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Monday
Jun132011

Trickle Up Economics

Are you tired of Reagan and Bush era trickle down economics? Even with a democrat in the White House, we can’t seem to get away from it. Has that trickle dried up for you? Yeah, I thought so. How about we try trickling up for a change?

The big questions are: why anyone ever thought trickling down could work, and why do we keep doing it? We’ve stood by and watched as the rich get richer and the stock market rebounds nearly back to where it once was while the middle class continues to lose ground and the realm of the poor gets larger and larger with each passing year.

Trickle down economics is just reverse Robin Hood theft. Let’s turn it around. Let’s put Robin back in charge and income taxes to where they were in the Clinton era.

How much would that gain? A lot. 2010 personal income tax revenues were approximately 1.2 trillion dollars.

That’s at today's 14% effective tax rate, a rate that has never been lower. Ten years ago the effective tax rate was about 18%. Do the math. In 2010 the feds would have collected an additional 340 billion dollars, mostly from higher income taxpayers who could afford it.

Now, let’s say we took that 340 billion and created 10 million entry-level jobs at $34,000 each. Poof, the unemployment rate drops back to where it should be, there are suddenly an additional 10 million consumers, nearly all the money they make gets spent right here in the U.S., which drives up corporate revenue and results in higher stock prices, thereby adding to the wealth of the already wealthy. That’s trickle up economics.

Okay, before you laugh at my idea, I do recognize it’s too simplistic. Nevertheless, it’s worth considering in principle. And for all you conservative thinkers, trust me, taking a few bucks out of the pockets of the top 10% wealthiest Americans will not stop them from investing what’s left. Even Warren Buffett has begged for tax increases.

But why should we do this? The answer, it seems to me, is that we have to adjust to a new global economic reality. The alternative would be to close our borders, turning our backs on free trade and free markets. Bad idea all around, and an eventuality no one should want.

Over the past few years we have concentrated our worries on the slumping housing market and corresponding slump in construction jobs. And it’s true that the loss of those 1.2 million jobs over the past 10 years has caused hardship for a lot of families, but construction jobs are just a small part of the overall labor picture. My guess is the numbers will surprise you as much as they did me. My main source is the U.S. Department of Labor Statistics.

The first number that got me was overall job loss from 2002 till today. There isn’t any. In fact, we added 227,000 jobs. Of course, over the past 10 years we added about 20 million new potential workers (the increase in those young people over 18), and though we’ve subtracted nearly 10 million workers at the other end of the age scale (those over 65), that still leaves us short at least 10 million jobs.

Okay, so it still sucks. We need to add jobs for a growing population, but the main point I want to make is where we gained and lost jobs, not how it averages out. Here are the rough numbers. In addition to losing 1.2 million construction jobs, we lost 3.8 million in manufacturing. My guess is that a lot of that loss is due to outsourcing.

So, where did we gain jobs? Services and government. About 4.4 million in services and 0.7 million in government. And before someone gets his or her knickers in a twist, only 15% of the government adds were federal. 15% were state and 70% local government.

Yes, you government-is-the-problem conservatives, most of those jobs are right there in your communities. They’re your neighbors.

Good government and the services we all want cost money. Those jobs are not some big funnel sucking our wealth down the drain.

Add to those the 4.4 million jobs in services, and it seems our unemployment shortfall could solve itself in time as the national economy adjusts to replace a manufacturing bias with service, both public and private. But a quick look at where the service job increases occurred paint a different picture. Let’s start with what you’d expect, 3.2 million new jobs in health care and 0.6 million in education, noting that these are not jobs that can be outsourced easily.

Add to those 1 million in business and professional services and 1.2 million in leisure and hospitality and you have 5 million new jobs. What’s worrisome to me is to see a 1 million job loss in information and financial services (more offshore job displacement, I fear). And what happens when the business and professional services begin drifting offshore?

It’s the BIG squeeze for the working class and middle class. Paychecks shrinking, both in size and number, good jobs going elsewhere (or threatened to go elsewhere if the unions don’t bend to management demands), and no end in sight. What’s worse is that federal funding for states, and state funding for local municipalities, are on the verge of shrinking. Not many layoffs yet, only 0.3 million government jobs lost nationally so far last year. But that leaves millions of government jobs at risk.

Returning to my trickle up idea, I believe we need to stop being selfish and shortsighted. Even if we hate the idea, let’s agree to raise taxes and aim that money at job markets which either can’t be sent offshore or at least wouldn’t work well there. Alternative energy is obvious, and so are construction jobs to help update our aging infrastructure, but whatever we choose to fund, we need to stop complaining taxes will cripple our economy. That’s just a load of shit and everyone knows it.

Oh, and one more thing while I’m on the subject of selfishness. If you can afford to retire, do it. Continuing to work when you don’t need to IS selfish. Find something charitable or creative to do instead. We boomers all worry that our children will not be as well off as our generation has been. Why not get out of the way so they at least have a fighting chance.

Pass the baton.


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Reader Comments (1)

I would agree with your idea if I thought I could trust our government to spend the increase in revenue in jobs. However, we both know that would not be the case. There are palms to grease: special interest groups, military contractors and the so called friendly countries we pay for the privilege of those hundreds of military bases scattered all over the world. We've robbed the SS fund and need to pay it back. We've promised a life of Riley to those who don't work and on and on. Yes, it could be fixed. But trying to elect someone to carry out those changes would be impossible.

June 3, 2014 | Unregistered CommenterJoe Hart

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