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20 year study of global wealth demolishes the myth of ‘trickle-down’

businessinsider.com

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Re: 20 year study of global wealth demolishes the myth of ‘trickle-down’

#41

Post by esja »

q1w2 wrote: post #27
esja wrote: post #16

Earlier quoted context omitted.

It’s not a straw man at all. The Fed explicitly justifies QE and the rest of their monetary insanity on the basis of the “wealth effect”. They believe asset price rises will create a feeling of wealth which will generate additional spending. They know that these asset price prices disproportionately benefit a wealthy minority. This is trickle-down economics.

This is your opinion. The Fed never "explicitly" said QE was for "tricke-down". You are equating the "wealth-effect" with "trickle down" - they are not the same. The Fed described the wealth effect of stable home prices because people, at the time, were re-financing their homes and taking home-equity loans, which created spending. Another "wealth-effect" are the stimulus checks. Are you suggesting those too are "tric…

Philosophically it’s the exact same thing.

It is a mathematical certainty that deliberately raising asset prices gives much more money to the rich than to the general public (many of whom get nothing or indeed go backwards by taking on massive debt to keep up).

It’s no different to a massive tax break or any other way of giving wealthy people loads of money in the hope that some of it “trickles down”. And it fails to boost the real economy for the same reason - Bezos can only get so many haircuts, read so many books, eat so many meals.

Re: 20 year study of global wealth demolishes the myth of ‘trickle-down’

#42

Post by [deleted] »

codegrappler wrote: post #2

I guess I’m not surprised that a bunch of folks who have made a career out of advising politicians on income inequality….discovered income inequality in their study. The two questions in my mind are: 1. Should we trust the government to spend the money more wisely than the folks who earned it? Or said another way, how do you combat the almost inevitable corruption you see with large government spending? 2. What will…

[deleted]

Re: 20 year study of global wealth demolishes the myth of ‘trickle-down’

#43

Post by ianai »

q1w2 wrote: post #34
romwell wrote: post #10

Ahh, the good old trickle-down, aka "piss in my eyes and tell me it's raining" (which is the only way trickle-down actually works). It was pure mythology from the start; there's never been any basis for it to begin with. It's a pity we even have to debunk it like that. Go figure, give a million hungry people $20 each, and see $20M return to the economy the next day as they spend it on food. Give a billionaire $20M, s…

I haven't seen a politician advocate for trickle down since the early 1980s. Why is this strawman still the target for low-effort articles?

Because it absolutely has been used by politicians and pundits since the 1980s into the present day and you’re the one spreading falsehoods.

Re: 20 year study of global wealth demolishes the myth of ‘trickle-down’

#44

Post by q1w2 »

romwell wrote: post #28
q1w2 wrote: post #4

I haven't heard a politician advocate trickle-down since the Reagan era. This seems like one of those strawman political football arguments. Also, the methodology here is a bit flawed. I think that economic data that cherry picks the start of the covid-19 pandemic is deeply flawed. 2020 will always be known as an economic outlier. It's like selecting 2008, or September 2001. These are data points that should be elimi…

>I haven't heard a politician advocate trickle-down since the Reagan era Which country are you from? Certainly not the US, are you? It's called "cutting taxes" these days, with the tax cuts being mostly applied to the ultra rich. The entire Republican party economic agenda still preaches trickle-down. If only because they are doing everything they can to prevent Reagan's trickle-down policies from being reverted. > 2…

Any tax cuts are trickle down?

So the Democrat's push to reinstate the SALT tax credit (cut) are trickle down also?

Are tax cuts in any bracket trickle down?

When the GOP raises taxes - do they implode?

Re: 20 year study of global wealth demolishes the myth of ‘trickle-down’

#45

Post by MarcellusDrum »

q1w2 wrote: post #34
romwell wrote: post #10

Ahh, the good old trickle-down, aka "piss in my eyes and tell me it's raining" (which is the only way trickle-down actually works). It was pure mythology from the start; there's never been any basis for it to begin with. It's a pity we even have to debunk it like that. Go figure, give a million hungry people $20 each, and see $20M return to the economy the next day as they spend it on food. Give a billionaire $20M, s…

I haven't seen a politician advocate for trickle down since the early 1980s. Why is this strawman still the target for low-effort articles?

Not sure about politicians, but it is still widely used by anti-tax republicans. Even if they don't explicitly refer to it as "trickle-down", they use its supposed implications as an argument.

Re: 20 year study of global wealth demolishes the myth of ‘trickle-down’

#46

Post by Emma_Goldman »

codegrappler wrote: post #2

I guess I’m not surprised that a bunch of folks who have made a career out of advising politicians on income inequality….discovered income inequality in their study. The two questions in my mind are: 1. Should we trust the government to spend the money more wisely than the folks who earned it? Or said another way, how do you combat the almost inevitable corruption you see with large government spending? 2. What will…

>'Should we trust the government to spend the money more wisely than the folks who earned it'

This is a false opposition. Taxed money does not have to be spent at the point of the state. A sovereign wealth fund could raise funds from wealth taxes and assign a share to every citizen in the country. It could then use its interest-bearing assets to pay out a dividend to all shareholders every year. It could be run by an independent but publicly supervised body - like the Norwegian wealth fund - and the money would be disbursed straight into the bank accounts of citizens.

In any case we live in democratic societies in which legislated changes to the structure and distribution of wealth would then bind politicians via the rule of law. We do not have to depend on the individual virtue of politicians. On the margin I would generally prefer states whose remit includes the public interest to spend another dollar than I would private entities ruled by financial profit.

