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Monday, March 07, 2011

"Trickle down economics" challenge from a leftist

I reckon this constitutes some sort of copyright violation in someone's view but I claim fair use. I captured an exchange regarding wealth and political power because it demonstrates very succinctly the left-wing view regarding Reaganomics (aka "Trickle down economics") and a proper response from a Free Market Advocate.

My comments and annotations are throughout; what are in quotes are obviously what I did not write. The links are mine except where they are not.

For the record I do not think the leftists are stupid; they simply proceed with a certain sort of logic from an incorrect set of correct-sounding premises.

Tony Sachs claims
"Trickle-down economics" delivered exactly what it promised. Of the flood of wealth that has cascaded to a tiny sliver of the population over the last 30 years, a mere trickle of that has gone to the poor and middle class. Ronald Reagan broke the plumbing, and now demagogues like Scott Walker want to rip the fixtures out of the wall entirely.
When asked about reversing the situation he replied:
Having folks like Walker overreach is a good start, I think -- but then we need a decisive guy on the left who's not going to play the GOP's game as Obama seems to be doing lately.
Darrin Moore of the New Centurion Program responds:
Tony, our economy has doubled since Reaganomics. If you double a small sum, it an accomplishment. If you take the largest economy the world has ever known and double it, you're talking about an accomplishment so grand that only an intellectual could deny it.

What, pray tell, do YOU think causes wealth creation? The government taking from the rich and giving to the poor? Isn't that like scooping from one of the pool and dumping it into the other and expecting the water level to rise? The only way we lift all boats is through Adam Smith's Invisible Hand: allowing men to keep (and to spend, save, invest or donate it as they see fit) the fruits of their labors.

Why is it greedy for people to want to keep what they earn, but it's not greedy for you liberals to confiscate other people's wealth so you can bribe your voters with it?
Darrin uses the term "intellectual" as Russell Kirk or Bertrand Russell would use it.  Mr. Moore is not engaging in the common use of the word. (I tend not to utilize the Kirkian mode of the word when casting aspersions upon the philosophical practice of leftists to those same individuals, although there is something positive to be said about an inside joke).  The "water level to rise... lift all boats" is a reference to a "motto" that President John F. Kennedy borrowed from a New England Council regional chamber of commerce: "A rising tide lifts all boats."  That phrase is now more of a mantra for Fiscal Conservatives (a term to be defined much, much later) although it is used best with nuanced applications, rather than simply a broad executive policy that could flood an economy with money.  That said the aphorism is a concise and accurate description of how a Free Market economic policy is applied.
 
While it is true that the size of our economy does not correlate to the (fiscal/economic) health of the people within that economy it does not hurt the chances for opportunity of citizens for a fiscally healthy economically sound nation.  A genuinely large economy correlates with (and possibly causes) opportunity.  It correlates that a nation with a weak or puny economy cannot provide or protect opportunities for economic mobility for every citizen; in those states the only people that benefit from markets and exchanges are the wealthy, people in higher class or caste positions and there is almost no possibility for a common citizen to earn, innovate, rise up and join this true upper class.  In at least one country that ruling subset has formal codified authority role as part of the politburo.  The lack of that correlation in an effective western free market economy is cause by free will.  That individuals make his or her own choices (and take the families with them, as well as their employees, potentially) offsets simple concepts such as "so goes A, so goes B".

So our economy is large and the size increased thanks to policy executed by President Reagan among others; a leftist will rightly indicate that lack of correlation but he will not realize why the lack exists.  Tony Sachs, for example, follows the accepted leftist track of blaming "the rich" with the direct implication of an existing class system in the United States, complete with a lack of (A) opportunity for mobility for individuals to cross from so-called "lower class" to the "middle class" (whatever that means) to the so-called "upper class"as well (B) a lack of respective complicity a common citizen possesses for his own fortune.
You're making it sound like our standard of living has doubled. First off, if you're earning twice as much as you were 30 years ago, but the price of groceries has also doubled, you're not going to be able to afford to eat steak every nigh...t any more than you would in 1980.

And second, if the economy doubles and the vast majority of that growth goes to the richest 1%, well that might be "lifting all boats" in think-tank speak, but it seems like the yachts are being lifted a lot faster than the sailboats. And let's not even talk about the rowboats and dinghys.

