Biden: Trickle-down economics "has never worked"

[AnBr]

www.axios.com/biden-trickle-down-economics-never-worked-8f211644-c751-4366-a67d-c26f61fb080c.html

[andydp]

Apr 30, 2021 2:29:09 GMT AnBr said:

www.axios.com/biden-trickle-down-economics-never-worked-8f211644-c751-4366-a67d-c26f61fb080c.html

"A blinding flash of the obvious."

[HockeyDon]

Trickle down economics has always worked exactly as intended.

[LFC]

Tinkle Down Economics has always been an integral part to the Two Santa Claus Theory and as HD said it works exactly as intended. There were people like Bruce Bartlett who believed the basic tenets but ended up being horrified at how it was implemented. As Bartlett said they went too far, the Reagan, HW, and Clinton tax hikes put things into what he felt was a proper balance (YMMV), and it should have ended there.

PS: Art Laffer should burn in hell for his part in this abomination.

[Bact PhD]

This WaPo piece (paywalled) provides something of a counter-point, at least under the current post-pandemic conditions:

www.washingtonpost.com/business/2021/06/18/luxury-boom-recovery/

The luxury travel boom is one of the clearest signs of a budding spending surge by wealthy Americans that is likely to tilt the balance of the economy even further toward the well-off and may deepen economic disparities already heightened by the global pandemic.


The spending tsunami, though good news for an economy still salving the financial wounds of the coronavirus, underscores how the wealthy can propel economic recoveries. As the rich have amassed more spending power, U.S. recoveries from recessions depend on a jump in their discretionary spending, according to data analyzed by The Washington Post. This represents a direct challenge to President Biden’s stated goals of rebuilding “our economy from the bottom up and the middle out.”


Even as unemployment falls and wages rise in the coming months, businesses across the economy will increasingly cater to the upper class, economists and business executives say. The highest-income Americans, like Williford’s cruise clients, are likely to grow their share of discretionary consumer spending that underpins U.S. economic growth, the Post analysis of federal data shows.

Already, nearly 40 percent of overall consumer spending comes from the top fifth of earners — households that earn at least $120,000 a year. By contrast, the bottom 20 percent of households account for just 9 percent of all spending, and most of that goes toward universal needs including food, housing and transportation.

This disparity is only set to deepen. Thanks to stock market gains, stimulus and a pandemic recession that largely bypassed white-collar jobs, Americans were able to save an estimated $2.5 trillion more than usual since the pandemic began, according to the Federal Reserve Bank of New York. Additionally, the wealthiest 10 percent of Americans added more than $8 trillion to their net worth, according to the Federal Reserve, as stocks and home values soared in 2020.


“Higher-income folks are accumulating a lot of savings. They will spend more going forward and that will further create an incentive for companies to cater to higher-income folks even more,” said Raj Chetty, a professor of economics at Harvard University and a leading researcher on inequality.


High-income consumer spending rebounded fully in March and is now up 11 percent above pre-covid levels, according to data from Opportunity Insights, in a potential preview of what is to come. This year, consumer spending could grow at the fastest pace since 1946, according to economists surveyed by Wolters Kluwer’s Blue Chip Economic Indicators.




The fastest-growing spending categories, so far this year, are the ones where the highest-income Americans typically dominate the market. Live entertainment is up 60 percent, amusement parks and related recreation is up 54 percent, membership clubs are up 45 percent, and hotels are up 33 percent, according to Bureau of Economic Analysis data through April.




While income and wealth inequality get a lot of attention, spending inequality is what draws the real, visible lines between the haves and have-nots. Consumer spending is almost 70 percent of the economy. What Americans buy determines their standard of living.


The dominance of the top 20 percent helps explain a defining trend of America’s economic recoveries: Growth in spending returns to full steam far faster than jobs. After a strong start to 2021, economic output measured by GDP is expected to soon recover to pre-pandemic levels. At the same time, 7.6 million jobs are still missing and many Americans don’t have enough to eat.


The outsize influence of the top 20 percent on the economy can already be seen through the proliferation of five-figure cruises, luxury retailers and vacation homes. Indeed, much of the service sector is increasingly more focused on wooing upper-class spending, because that’s where they see the growth opportunity, as income rises at the top.

