tax burden on workers should be reduced to a bare minimum, and employers should face no tax burden at all.
I pulled this from my dictionary:
Tax. n.
2. A burdensome or excessive demand; a strain.
Now wolverine, as a true liberal...If you really hate poverty, why would you punish those who are PREVENTING it with any tax over 0.00%?
Why place any burden on those who are already helping society and keeping people OFF the dole? |
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| Shakka |
| quote: | Originally posted by Capitalizt
I see socialism as the "equal" and "fair" distribution of misery among everyone, and free market capitalism as the only (theoretical) system that gives people a chance to reach their true potential. |
Couldn't have said it better myself, so I won't. |
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| Dupz |
In Australia we have similar debates between free-market and "socialist" ideologies. Such ideologies are so different from one another, yet so similar. Both have the intention of making society better off, but the difference is the way in which they go about it.
Socialist style economic arguments, in my opinion anyway, are focused on addressing short term problems and offer short term solutions. (ie. lets tax people to pay for poverty alleviation)
Free-market economics, on the other hand, focuses on the long run solution to problems while often ignoring transitional effects in the short run. (ie. lets eliminate poverty by removing artificial and restrictive policies)
As Capitalizt just mentioned, you cant have the benefits of both... there is a trade-off. If you take a socialist view on poverty alleviation you eliminate your ability to gain the longrun benefits of a free-market economists view. If you take the free-market view then you run the chance of creating even more poverty in the shortrun, while the economy is in its transitional period, but have the longrun benefits to reap in the decades/centuries to come.
Now, lets come to the agreement that neither ideology is perfect and that both have their strengths and weaknesses.
Personally, I dont see why we should continue with our short sighted view on economics and that we should take the punch of the transitional period on the chin. In the end we're only cheating ourselves.
My opinion isnt without bias though. I mean, I have graduated from university, and my family has made all the money they need to ensure their middle-class existence isnt in jeopardy. The future prospects for myself and my family are quite good, and we'd easily be able to make it through any transitional period radical economists could throw at us. Perhaps I'd have a different view if it were my family's arse that's on the line...
p.s. Oh, and anyone who suggests that western countries dont offer ample opportunity for rubble-to-riches stories is plain blind. If a poor, black, fat, and ugly african-american woman can make it (i'm talking about Oprah if you havent guessed) then any and his dog can.. there is no excuse. |
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| Subey |
| quote: | Originally posted by Capitalizt
I see socialism as the "equal" and "fair" distribution of misery among everyone, and free market capitalism as the only (theoretical) system that gives people a chance to reach their true potential. |
| quote: | Originally posted by Shakka
Couldn't have said it better myself, so I won't. |
With 5% of the people in the lower classes making it to middle class obviously they have little opportunity to reach their full potential.
Thus I can't see how anyone would equate capitalism as being a system that has any interest in fostering potential.
To me one of the great western lies, is that the individual who rises from the bottom to the top somehow illustrates that everyone has that opportunity, and therefore being at the bottom ain't so bad, its just a question of hard work and dedication.
That's as logical as saying that if you play baseball you'll naturally one day play in the Majors. Its just not going to happen for the vast majority, and their reality supercedes the few exceptions.
I can't help but think of an episode of 60 minutes I many many many many many years ago in which they were interviewing a gang member of I believe LA's The Crips who said something along the lines of "joining a gang here is as natural as going to college in Long Island" |
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| Shakka |
| quote: | Originally posted by Subey
With 5% of the people in the lower classes making it to middle class obviously they have little opportunity to reach their full potential. |
With this sentence alone you have made the assumption that every single person is born with the inate potential to be the next Bill Gates (Even someone with severe mental retardation). It just isn't so. Everyone has different strengths and weaknesses which they will actualize differently during their life.
A person may never get past the level of a lowly janitor, however for them, that may be the best that their genetic makeup offers them, thus they may be reaching their full potential(and they might very well be damn happy with their accomplishment), it's just that you want to set the bar artifically higher for them. |
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| wolverine16 |
| quote: | Originally posted by Capitalizt
Now wolverine, as a true liberal...If you really hate poverty, why would you punish those who are PREVENTING it with any tax over 0.00%?
Why place any burden on those who are already helping society and keeping people OFF the dole? |
Did you read what I posted, particularly the 2nd article? People are WORSE off in Israel with the unravelling of such programs and the free market isn't addressing such problems and certainly doesn't provide any sort of safety net. I'm sorry, but that's absolutely laughable to suggest that people would be better off by taxing the richest people & corporations at 0% to help out everyone else. That's just placing an enormous burden on the middle class to pay for every public expenditure in the country, including defense spending. P.S. if you look at the 1st link I posted, at least in terms of federal taxes, a lot of corporations are already paying 0%. ;) On the notion that I want to make the rich "suffer": The reality is that there are real expenditures that need to be paid through taxes, so if the money has to come from somewhere, I'd rather the rich "suffer" (who will continue to be rich) rather than your attempts to make the middle class suffer, because that's what will happen in reality if you install a flat tax or completely eliminate taxes on the most wealthy. (Also a few of my initial points were directed to Denny Shibby, not you, so I apologize they were lumped together to make it seem all were directed to the same person).
In General: I'm not advocating full socialism, but rather social safety nets as good policy within a capitalist economic structure in comparison to the myth that full privatization will solve all ills better. Education I do think should be universal, as the U.S. is certainly falling behind in terms of upward mobility due to better foreign investment in that area.
