The wealthy and their Congressional bedfellows in the Republican Party have claimed for decades that cutting taxes for the wealthy is the surest way to spur economic growth. This is a massive subterfuge that is perpetuated by the conservative echo chamber, media sources like the inaptly named Fox News, and conservative talk radio. Conservatives love to roll out this deceptive practice at every opportunity.
The logic behind this goes something like this: the wealthy spend more than the middle class, providing the need for jobs to support their consumption. In addition, they invest more, which makes funds available for private projects, and thus create jobs. This series of events is known colloquially as “trickle down economics”. Give the wealthy more and they will make everyone wealthier.
The con is subtle; it says, give me more money and I will help you get more. This is standard fare for Ponzi schemes or pyramid selling in which the first people to start investing are able to make large amounts on their investments, but as more and more people flood into the system, it slowly breaks down and collapses under its own weight. This is what happens to economies when wealth is concentrated at the top.
There are so many problems with this economic model that it is not always easy to know where to start.
Firstly, the wealthy take their tax breaks and put them in nice safe investments where they do little good for the economy as a whole, such things as Treasury Bills or Notes, or Municipal or corporate bonds. The banks in which they park these savings are reluctant to lend in a financial downturn, especially at lower interest rates, so the money sits doing very little.
Secondly, if the wealthy spend, it will be on expensive vehicles or homes, neither of which create more jobs to any greater degree than a normal home. If it takes ten men a month to build a middle class home, it might take twenty men two months to build a mansion. The number of jobs created is not in proportion to the cost of the home. The same can be said of a vehicle. The wealthy might take vacations, which takes money out of the local economy and creates few jobs at home. The wealthy may also buy expensive furniture or ornaments, but the effort it takes to produce these products is not in proportion to the cost of those products.
The wealthy are not going to do anyone any favors. They will spend money to create a lifestyle for themselves. What happens to the poor really does not concern them at all. The pittance that they may pay to their servants is often given reluctantly, with a supercilious contempt for the lazy poor that want something for nothing.
The fact is that jobs will only be created when businesses have customers. If corporations do not employ more people, they will not have customers to buy their products. Henry Ford understood this principle very well. In the absence of corporate hiring, government must step into the void and create jobs. Until they do, the economy will only deteriorate
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