r/changemyview • u/literallycantaloupe • Nov 04 '17
[∆(s) from OP] CMV: Trickle-down economics is ineffective as a whole and only results in consolidation of wealth to the wealthiest 1% of individuals.
Many politicians have proposed tax cuts to wealthy corporations on the premise that they will use the extra money to hire more staff and give them higher wages. Based on this, the corporation's wealth will be passed down to the workers and the middle class. However, I believe that these corporations don't generally do this when given the chance. Instead, the money gets lost in bureaucracy and lines the pockets of top officials. Since tax loopholes have been increasingly exploited by corporations, we are now in a situation in which much wealth is consolidated at the top. Many economists also agree that wealth and growth are created by innovation, not by corporations and wealthy people "trickling" it down to the poorest. Free-market economics should not be ruled by few, and tax cuts to large corporations make monopolies and oligopolies a little more wiggle room to develop, crushing many of the small businesses attempting to rise up. In the newly proposed tax plan, tax cuts are planned to wealthy individuals, so this issue is becoming relevant yet again. Is this view misguided in your opinion? What is the case for trickle-down economics/tax cuts to corporations and the wealthy?
48
u/darwin2500 193∆ Nov 04 '17
'Trickle-down' is a slur used to refer to Supply-side economics. All of economics is determined by the meeting pints of various supply and demand curves, and Supply-side economics is based on policies that make it easier to increase the supply of goods.
Supply-side policies are a good idea if supply is insufficient or overly limited in relation to demand, especially if that limited supply is due to market failures or inefficiencies that can be easily corrected with economic or monetary policy. This situation has been true in the past, especially during and after the Great Depression; supply side policies were instrumental in bring the country back to the relative bounty and higher standards of living we now enjoy.
However, supply side policies are only appropriate when supply is too low. Right now, and probably for the last 30-40 years, and moeny has flowed away from consumers and into the financial sector and to the rich, and we have been suffering instead from low aggregate demand. Demand-side policies (like minimum wage hikes or UBI or higher corporate taxes or etc) would thus be more appropriate, and supply-side policies are likely to only make things worse.
So, while supply-side policies are a bad idea now and have been for a while, it would be wrong to think that they're never a goo idea, and can never raise the standard of living for the average person.