What Is Wrong with "Trickle Down Economics"?

Oh, no, no, no. I’m not saying that they are “our jobs.” That’s why I mentioned specifically that I don’t have anything against people, no matter who or where they are, getting work. My only point was that the “job creation” that’s supposed to be happening for Americans due to “trickle-down economics” is not what it seems. And as for my post, I didn’t mention “threatening” or “Obama,” so I’m not sure what you’re on about.

And as to your point about education fixing things, well, I’ve read and seen reports that mention this, and I agree to a certain extent. Here’s the issue that hasn’t been answered for me and which causes my agreement to be limited: I read about our engineering sector, and how jobs are being lost to immigrants brought over here (and I have no problem with immigrants, none at all) who’ll take, say, an engineering job that would normally pay $90,000 per year, but the immigrant worker will do it for $45-50,000 per year. So, that ends up driving down the pay scale that someone with an advanced education can count on. Meanwhile, the cost of living in America (and sending your kids to college) isn’t going down at all.

Theoretically hiring workers at a lower rate, domestically and overseas, is supposed to bring or keep the cost of goods down for Americans, but if Americans don’t have jobs anymore or jobs that pay as much anymore because they’ve gone overseas (think of the manufacturing sector), then we can’t buy as much anyway. It’s a real problem, and I don’t see any easy solutions. That’s the problem with globalization. All economies are not equal. This was true before Mr. Obama took office, btw.

 

Yep he criticizes them for not spending enough, 1.2 trillion dollars per year is too little for him. This sort of reasoning leads to maxed out credit cards and bankruptcies. Take the company that sells $30,000 dollars and is losing market share to a company that is selling basically the same product for $25,000. Now a static analysis might suggest that since company A sells fewer cars than company B, they might raise the price of their cars from $30,000 to $40,000, and since the car still costs the same to make although there are fewer of them sold, the extra $10,000 in the price will make each unit sold more profitable. What static analysis does not take into account is that the higher price will deter still more buyers and the market share will drop even further. Company B makes up for the fact that it is earning $5,000 less on each car is sells by selling more of them. A tax is the price one pays for government, and the more efficient governments charge less in taxes, and millionaires and billionaires are highly mobile, they recognize the need for government, but they also like to shop around to find the best government and country to do business under. Entrepreneurs are no different from car buyers in this respect, they like to get a bargain, and they recognize the value of lower prices in products, will Democrats? Most Democrats I know would prefer to buy the $25,000 car over the $30,000 one, all they have to do is apply that same logic to government spending and taxation.

 

Stop comparing individuals, families, and companies to sovereign governments. They aren't the same. The financials don't work the same. They don't work the same because of two basic facts:

1. Sovereign governments control their money supply (directly or indirectly.)
2. Sovereign governments guarantee their debts through the power to tax.

Private entities like corporations and families cannot do this, therefore their borrowing power and debt implications are much more severely constrained.

 

You can complain about foreign country's lower costs, but what can you do about them, raising taxes doesn't help, educating out children better will cause them to go where the jobs are. Protectionism won't make the US a more attractive place to invest, and it will hurt our exports due to our foreign competitors retaliating. I think the only practical remedy is lowering our costs so we can compete with them, we can train up and retain higher salaries by offering a higher quality product in our workers than our competitors can. If we can get a comparative cost advantage investors will flock to our shores and produce jobs.

 

Do you think printing money creates value? Yes governments can always steal from their citizens to cover unnecessary expenditures, and printing money is a form of stealing. if the government wrote everybody a check for one million dollars, we'd all be a lot poorer, as there is no value behind all this extra currency.

A direct tax is another form of theft, though sometimes justified because there are some things government needs to do and the only way to acquire the funds to do them is through taxation.

I really think we ought to go back on the gold standard so the government can't print money, and that way it can't steal from its citizens who hold currency.

I don't believe in government simply spending money to stimulate the economy, that is not the purpose of government. By that reasoning no money is every wasted by government even if it buys junk, and I don't accept that.

 

^ (To Mars' Long worded economic problem) Uh, yeah.
Btw Mars, you didn't answer my question.

 

Do you even know the basic concept of both Micro-economics and Macro-economics?
Robert is right on this one.
Also, how would gold standard currency work in the 21th century for the U.S?

 

Well, there we go. Money is theft. Taxation is theft. Civilization is theft. I think we've established that your beliefs are totally divorced from what all credible economists believe.