Truly progressive taxation didn't hurt our economy in the quarter century following World War II, and it wasn't until your boy Reagan started bribing HIS voters with money they didn't need that the national budget went completely out of whack. Having wealthy people pay for infrastructure, defense, and hell yes, Medicare isn't "confiscating wealth" as you class warriors put it, it's called the right thing to do.

OK, I'm finished, you may go back to demonizing public school teachers while lionizing investment bankers. Have fun.
Mr Sachs is correct that the price of standards of living increase in rendering increases of respective income less of increase.  That phenomenon is symptomatic of inflation, however, which is a leftist/pseudo-Keynesian attempt to artificially "raise the tide" and grow the economy.  In any case it means that buying power decreases regardless of what amount of currency is possessed; the fact is that inflation is caused by a number of things and the more relevant point is that certain places are bubbles where the prices increase because of local circumstances.  This is why in New York, NY the income and standard living expenses are essentially the same as a person performing the same task in Central Michigan, with some sharp margins for whether one lives in Manhattan, among other points.  A growing economy, as a whole, includes a growing number of fiscally healthy people.  When the economy is grown correctly without heavy-handed guidance that correlation is fact.  When it is grown artificially the prosperity is superficial and temporary at best.  Under those circumstances the growth is temporary and the prosperity of the individual really is a lie as the well-being of the individual is a matter of dependence, not the result of choice and the consequence of well-chosen individual action.  Based on that, inflation is not simply caused by growth.  Growth can be anticipated and accounted for as can inflation.  To an extent inflation is an inevitability because of our fiscal policy, which involve circumstances and history that I am not prepared to explain.  Now inflation, buying power, is not a product of the size of the whole.

Mind you, Mr Sachs is simply jumping to hostile conclusions when he accuses people of demonizing public school teachers and asserting Medicare as a sort of higher calling in and of itself instead of a political weapon.

As it is I simply believe that many people will possess excessive wealth along with the individual (or corporate) responsibility to use that wealth properly; these sorts of people will always exist.  As not a social corollary or an economic corollary there will always exist impoverished people.  These people are impoverished because others are wealthy and these people are not lacking in something because someone else possesses that something.  Usually it is not the decisions of the wealthy or the empowered that caused the poverty of the individual but a combination of many factors, circumstances, and choices.  A lot of these choices were made by the person who would be impoverished is impoverished and the responsibility is ultimately his or hers.  To be fair, of course, sometimes things are just outside are our own control; we play with the hand we are dealt.  Socialism, of course, is the sociopolitical negation of free will, especially in terms of wealth, advancement, markets, and well-being. Winston Churchill said
Socialism is a philosophy of failure, the creed of ignorance, and the gospel of envy, its inherent virtue is the equal sharing of misery.
While economics is a study of individuals' choices all market systems are such where these choices related and actions have consequences.  Objectivists, most theists, and many agnostics believe that when people work towards their own informed best interests, and make proper choices individually it will work out best for the greater whole; that takes an element of faith.  Contrast to socialism, where the assets possessed are sorted and resorted according to what a small circle of planners dictate is social justice and moral imperative.  A free market philosophy implies risk for return.  Socialism promises no risk for a false promise of a safe great return.  (Pardon my over-simplification).


Mind you there is also the matter of "empirical evidence"
You would see that the poor did better with Ronald Reagan than at any other time in the twentieth century. "It's not that our liberal friends are ignorant, it's that they know so much which isn't so."
Mr. Moore implies that the fruits of labor comprise the proof.  Mr. Sachs is dissatisfied.
Show me the empirical evidence, Darrin. And also try to convince me that, if the poor did well under Reagan, it wasn't because he was unable to make a dent in liberal social policy despite reducing revenue, to the point where the country had to borrow more heavily than it ever had despite being in an economic "boom." As my man Lloyd Bentsen said, "Let me write $500 billion of hot checks and I can show you the illusion of prosperity, too."
Mike Shedlock insists these same political weapons, what Mr. Moore referred to as "wealth confiscation" and "bribes" for voters, take a large bite out of what would otherwise be a large and healthy economy; if I interpret the graphs correctly it is a negation of American prosperity on a macroeconomic and possibly microeconomic level.  Left-wing social policy is the care for people of various economic classes without significant regard to individual levels of responsibility or access to opportunity; for the most part it is
  1. intended to make people feel good about themselves
  2. intended to compel voters to vote for the proponents of these social policies
under the implication that if the politicians did not shift the capital (money) to provide for the people then these individuals would suffer and die. The purposeful implication is that the people only live because of the government and that no other option is available.