[snip]

As the wealthy open their wallets, some of that money spills over to the working class by generating “wealth work” jobs. Firms looking to serve the high-end market need to hire armies of lower-wage service workers such as manicurists, fitness trainers and animal caretakers, and a smaller number of production jobs will also be created in industries such as construction.


Four areas of spending most vulnerable to the pandemic — education, hotels, recreation, and airlines and other transportation — also happen to be categories that are dominated by higher earners, according to a recent analysis by the New York Fed. The economists who conducted the analysis wrote that they “expect high-income households to drive an important part of the recovery” as spending bounces back and is driven to new heights by the hundreds of billions of dollars the wealthy saved during the pandemic.

Depending on how the rest of the year shakes out, U.S. policymakers could deepen old patterns of inequality or break the cycle completely.
Some $5 trillion in ambitious covid-era stimulus packages have shown that the government can almost single-handedly reshape the U.S. economy. Stimulus checks and jobless aid from former president Donald Trump and Biden helped the middle class weather the crisis, while boosting incomes of many at the bottom. Biden’s family and infrastructure plans could push the government’s role even further.




Sectors that depend on low-income spenders, such as groceries, rent, car insurance and gasoline, have weathered the downturn — largely because they are absolute necessities that get prioritized even during periods of economic hardship. Spending by low-income Americans nearly recovered by last summer, according to Opportunity Insights, largely because of stimulus checks and more generous unemployment aid.


But the cycle of economic recovery isn’t driven by necessities. It’s driven by discretionary spending. And increasingly, that means luxury goods.

[snip]

As more schools reopen, wealthier parents are now seeking private tutors to catch kids up on any subjects they have fallen behind on, setting up more disparities in education as many low-income students dropped out of virtual school because their Internet did not work well enough to attend classes consistently, data shows.


The rise of luxury education is another sign that, without significant changes in support for the lower and middle class, the inequality that has defined the early covid recovery could be perpetuated for generations.

My take-away? Society may be screwed.

[AnBr]

Jun 19, 2021 20:40:40 GMT Bact PhD said:

My take-away? Society may be screwed.

I used to think that the idea of a French style revolution occurring in this country was ludicrous, but fro the past few years I have started to wonder if it might not be inevitable. in the first half of the last century there was the specter of the Russian Revolution to scare the elites enough to allow at least parts of the New Deal to pass. Today's elites seem to be oblivious to a lesson that even the Romans understood. You have to leave the average man his bone. If you leave him with nothing you create a mass of people with nothing to lose.

[Bact PhD]

Jun 19, 2021 21:46:21 GMT AnBr said:

Jun 19, 2021 20:40:40 GMT Bact PhD said:

My take-away? Society may be screwed.

I used to think that the idea of a French style revolution occurring in this country was ludicrous, but fro the past few years I have started to wonder if it might not be inevitable. in the first half of the last century there was the specter of the Russian Revolution to scare the elites enough to allow at least parts of the New Deal to pass. Today's elites seem to be oblivious to a lesson that even the Romans understood. You have to leave the average man his bone. If you leave him with nothing you create a mass of people with nothing to lose.

Sadly, agreed, if not within our own lifetimes, very possibly those of our children, I suspect. Moreover, given the apparent rise of "Y'All Quaeda", such a revolution may echo Mao's Cultural Revolution in that what we consider the "professional upper middle-class" -- the physicians, lawyers, college professors, and middle managers -- are the ones who see the tumbrels first, rather than the "one percenters".

Something within the ranks of the American elites unnerved them enough to permit some economic progress for the non-elites; T. Roosevelt's "Square Deal" was before the overthrow of Tsar Nicholas. Whether it was the specter of Bolshevism or the whiffs of Fascism (no guarantee that the Supreme Leader won't turn on you at some point!), or a combination of both, is anyone's guess. I had wondered some time back, maybe the mid-'aughts, whether we were headed for a second Gilded Age; at the rate things are going, I wonder no more.

[AnBr]

Note that I said the New Deal, not the Square Deal. FDR's New Deal was after the horror in Russia. That aside, when the tumbrel wheels start to creak it will not be good for anybody.