Every time someone dares to suggest that a policy designed to benefit elites will hurt others, a clown car full of economists drives up. They pile out, tripping over each other to explain to us how we just aren't smart enough to understand economics and how actually cutting taxes for the rich (for the Nth time) will create such extraordinary economic growth that everyone's boat will float upwards as a result.
Of course, they are wrong, but next time this topic comes around I guarantee the clown car will be there and in the meantime it behooves us to stockpile ammunition.
See also: shipping all the manufacturing to China.
Yeah, but the American middle class got absolutely wrecked. Cheap sneakers don't make up for a lost job.
Also, the numbers you cite seem pretty dubious. Yes, if you want to do onshore manufacturing today, it's twice as expensive, but propagating that all the way into the cost of the goods assumes 100% of the cost is in manufacturing, that there would be zero economy-of-scale benefit from retaining our manufacturing base, and it assumes no benefit to your income from the increased economic re-circulation. Those... aren't neutral assumptions.
This is a separate matter from the one in TFA but the players and strategies are similar.
The American middle class didn't get wrecked though. People had more capital on hand due to cheaper goods that they were able to spend on other industries and services.
If manufacturing didn't go to China it would've went to Vietnam or another country with cheaper low skilled labor. Long term automation will eat those jobs anyways
Oh? The American middle class didn't get wrecked? I'm sure all the opiate addicts on disability roll will love to hear about all the capital they have on hand due to cheaper goods.
Many actions could have been taken to prevent people from struggling to adapt to a changing economy such as:
* Subsidies for relocation
* Subsidies for retraining
* Subsidies for drug rehabilitation
All of which could have been funded by the greater economic growth generated by trade. If you want Americans to pay more for goods to subsidize the cost of living of groups of Americans, make it a transparent tax. Don't hide the cost in greater coats for goods.
Also where was this concern when these same issues were hitting poor urban regions throughout the 80s and 90s?
The hypothetical $2000 cellphone doesn't exist in a vacuum. It's entirely conceivable that income difference from the increased purchasing power of domestic labour would more than offset the potentially increased prices.
You'd never have to pay $500 for sneakers made in the us, other than fancy designer shoes, prices unrelated to costs. You can already pay 2k for a cell phone.
A little. The thesis behind 'trickle down' sorta makes sense if you think about it. Less taxes = more money to invest = more investment = more economic activity. I did kind of expect to see SOME impact, though have felt for a while that the financial markets have become so disconnected from actual investment behavior that the impact would be marginal...and looks like this study concludes its even less then that.
That's exactly the problem: arguing that taxing the rich less will lead to trickle down / more economic activity / jobs etc sounds like it should work.
As the linked study (and many others like it) shows, it doesn't actually work in practice.
That might be obvious to you but history has shown it to be inaccurate. Of course rich people, who have lots of influence will be in favor of things that lower their own personal taxes. But in the us it has been show this does not lift others up. The thing that helps lift the overall economy is more money to less wealthy people, especially poorer, because they spend any extra income they receive on necessities.
This is one of many dangers of "common sense" style policy and legislation. It's very easy to make misleading or outright false statements and dress it up as "common sense" and sell it to millions of people over and over again decade after decade despite all evidence building up refuting it.
Sure, giving anyone a tax break will enable them to spend more and generate economic activity. However, generally reducing taxes also requires reducing government spending, which means less investment in things like infrastructure (which tends to create lots of middle class jobs). Basically the two end up cancelling each other out, so the result is just worse income inequality like the study showed.
Wealthy people invest in things that wealthy people want to invest it.
(Democratic-ish) governments, for all their many issues, tend to invest in things that can be justified to much broader populations (yes, I know, lots of exceptions to prove the rule)
Increasing private investment and decreasing public investment isn't a "cancel each other out" situation.
"A little. The thesis behind 'trickle down' sorta makes sense if you think about it."
Only if you only think about it. This is the danger of theoretical predictions without empirical backup: the path of the Laffer curve is dependent on more than just the tax rate, and is likely also historically dependent.
“Such reforms do not have any significant effect on economic growth and unemployment” is in direct contradiction of a central tenet in center-right politics in the West for the past 40 years. It bears repeating.
To reinforce that the concept that tax cuts for the wealthy creates growth and jobs is patently false. Some are still uninformed, or in disbelief, despite the data and scientific consensus.
> Some are still uninformed, or in disbelief, despite the data and scientific consensus.
I think calling this a "scientific consensus" is a bit inaccurate. There's very little consensus in economics (and one can argue about the level of science as well).