I think at this point my own analysis is slightly less interesting.
Mr. Moore counters:
Look at what you're doing here, Tony. You ask to see the facts but you already have your little ready-made answer to disregard them based on emotion and sentimentality.
Show me the empirical evidence, Darrin. And also try to convince me that, if the poor did well under Reagan, it wasn't because he was unable to make a dent in liberal social policy.
Then you try to play the deficit card:

despite reducing revenue. . .
Tony, tax revenues double during Reagan! -Proving the point that it's better to get a small percentage of taxes on a growing pie than it is to take slovenly large pieces from a stagnant commonwealth.
to the point where the country had to borrow more heavily than it ever had despite being in an economic "boom."
Tony, are you seriously going to try to hate on Reagan for his tiny little deficits compared to those of Obama's? I smell hypocrisy.

Plus, just as soon as the GOP got hold of the purse strings in Congress, the budget was balanced for the first time in forty years!

As my man Lloyd Bentsen said, "Let me write $500 billion of hot checks and I can show you the illusion of prosperity, too."
If that is what caused the greatest economic boom the world has ever known, Tony, the TRILLION DOLLARS worth of Obamabucks should make us rich beyond pale. (ooops, it doesn't work that way)
First I think this demonstrates how certain internet forums make for less effective places for debate than others.  Second it is important to note that President Reagan's accomplishments and failures during  his terms occurred with the Democrats ruling the legislature.  When the Republican gained the Federal Legislature under a Democrat Executive branch things were quite different, especially with Republican Dick Morris being the most important adviser to moderate Democrat President Bill Clinton.


My safest approximation if how a healthy economy works is when various controlling authorities do their best to stay out of the way.  This is not an absolute; we need ordered liberty and we need a fiscal policy to anticipate market shifts and economics as well as to protect the market from larger corporate entities that seek to deliberately obliterate competition in the most literal sense.  Most government fiscal policies interfere with market shifts instead of anticipating them, causing unintended consequences, one of which was mentioned earlier: the diminishing of buying power (on a larger scale).  Darrin Moore claims:
My buying power increases when
  1. I EARN more money (my personal money supply increase)
  2. Businesses vigorously dook it out for my discerning dollar and (supply increases)
  3. the government stops printing new dollars.
when the government prints more dollars, each of our own dollars become worth less. Therefore we need a stable dollar, not constantly printing more dollars which dilute the value of everyone's dollar. But printing more dollars (a hidden form of taxation, to be sure) effects everyone who has dollars equally. Regardless what the Fed does (although every decision they make affects the market), an individual can increase his own wealth by supplying goods or services that are demanded by the free market. -And you can be sure that if he's selling a product that is highly demanded, he'll try to sell his supply at the highest price possible.
Government needs to be present as regulatory agent for the market in terms of protecting our medium of exchange.  In modern times that medium of exchange is currency.


From a theistic standpoint people have what they have because they are supposed to have it and the choices they made with the opportunities thus granted have resulted in a particular set of circumstances, both good and bad.  In a scale with God everything belongs to Him and He distributes wealth and possibility as He sees fit; all we have is temporary stewardship and these mere things belong to God to be taken and given as necessary.  He who stewards well with the mere things that God has given will be given more.  He who stewards poorly, makes poor decisions with the possibilities, mere things, and opportunities granted to him, will have his things taken away and he will thus become a case where life is lived because of the fruits and gifts and love of others.  On that scale everything is up in the air, nothing is permanent and claiming ownership is a silly, frivolous and frighteningly temporary proposition.  That said, God established the concept of property, or at least affirmed the concept of property, because many of us operate with other human beings, sentient creations of God, as equals on an earthly playing field that operates with unalterable rules, such as those of economics.


