The economic supporting principle behind tax cut for high income persons has been captured and crystallized as the “trickle down” theory. The idea is that the money saved by these high income persons with be spent on business initiatives, such as new factories, additional equipment, hiring additional employees or new business startups that will result in new jobs, new hires for existing companies or higher salaries for existing employees in the companies or business that these persons own or control. In other words the money will “trickle down” to lower income persons, benefiting them.
What actually seems to have happened is that those tax savings of the rich have been spent on luxury items and lifestyles which, although some number of lower income persons benefited by producing these items or serving at these luxury locations, there was little large scale or long lasting stimulus to the economy that benefited large numbers of workers.
A completely different approach, indeed, exactly the opposite, could be called the “trickle up” theory. This would involve cutting taxes for vast numbers of middle income persons, who could be depended on to spend the money saved on a wide variety of basic consumer items sold, manufactured or imported by those higher income persons, thereby benefiting them.
Make sense? You betcha ! Dogonne right it does! Neither Palin nor her running mate can afford to change the economic policies of the party that supports them or they will forfeit the support of that party.
While most of the voters in that party, and those independents that sometime support the candidates of that party, are not the high income persons who benefit from the Republican tax cuts, they don’t control the party. Those controlling persons have traditionally had a very cozy relationship with that party when it is in power, as it has been for the last eight years. Those high income persons, with large inherited wealth or the money and power that come with corporate control, always advocate for smaller government and less regulation and government oversight. It is disturbing, to say the least, to see them now begging for government funds and having the effrontery to ask for it with no control or oversight,e.g., the first three page proposal by Paulson.
Paulson is not, at present, part of the business hegemony that influences the Republican Party, but he was; he always will be; and he follows their script, as that party always has.
The cozy relationship with the party in power has other perks and pleasures, as we are finding out from the latest investigations at the SEC. So far, it looks like John J. Mack, currently CEO of Morgan Stanley and an associate of the founder of the hedge fund, Pequot Capital Management, was about to be called to testify about insider trading at Pequot, when suddenly the SEC attorneys in charge of that investigations were terminated. That’s the kind of “deregulation” that really pays off for big businesses and corporations that call for smaller government and less oversight.
The consistent theme of the present party in power, and that party’s candidate, John McCain has been deregulation. The mantra is: "let the market rule and competition and market forces will result in the best benefit for the most people" (except, of course, when some few need large amounts of government money to bail them out.)
It would be amusing, if the overall situation were not so tragic, to see McCain’s attempts to distance himself from the failed economic policies and practices of President Bush (another person, who has said that economics was not his strong suit.) The oratorical twists and turns of logic, or illogic, have been mind boggling and it just might have worked to win the election, in connection with an assortment of smear tactics like the “Swift Boat” attacks that helped turn the last election. However, a funny thing happened on the way to the White House: the economy collapsed. Suddenly, somebody shouted out from the crowd that “the emperor has no clothes!”
The polls across the nation are showing what people are thinking: that there must be a change from the policies of the present party in power; government turning a blind eye to financial excesses , greed driven speculation and impossible to understand financial derivative instruments. Structures that enrich and benefit only those who create and control them while the same government winking and smiling at the corporate predators, part of their elite circle.
In the 1992 successful Clinton election campaign against Bush the cry was, “ it’s the economy stupid.”
In this election is well might be, “ it’s the stupid economy.”
Robert Borsody, Is a graduate of Virginia Law School, and has worked as a lawyer in Manhattan for over 30 years.
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