 

A Ron Paul-style embrace of the gold standard(a limited commodity that can't even come close to being worth as much as the current size of the U.S. economy and thus would require a massive, devastating contraction and shrinking of the economy in order to switch over to that standard) and a denial that Keynesian economics can and often does work in times of economic downturn or crisis are not the basis for any sort of sound, sane economic policy for the United States in the 21st century.

Even if the United States had access to and bought every scrap and ounce of gold on the face of the planet we'd barely be able to reach the $2 trillion mark in USD value. Our current GDP even under present conditions is about $15 trillion. You and others who clammor for the gold standard want us to convert to gold but there simply isn't anywhere close to enough of it on the earth to allow for a one-to-one conversion of Federal Reserve notes to gold.

I'm not an economist by a longshot and I get some details wrong from time to time, but a number of months back Squiggy and one or two other posters thoughtfully crunched the numbers and demonstrated that even if the United States had possession of all of the planet's gold as well as proven reserves our economy would have to experience a dreadful contraction and become a shell of its former size in order to convert our currency to the gold standard. It won't work. It's absolutely, completely impractical. Give up on the dreams of this nation embracing it.

 

Going back to a gold standard makes no sense given our understanding of economics now.

You cannot use a finite resource whose grows unreliably as a store of value for something which grows much more quickly: that is, the supply of human labor. Ultimately, that is where our money's value comes from. By that token, it would then make the most sense to argue that the money supply should more or less keep pace with population, but expanding and contracting as inflationary and unemployment circumstances require.

 

The complaint isn't about foreign countries having lower costs; the complaint is about how globalization has thrown entire economies off, including ours. Educating our children better may cause them to go where the jobs are--IF there are jobs there and that country (and its companies) isn't intent on hiring "their own." Some people will be able to take work for an American company that has a job posting in another country, but I fear that number will not be nearly enough.

Let's hope that you're right.

 

This is where I would point out that the US should try to emulate Germany, and nurture a vast category of small-to-medium-sized businesses producing specialty goods, rather than try to compete with China on making the cheapest mundane widgets with slave labor.

 

We'll never be able to successfully compete with any nation of 1.3 billion people that uses dirt cheap or even free prison and slave labor to make popular consumer goods for mere pennies on the dollar...not unless we want to erradicate federal minimum wage and workplace safety laws and start paying well educated American college graduates a pittance per hour to put together plastic crap for the shelves of a Walmart or dollar store.

 

Because we would never win that one. They've got a billion person head-start on us. You've gotta know when to hold 'em and when to fold 'em.

 

Sometimes I think that's what we're coming to.

 

The dirty little secret is that Keynesian economics didn't even work during the Great Depression, it prolonged it in fact. That is why it lasted over a decade rather than less than four years, Because first Hoover did his own meddling and it didn't work, then FDR claimed that he wasn't meddling enough, and the public believed and elected him, Then by 1936, he said he was still trying hard, and buy 1940 he said he needed another 4 years to get the job done. All call these excuses, what he was trying just made things worse, it was World War II that got us out of the Depression and this wasn't Keynes it was Hitler! War forces governments to work efficiently otherwise they lose the way and don't survive, Germany had a knife to America's throat, which under normal circumstances isn't there when government wastes money.

I don't care what the value of gold is, if its $10,000 that's fine with me. I think the dollar should be revalued anyway, the government should issue a new currency backed by gold and perhaps exchanged for the old currency at the rate of one old dollar per new penny. cut off two zeros off the price of everything you see in the store, and that will give you an idea what the new price structure would be. how about 2 cents for a 20 oz bottle of soda instead of two dollars, is that sound better? Governments instead of spending trillions of dollars annually would now be spending only tens of billions of dollars.

Don't get distracted by the currency, the value of an economy is by the goods and services that it produces, gold is only worth what someone is willing to pay for it. A gold standard could be maintained through monetary policy targeting gold to remain fixed, a small reserve of gold would be kept to maintain the value of the dollar in relation to gold. A good exchange rate would be 1 dollar for one hundredth of a troy oz of gold, that sounds reasonable. I don't suggest we go through a period of deflation to get there, we simply issue a new currency and exchange it for the old one.

 

We could mine the asteroids for more gold and so expand the money supply.

 

We competed successfully with a nation that used slave labor in the 1860s. We don't know we can't compete with China until we really try, defeatism never works.

 

Not sure if serious.



Okay. Not.