Most of us must (temporarily) operate as if there is no God (in order to communicate with those that believe there is not).  Most operate as if there is no God regardless of moral imperative.  We treat life as if our short time on earth is all there is and what an individual briefly holds in his hand as a matter of personal responsibility is simply his alone in terms of choice, action, and consequence.  Property is power and for all intents and purposes that power is real.  We are stewards especially because we are compelled to think of others but we own property to remind us of the liberty (and burden) of personal choice.  The seeming paradox is reconciled if one ponder whom is being related to, God or another man.  In either case God regards each individual person as equal in value and equal in responsibility to himself and others.  I will grant you outright that certain people are less accountable to choose certain actions than others.  Sinners are not expected to stop sinning until they believe they must; God does not demand Christian charity from a man whose very nature demands he live only for himself; if a sinner repents and becomes a saint then he is accountable to lover others, be charitable, and sin no more.  Some people have greater responsibilities towards their fellow man and I take that as an axioum.


Yet as citizens our responsibility towards one another renders each of of us as co-equals.  Whatever power and property we hold responsibility for is inherently unequal but that does not increase our responsibility for our fellow citizens.  To that end the expectation that the so-called "poor" have a lesser responsibility than the so-called "wealthy" is very much a leftist one.  That the responsibilities of each individual citizen be a pliable burden, one shifted to other citizens simply because of means is more of socialistic tenant than a belief of free men.  Establishing laws that enforce those tenants actively hurts the pursuit of individual (and willful corporate) prosperity and thus hurts the pursuit of those who would willfully use wealth as instruments of love.  Redistribution of wealth hurts charity by damaging the mechanisms of true growth, true growth enables individuals to be charitable.


In any case, according to leftist economic philosophy there are those set to be dependents and those set to be providers.  According to an aspect of rightist economic philosophy the existence of those with more is part of how one facet of our society works with the other.  I quote Darrin Moore again.
When the rich get richer, or for that matter when anyone accumulates wealth, they have more wealth to buy stuff poor people make, to buy services poor people offer and to invest in companies of poor people start up but don't have the dough for themselves.

I'm not suggesting that there aren't a bunch of really bad capitalists who'll cheat, steal and lie to make a buck, but, are you people really suggesting that Adam Smith was wrong and that the invisible hand is just a pipe dream? Seriously? Where did you learn your economics?
We can excuse children for being afraid of the dark, but it’s inexcusable when an adult is afraid of the light.
We are equals because we interact without a compulsion from the state.  This interaction of the willing benefits us all.  The darkness is leaving the responsibility to the state. Former communist Max Eastman describes it thus:
It seems obvious to me now – though I have been slow, I must say, in coming to the conclusion – that the institution of private property is one of the main things that have given man that limited amount of free-and-equalness that Marx hoped to render infinite by abolishing this institution. Strangely enough Marx was the first to see this. He is the one who informed us, looking backwards, that the evolution of private capitalism with its free market had been a precondition for the evolution of all our democratic freedoms. It never occurred to him, looking forward, that if this was so, these other freedoms might disappear with the abolition of the free market.
I try not to think of the "free market" as something to be revered but something that existed which we can observe.  And try not to break. Like the physical laws we ignore this at our peril.




Now for that "empirical evidence"

I don't reckon you're going to read a book but if you did, I would suggest a book that Obama's senior economic adviser, Paul Volcker said 

takes 'supply side' theory from the realm of the mystical gospel for a few to a thoughtful exposition for the rest of us.
But since liberals avoid learning from history books like narcissists avoid shame, here are some columns full of data and analysis which explain why, when the shackles are taken off the market and it is allowed to flourish, it proves Adams Smith right that the rising tide lifts all boats like an invisible hand.
Nominally I am leery of Reagan worship but every time I read the man or hear the man he does not fail to impress me.

It remains that as much I prefer Supply-Side Economics, that being where we anticipate the flow of choices and such to the point where we simply remove as many burdens as possible to growth the leftists see it as "trickle-down economics" because they resent any sort of prosperity whose origins that they cannot control and that hints at fiscal inequality.  These Progressive types do not make the connection that the alternative has no control for them either and certainly less equality in terms of real power.  Under the logical consequences of ordered liberty everyone has an equal vote and their power in other respects can be increased along with the upward mobility; under the logical consequences of a command economy one's own fiscal powers are determined by a central authority.

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