Re: 20 year study of global wealth demolishes the myth of ‘trickle-down’

#47

Post by throw0101a »

codegrappler wrote: post #2

I guess I’m not surprised that a bunch of folks who have made a career out of advising politicians on income inequality….discovered income inequality in their study. The two questions in my mind are: 1. Should we trust the government to spend the money more wisely than the folks who earned it? Or said another way, how do you combat the almost inevitable corruption you see with large government spending? 2. What will…

> 1. Should we trust the government to spend the money more wisely than the folks who earned it? Or said another way, how do you combat the almost inevitable corruption you see with large government spending?

The folks that have a lot of money don't spend it. Out of all of Buffett's, Gates', and Bezos' fortunes how much is being spent 'productively' and how much is just sitting around collecting interest on interest. The velocity of money hasn't been doing much in recent decades, which seems to indicate it's just sitting in accounts:

* https://fred.stlouisfed.org/series/M2V

'Coïncidentally' wealth inequality has been rising in the same time period. Perhaps the link of stagnant money and a lack of activity are linked?

There's plenty of old bridges, dams, locks, transit, airports, etc, that need to be repaired and that money could be used for those upgrades providing good pay jobs.

"Bezos’s ex-wife MacKenzie Scott can’t give her billions away fast enough", and she is worth 'only' US$ 60B (21st richest person):

* https://www.thetimes.co.uk/article/bezoss-ex-wife-mackenzie-...

* https://archive.md/ZzeMI

Further, this is not (or does not have to be) an either-or situation: it's not like all the money goes to the government or stay with the wealthy. If (e.g.) 2-5% of someone's wealth over (say) $10B is taxed annually, they still have 98-95% to do whatever with.

> 2. What will incentivize people to work at insane rates if the vast majority of their income and wealth is taxed?

What motivates someone with $1B to work more? Is it really to make another $10M? Is Bezos working the hours he is because of money? Is Buffett? Musk? I think the people who get to this level work because of of intrinsic motivation rather than extrinsic rewards.

> Would I be willing to put in the long hours and sacrifices usually required to work up to a $1m+ salary if it’s taxed at a 90% rate?

Do you understand how marginal tax brackets work? When someone makes $1M + 1 dollars, the government does not take $900K in this hypothetical 90% margin rate: they take 90¢ of the last $1. The rest of the money is taxed at lower rates:

* https://www.vox.com/policy-and-politics/2019/1/7/18171975/ta...

And a 70% top tax rate isn't unheard of in the US: it's what it used to be during the 1950s and 1960s, and economic growth was just fine. 70% isn't a bad rate to start looking at:

* https://www.vox.com/policy-and-politics/2019/1/4/18168431/al...

And perhaps by having ridiculously high top tax brackets will send a signal to people that instead of send money to the top, perhaps the 'little people' should get some of it too:

* https://www.vox.com/2014/4/18/5620702/case-for-confiscatory-...

Re: 20 year study of global wealth demolishes the myth of ‘trickle-down’

#48

Post by iso1631 »

chii wrote: post #39
romwell wrote: post #10

Ahh, the good old trickle-down, aka "piss in my eyes and tell me it's raining" (which is the only way trickle-down actually works). It was pure mythology from the start; there's never been any basis for it to begin with. It's a pity we even have to debunk it like that. Go figure, give a million hungry people $20 each, and see $20M return to the economy the next day as they spend it on food. Give a billionaire $20M, s…

> give a million hungry people $20 each, and see $20M return to the economy the next day as they spend it on food. if there wasn't enough food in the first place, then the $20m just got inflated. This 20m will not go towards investment in higher food productivity when given to individuals like that. Give this 20m to "the rich", they will invest it in food creation machinery. At least there would be more food produced…

> Give this 20m to "the rich", they will invest it in food creation machinery. At least there would be more food produced after the investment.

That's the falacy. Reality is nearer they'll buy an NFT of a hamburger and then ask for another $20m

Re: 20 year study of global wealth demolishes the myth of ‘trickle-down’

#49

Post by esja »

q1w2 wrote: post #33
Simon321 wrote: post #19

Earlier quoted context omitted.

>The Fed explicitly justifies QE and the rest of their monetary insanity on the basis of the “wealth effect”. They do?? Do you have a source for this?

Not really. They used this term in the housing crisis, in reference to stabilizing home prices. They recognized that home equity loans were driving a lot of spending AT THAT TIME. It's not some general core principle. Also, the stimulus checks are also a "wealth effect" mechanism, but no one would confuse that for "trickle down". The title makes a false comparison.

That’s not the case. All the central banks and the BIS understand and use this terminology when discussing the relationship of asset prices to demand, and it’s not at all specific to the USA or even a specific time period or specific market in the USA.

Also, the stimulus checks are a fiscal measure and have absolutely nothing to do with the wealth effect induced by loose monetary policy.

Re: 20 year study of global wealth demolishes the myth of ‘trickle-down’

#50

Post by anothernewdude »

chii wrote: post #39
romwell wrote: post #10

Ahh, the good old trickle-down, aka "piss in my eyes and tell me it's raining" (which is the only way trickle-down actually works). It was pure mythology from the start; there's never been any basis for it to begin with. It's a pity we even have to debunk it like that. Go figure, give a million hungry people $20 each, and see $20M return to the economy the next day as they spend it on food. Give a billionaire $20M, s…

> give a million hungry people $20 each, and see $20M return to the economy the next day as they spend it on food. if there wasn't enough food in the first place, then the $20m just got inflated. This 20m will not go towards investment in higher food productivity when given to individuals like that. Give this 20m to "the rich", they will invest it in food creation machinery. At least there would be more food produced…

Arguably there is fixed bandwidth on investment. It's why negative interest rates are coming. There's few good places to put money.
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