I'm not following this theory that trickle down economics is better long term, because I can't think of a single example of a privatized economy in history where there was 100% employment, universal education, etc. Surely the argument isn't that those without such things are simply just lazy? I would certainly agree that socialism is an economic model with many flaws, but at the same time if the free market system is not perfect, what's wrong with trying to address such flaws, as they will not go away by simply expanding the structure? Also, it seems in the quest to glorify the supply side of economics, the demand side gets completely ignored. The more money workers have to spend from policies like ensuring a minimum wage, the more demand & purchasing power there is for products to be bought. If balance isn't the way to go, let's please see some real life examples of economies where total free markets have provided better living conditions for society than having some safety nets in place while encouraging private enterprise. (The U.K. being a 3rd world country until Thatcher came around is not a valid example :) ). |
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| Subey |
| quote: | Originally posted by Shakka
With this sentence alone you have made the assumption that every single person is born with the inate potential to be the next Bill Gates (Even someone with severe mental retardation). It just isn't so. Everyone has different strengths and weaknesses which they will actualize differently during their life.
A person may never get past the level of a lowly janitor, however for them, that may be the best that their genetic makeup offers them, thus they may be reaching their full potential(and they might very well be damn happy with their accomplishment), it's just that you want to set the bar artifically higher for them. |
You've jumped off my statement and landed in a rather unusual place. I will clarify, as the assumptions you've made about my statement are wrong.
My assumption is that the DNA pool present in the lower classes is identical to the gene pool in the upper classes. And as such, the limiting factor to their advancement is their socio-economic status.
Obviously a mentally handicapped person who lives in a slum isn't going to become a rocket scientist. Nor would Bill Gates son become a rocket scientist despite his father's billions if he were mentally handicapped.
That's what I was illustrating with the Gang member, within his environment, being an intelligent person, it was *natural* for him to become a gang member when he grew up. In contrast an idividual of parallel intelligence growing up in long island, who sees everyone around him put on a suit and tie in the morning, its natural for him to go to college. |
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| Capitalizt |
wolverine, I see lots of opinions and anecdotal evidence from a few interviews in that second article but not many facts. Either way, I did some digging and found this info:
In 2005 Israel's corporate income tax rate is 34%.
Individual income tax rates in 2005 are 10%-49%.
http://www.worldwide-tax.com/israel/israel_tax.asp
They also pay a flat 17% VAT tax on virtually all items sold in the country.
http://www.asiatradehub.com/israel/tax.asp#B
Bear in mind these are only the FEDERAL taxes paid by Israelis. They must also pay income taxes for local and municipal governments, in addition to property and sales taxes. All told, the poorest Israelis pay more than 30% of their income to the state. The middle class pay 40-50%, and the most successful in Israeli society can easily hit the 80% level when the government is through with them.
I would hardly consider this a free market paradise, and wouldn't be surprised at all to see their economy slip into recession/depression in the coming years, even if the government continues to "give money" in the author's words (i.e. take LESS) from the people. |
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| wolverine16 |
| quote: | Originally posted by Subey
You've jumped off my statement and landed in a rather unusual place. I will clarify, as the assumptions you've made about my statement are wrong.
My assumption is that the DNA pool present in the lower classes is identical to the gene pool in the upper classes. And as such, the limiting factor to their advancement is their socio-economic status.
Obviously a mentally handicapped person who lives in a slum isn't going to become a rocket scientist. Nor would Bill Gates son become a rocket scientist despite his father's billions if he were mentally handicapped.
That's what I was illustrating with the Gang member, within his environment, being an intelligent person, it was *natural* for him to become a gang member when he grew up. In contrast an idividual of parallel intelligence growing up in long island, who sees everyone around him put on a suit and tie in the morning, its natural for him to go to college. |
I've gotta go with you more on this, though I think the 5% number is a bit too conservative. Poor/high crime neighborhoods certainly have more to do with social & economic disadvantages, rather than the genetic inferiority of the people who live there. If you switched a child born in Compton, CA and one from Beverly Hills after birth, I think the former would be far more likely to have a better life.
Certainly some people are better in one area than another and certain people are gifted, but just about everyone is born with the potential to become more than a janitor. If a person gets an education where they barely have access to a computer though, they're never going to have the opportunity to become Bill Gates even if they do have the same gifts. That's why greater access to education is important, because a lot of potential doctors, entrepreneurs, professors, etc. are not given the resources to become their best. |
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| wolverine16 |
| quote: | Originally posted by Capitalizt
wolverine, I see lots of opinions and anecdotal evidence from a few interviews in that second article but not many facts. Either way, I did some digging and found this info:
In 2005 Israel's corporate income tax rate is 34%.
Individual income tax rates in 2005 are 10%-49%.
http://www.worldwide-tax.com/israel/israel_tax.asp
They also pay a flat 17% VAT tax on virtually all items sold in the country.
http://www.asiatradehub.com/israel/tax.asp#B
Bear in mind these are only the FEDERAL taxes paid by Israelis. They must also pay income taxes for local and municipal governments, in addition to property and sales taxes. All told, the poorest Israelis pay more than 30% of their income to the state. The middle class pay 40-50%, and the most successful in Israeli society can easily hit the 80% level when the government is through with them.
I would hardly consider this a free market paradise, and wouldn't be surprised at all to see their economy slip into recession/depression in the coming years, even if the government continues to "give money" in the author's words (i.e. take LESS) from the people. |
The article stated that it has traditionally been highly taxed, so they're taking into account that they're starting from a greater rate as part of their story. Surely Sharon & Netanyahu are decreasing that, aren't they (which is coming from cutting social programs rather than from their main public expenditure: defense spending)? The statistic on the growing poverty rate as a result from decreasing their safety nets is a pretty hard fact. Still waiting to see evidence that shows that having no safety nets provides better for the greater welfare... |
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