Economics Online Tutor
|Policies in Washington are redistributing
wealth by giving it to those at the very top,
at the expense of everybody else
Trickle-down economics does not work!
Those at the top have always earned more than everybody else. That is how a market economy works.
The economy grows, and everybody gains.
That statement: the economy grows, everybody gains - it used to be true. Statistics from the actual
performance of the economy proved it. But it is no longer true. Statistics also prove that. The change is
very pronounced, and can be traced directly to specific policy changes in Washington.
These policy changes have created a situation in which income and wealth trickle up, not down. These
policies include a much less progressive income tax, and deregulation.
The economy is "out of whack" as a result of these policies. Reversing some of these policies in order to
help the economy will do nothing more than restore a balance that existed prior to the implementation of
these policies. It will NOT take money away from those who earn it in order to give it to free-loaders; it will
do just the opposite. It will NOT cause the "rich" to pay a larger share of taxes, or create larger deficits; it
will actually broaden the tax base. It will NOT undermine free-market economics; it will take away some of
the causes of market failure and restore the power of the "invisible hand" of the market to create a better
economy. It will NOT create a socialist society; it will only return the economy to a previous form.
The "conservative" answer to the problems of the economy is to double-down on the policies that have
caused the problems in the first place. It will not work, it will only make the problems worse.
Here are some charts that put this information into visible form. You can see the results of these policies
for yourself. These charts have been going around the internet, and are sourced. I have only copied the
work of others.
These three charts all show the same thing. I
included all of them in order to show that many
different versions of this information is circulating
around the internet.
These have been sourced to the CBO. Actually,
many different studies have shown the same
results. The government study made news
because it matched what several private studies
had already shown. I personally like this next one,
because it shows the trends dating back to well
before the introduction of "trickle-down
economics". Notice that those at the top gained
more than everybody else prior to 1981; but the
policies since 1981 have helped ONLY those at the
top. Nothing has "trickled down".
The chart on the right shows the relationship between
corporate profits and employee compensation since 2001.
The blue line represents corporate profits and the red line
represents employee compensation. By definition, the
divergence between these lines means that workers are
NOT being compensated according to productivity. The idea
that workers will be compensated according to productivity
is a necessary assumption for classical economic theories
(think Adam Smith and Ayn Rand) to work. They do not.
The next two charts show the income gains by quintile
since the implementation of "trickle-down" economic
policies. The first compares 1979 with 2007 (before the
Great Recession), and shows that only the top 20% have
gained (with the top 1% receiving the bulk of this); everybody
else has lost real income. Notice that this is after transfer
payments and federal taxes - the numbers have already
been adjusted for welfare etc.
The second chart shows the same trend, but uses total
wealth instead of income, and focuses on the years
So much attention has been focused on the top 1%, and what tax rates should apply to this group. Should their tax rates be lowered
to spur job growth, as conservatives suggest? Or should they be raised to fix the income and wealth disparities of the past 30
years, as progressives suggest? If you create a tax that applies only to the top 1%, who would qualify for such a "millionaire's tax"?
The chart on the left shows the income cut-off point that will put you in the top 1%. The chart on the right shows the historical
record between the top income tax bracket and job creation.