Fakenomics Keeps Pulling The USA Backward

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I had the title written before I saw this tweet, but it’s a good metaphor for the overall topic:

You could take that metaphor far and wide. I won’t spend the time doing that right now, even thought it would be fun from a literary perspective, but let’s jump to the point:

Study after study after study after study has shown that “trickle-down economics” is nonsense. When you cut taxes on the super rich, it doesn’t trickle down, or it trickles down so little that trickle is a deceivingly ambitious word for it. (One recent study, for example, has found that 83% of the Trump tax cuts will be benefiting 1% of the population by 2027.)

Just consider it for a minute: You’ve got a billion dollars. In fact, you’ve had a billion dollars for years. What are you going to do differently with the extra money you get from a tax cut? You’ve been living the billionaire lifestyle — doing everything you could imagine wanting to do. What are you going to do with your tax cut?

Now, let’s flip it — let’s say that 1% of the population doesn’t get 83% of the tax cuts. Let’s say only the bottom 60% of society gets tax cuts. What are they (we) going to do? I live a fairly comfortable life, but there’s A LOT MORE I could do with a significant boost to my income or cut in my taxes. I’d spend more money, which would boost our economy.

The income growth of the typical American family closely matched that of economic productivity until some time in the 1970s. While it began to stagnate, productivity has continued to climb.[64] According to the 2014 Global Wage Report by the International Labour Organization, the widening disparity between wages and productivity is evidence that there has been a significant shift of GDP share going from labor to capital, and this trend is playing a significant role in growing inequality.[65] Image by Delphi234, via Wikimedia Commons.
US wealth split from 1989–2018 in 2018 dollars. Top 1% up $21 trillion. Bottom 50% down $900 billion. Image by People’s Policy Project, via Wikimedia Commons.

The problem with “fakenomics,” as I’ll call it, is that it just lets the super rich store even more money in a few bank accounts somewhere. The other problem with fakenomics is the rationale for it is always that it’s going to boost the economy by enormous amounts that will offset the lost tax revenue, and that’s just nonsense. It has been shown to be nonsense since the 1980s when Reaganomics was born. Ironically, back then, there was a battle within the Republican Party about this. In the Republican primaries, George H.W. Bush attacked Reagan’s proposals as “voodoo economics.” They were voodoo economics, but the party went down Reagan’s road anyway and that has continued to be the case to today. The difference between 1980 and 2020 isn’t just 40 years. Research has been able to evaluate the claims around “trickle-down” tax cuts and the actual results. The claims from Republicans pushing for more and deeper tax cuts for the rich and for corporations have routinely proven to be far more boisterous than the results.

Policies that have been focused on putting tax revenue into the economy — via big infrastructure bills, clean energy funding, and stimulus packages — have resulted in economic booms. Rather than cutting taxes on the super rich and corporations, taking a bit more in taxes and spending it on the people of America has made America stronger, healthier, and richer. Ironically, Republican presidents have ridden the coattails of such policies while working to just cut taxes and deregulate again, which has routinely led to one economic collapse after another. (Note that even with this coronavirus crisis, Trump dismantled policies and programs aimed at averting or better preparing for pandemics. Joe Biden tweeted a warning about it in 2019 when some of this was occurring! But it’s just representative of Republican policy overall: dismantle and defund important government agencies, weaken the US government and make it more dysfunctional and sometimes even counterproductive, blame the government for everyone’s problems, rinse & repeat.)

Joe Biden aims to pump money into the American economy again, and Moody’s has determined in an analysis that Biden’s plan would create 7 million more jobs than Trump’s “plan.” That just makes sense.

One great irony of the 2020 presidential election is as follows: Donald Trump, born with a golden spoon in his mouth and losing hundreds of millions of dollars through horrible business deals, has carried forward policies that hurt the working class and the middle class — yet he has the support of less educated voters who live in that portion of society. Many of his voters came to him because the “political establishment” hadn’t done right by them. Well, it wasn’t the “political establishment.” It was 4 decades of Reaganomics fakenomics, and Trump has put fakenomics on steroids. He hasn’t helped those people, and he won’t. Perhaps he has entertained them. But he certainly hasn’t helped them.

But that’s what con men do, isn’t it? They get you to look at one thing, perhaps an entertaining performance, perhaps thoughts of magic economic performance in the long term — and then they rob you blind.

CBO Chart, U.S. Holdings of Family Wealth 1989 to 2013. The top 10% of families held 76% of the wealth in 2013, while the bottom 50% of families held 1%. Inequality worsened from 1989 to 2013.[1] Image by Congressional Budget Office, via Wikimedia Commons.
Fakenomics has been hollowing out the working class, making more and more people work multiple jobs, leaving countless Americans in worse conditions than they were in when they were much younger. Some people have gotten a good mixture of luck and hard work and are doing much better, but that is not the norm. Some politicians and even the media will routinely use certain statistics to make it seem otherwise. But many Americans who have been on the planet for several decades know how their lives evolved. They recall working class or middle class upbringings that provided much more for their families — much higher quality of life — than what they have now. It is easy to listen to a good storyteller or con man tell you about how it’s John Doe’s fault and how he will come in and turn things around. Unfortunately, when that happens enough for years, many people following this life trend are more prone to hitch their wagon to a reality TV entertainer who throws grenades at the fundamental structures of society … while continuing to engage in the wealth theft that will only make matters worse in the medium and long term.

US national debt is at $27 trillion. This is far beyond previous US limits. Fakenomics didn’t trickle the money down enough for tax cuts to make a notable difference in people’s lives. Yes, some people rose from poverty or the middle class to the upper class — there will always be some cases. Look, there are Lil Wayne and Ice Cube, for example. But everyone not in the top tier of society has been swimming against the current, and it’s been a strong current, while the richest of the rich have been floating down the river in a comfy little boat.

Actually, though, even the richest portion of society that got most of the benefits doesn’t really notice a difference — what does someone change about their life with $9 billion instead of $8 billion? What are you going to do with $9 billion that you wouldn’t already do with $8 billion? What does change is US society continues to stagnate, smolder, and get torn apart.

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Zachary Shahan

Zach is tryin' to help society help itself one word at a time. He spends most of his time here on CleanTechnica as its director, chief editor, and CEO. Zach is recognized globally as an electric vehicle, solar energy, and energy storage expert. He has presented about cleantech at conferences in India, the UAE, Ukraine, Poland, Germany, the Netherlands, the USA, Canada, and Curaçao. Zach has long-term investments in Tesla [TSLA], NIO [NIO], Xpeng [XPEV], Ford [F], ChargePoint [CHPT], Amazon [AMZN], Piedmont Lithium [PLL], Lithium Americas [LAC], Albemarle Corporation [ALB], Nouveau Monde Graphite [NMGRF], Talon Metals [TLOFF], Arclight Clean Transition Corp [ACTC], and Starbucks [SBUX]. But he does not offer (explicitly or implicitly) investment advice of any sort.

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