Trickle-Down: A Rich Man’s Dream But a Poor Job Creator


In the first Presidential Debate of 2016, Donald J. Trump, the Republican candidate, said, “Under my plan, I’ll be reducing taxes tremendously, from 35% to 15% for companies, small and big businesses. That’s going to be a job creator like we haven’t seen since Ronald Reagan. It’s going to be a beautiful thing to watch.”

According to the Bureau of Labor Statistics, under President Reagan, the United States created about 2 million jobs per year, or 167,000 per month. This is good, but not as good as the job creation record of Presidents Clinton or Carter.

Republicans point to September 1983, when the US economy grew by over one million jobs. This would be truly impressive if it weren’t for the fact that in August 1983, the Communications Workers of America went on strike, pulling hundreds of thousands of workers out of the labor force. The dramatic growth the following month marked their return to work. The CWA won a new contract that included wage increases, greater job security, and improved health benefits. Credit for the dramatic job growth should go to the union, not President Reagan.

In spite of this, the Republican Party continues to offer the panacea of Trickle Down Economics, a.k.a. Supply Side Economics. The notion is that the more you make, the more you can keep, and so you’ll work harder in order to increase your income, and everybody benefits. It doesn’t work. Maybe if you get paid by the hour, the chance to make a few extra dollars will induce you to schedule an extra hour or two, or volunteer to work a holiday for the overtime pay, but if you’re Leslie Moonves, CEO of CBS, with a compensation package of $56.4 million (Equikar/New York Times study) what does “working harder” mean? Not going to the bathroom during commercials?

Lower taxes don’t translate to job growth or increased investment. Apple Corporation is an example of modern globalization. The company is associated with Cupertino California, but while its sales and intellectual property are in the US, Apple has an Irish holding company with neither operations nor employees located in Ireland. According to Forbes, “Apple Inc., the US parent of the whole group, pays US tax on the investment earnings of this company. Otherwise, the holding company pays no tax to any government, and has not paid tax for five years.”

Of course the majority of jobs are located in China, where the iPhone is actually, built, although Foxconn, which actually makes the product, is replacing 60,000 factory workers with robots. Not much job creation there. Meanwhile, European nations, still trying to recover from the Great Recession, have ordered Apple to pay $14.5 billion plus interest on the grounds that Ireland offered Apple a tax rate that was illegally low. Mr. Trump’s 15% tax rate can’t compete with the 0.005% that Ireland was charging Apple.

Beyond that, when are corporations going to expand, when they can sell all the product they can make, or when they can sell more than they can make? This is an obvious part of the law of supply and demand – companies will invest and grow when demand outpaces supply.

If US job market is going to grow, the answer isn’t to put more money into the hands of corporations or their CEOs, it’s to expand the customer base so that more people can buy more iPhones. Job creation is the result of increased demand, which means that the tax code should be more progressive and redistributive.

US corporations are sitting on $2.1 trillion in cash – something like Donald Duck’s Uncle Scrooge who kept his wealth in a money bin, and enjoyed swimming in the cash. If they wanted to build a new factory, they could do it.

Somehow, in spite of a long record of failure, Republicans keep lowering taxes for the rich, people and corporations (don’t let the list price fool you, nobody pays full price at JC Penney either) but it never works.

Liberals and progressives and for the most part Democrats, understand this is basic Keynesian stuff, but never seem to go around making it sound like one of the laws of economics, or make irrational claims of prosperity. The Republicans, in contrast, make trickle down sound like like a scientific law that’s been proved by repeated experimentation, somewhere between Ohm’s Law, Cole’s Law and Murphy’s.

Bernie Sanders, and now Hillary Clinton understood how to create jobs – it’s about time we tried it.

Sam Uretsky is a writer and pharmacist living on Long Island, N.Y. Email

From The Progressive Populist, November 1, 2016

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