Thursday, September 16, 2010

Trickle-Down Economics

Poverty has reached its highest level in the 50 years of recorded American history. Of course, the arbitrary line defining poverty has moved up over time, so this is not to say people are actually poorer than their grandparents, but they are certainly poorer than they were a few years ago.

It's a trope on the left now to mock "trickle-down economics", the notion that wealth created by the wealthy and talented drips down to those below them. The ugliness of the analogy aside, this notion was hammered hard during the Bush years, which saw substantial economic growth, but saw it concentrated in the top half of the income profile.

Does anyone, however, doubt that we're in the midst of a trickle-down recession? It began as a 'rich-man's panic', with stock portfolios tumbling and real estate investors losing big while the real economy chugged along healthily. After six months or so, however, job losses started piling up and a full-scale recession hit in the last quarter of 2008.

Now that the focus is on the recovery, why does "trickle-down economics" get such a bad name? If anything, the fat-cat bankers and annoying-at-parties investment bankers should have made themselves (and their conspicuous consumption) missed. These folks aren't the ones entering poverty, but those who are newly poor are painfully aware of the complementarity of capitalist, entrepreneur, and labor in creating jobs.

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