Yesterday we touched upon supply-side economics, the trickle-down theory, Austrian economics, and Reaganomics and how each has serious problems in the world of economics. Unfortunately, the world of politics uses economics as a tool to achieve ends and politics is often devoid of the day to day realities and fiction becomes an excuse for bad behavior andself delusion. This is the dirty little secret that politicians and economists do not want to openly admit – they do not have a clue how everything works. The interrelationships are so complex, there is so much data to absorb, what mostly happens is conjecture. This is why economics is considered a soft science – there is far too much that has to be taken on faith.
Before we begin a discussion of income inequality a bit more clarification about the trickle-down theory is in order. Economists don’t use the term trickle-down – at one time about 120 years ago there was a term that was used, the Horse and Sparrow theory. The economist and sociologist John Kenneth Galbraith said when describing the Horse and Sparrow theory “If you feed the horse enough oats, some will pass through to the road for the sparrows.” Ross Perot during the 1992 elections called trickle-down economics political voodoo. Old man Bush when running for President called trickle-down economics “voodoo economics”.
The end result of trickle down, the theory that doesn’t work is income inequality. While the macro issue of economics is open to disparate and far reaching debate a slice, a specific issue can be looked at with greater certainty. What we can do is to take a specific issue, such as income inequality, and to research just that. Research has shown that there is a link between income inequality and social upheaval. In societies that are more equal people are more likely to trust each other with greater incidence of community involvement and with lower homicide rates. Research (some by Richard Wilkinson and Kate Pickett) also suggests that health problems are greater in countries where income inequality is the greatest. There is also research that lower socioeconomic standing is a major factor in chronic stress which leads to heart disease, ulcers, type 2 diabetes, arthritis, and some cancers.
As I mentioned yesterday we should, for our current discussion, not look at the moral and ethical concerns of an issue like income inequality but how the success or failure of that issue impacts us all. We have already mentioned income inequality’s effect on health. What is ignored over and over is that unless we change the complete philosophy of our society health issues concern us all as a sicker society increase insurance premium cost and also increases emergency services cost which are generally picked up by our society.
Lets end this discussion today with some quotes from someone that was introduced during the discussion yesterday – David Stockman, President Reagan’s director of the Office of Management and Budget.
Of the budget process during his first year on the job, Mr. Stockman is quoted as saying: “None of us really understands what’s going on with all these numbers.”
“(Extending the Bush tax cuts is) rank demagoguery. We should call it for what it is. If these people were all put into a room on penalty of death to come up with how much they could cut, they couldn’t come up with $50 billion, when the problem is $1.3 trillion. So, to stand before the public and rub raw this anti-tax sentiment, the Republican Party, as much as it pains me to say this, should be ashamed of themselves.”
“The Republican Party has totally abdicated its job in our democracy, which is to act as the guardian of fiscal discipline and responsibility. They’re on an anti-tax jihad — one that benefits the prosperous classes.”