LETTER TO THE EDITOR: ‘Trickle-down’ ideas only lead to economic insanity

It was disturbing, but not surprising, to see the column on Feb. 19 which purported to have discovered the key to promoting economic growth and prosperity in Delaware. [“A smarter economic pathway for Delaware”] The authors’ recipe for “success” was a rehashing of the same policies that have repeatedly failed for the past 100 years: namely, the idea that if we do just a little more to help the rich, the benefits will come cascading down to the rest of us, and we will all live happily ever after.

At a time of the greatest inequality of wealth and income since the 1920s, when the middle class is disintegrating before our eyes, and when working people struggle to get enough food on the table to feed themselves and their families, the authors recommend that we follow the same policies that got us here in the first place!

The best thing about their column is that they confess that their ideas come from the American Legislative Exchange Council, an extreme right-wing think tank funded (at least partially) by the Koch brothers. That is the equivalent of “buyer beware”!

Their prescription for “economic success” is thus the Koch Brothers’ dream come true: cut income taxes for the wealthiest, cut the corporate income tax rate, get rid of the estate tax, and pass a right-to-work (for less) law so that wages can stay as low as possible since those pesky unions won’t have any bargaining power! That will solve all our economic-growth problems, of course! Why didn’t we think of that before?

The problem is, we HAVE tried these policies before, and they have never worked. This was essentially the economic program of Calvin Coolidge and Herbert Hoover in the 1920s (producing the aforementioned extreme inequality during the “Roaring Twenties”), which immediately preceded the Great Depression, the greatest economic disaster in American history. The “Reaganomics” of the 1980s led to record deficits, and the anti-union policies of the Reagan and Bush administrations began the hollowing-out and disintegration of the middle class which continues to this day.

When President Clinton instituted a mild reversal of this policy in 1993 by passing a very slight increase in the highest marginal income tax rate, every Republican in the country predicted economic disaster. Instead, an economic boom occurred, millions of jobs were created, deficits were replaced by budget surpluses, and incomes across the board y grew.

Faced with this evidence, George W. Bush in 2001 ignored it and proceeded to pass a massive income tax cut (mainly for the wealthy), even as we proceeded to involve ourselves in two wars! The ensuing massive deficits were quite predictable, and nothing was done to stop the loss of well-paying jobs to foreign shores. The wealthiest among us grew even wealthier as income remained stagnant for everyone else, producing the greatest inequality in 80 years, leading to the “Great Recession” in 2008, from which we have in many ways not fully recovered.

The only reason we did not have a second Great Depression (besides the expansion of the money supply and low interest rates by the Federal Reserve) was because the Obama administration adopted some stimulative policies (à la FDR), which received no support from Republicans, who predicted (again, wrongly) that an income tax increase in 2013 and Obamacare in 2014 would both be “job-killers.”

The only kind of economic policy that produces prosperity for most, that grows the middle class, and gives working people any kind of chance for a decent life, is demand-side, bottom-up economics, which was adopted by FDR in the wake of the Great Depression and lasted through the 1960s and early ’70s, and which created the great middle class and the greatest prosperity in American history.

We see now the same types who cling to trickle-down economics in spite of all evidence and experience now trying to convince us of the horrible things that will occur if Delaware raises its minimum wage. Even though, adjusted for inflation, the minimum wage was significantly higher in 1968, they warn us of dire results if we would try to raise it now. This is poppycock! Raising the minimum wage would reduce turnover, a significant cost to employers, thus saving money.

A study at the University of Massachusetts-Amherst found that each 10-percent increase in the minimum wage reduces turnover by 2.2 percent. This is a significant savings, since it costs fast food restaurants, for example, $4,700 for each worker who leaves. Another study, by Purdue University’s School of Hospitality and Tourism, found that raising the minimum wage to $15 per hour (much higher than is being proposed in Delaware) would lead to an increase in fast-food prices of only 4.3 percent — thus, a Big Mac might cost 17 or 18 cents more. I believe that the people of Delaware will not mind to pay 10 cents or so more for their hamburgers so that the people that prepare their food and serve them are more fairly paid.

And as Henry Ford realized over 100 years ago when he decided to pay his auto workers the unheard-of sum of $5 a day, well-paid workers can also be your customers and make everyone better off!

That would be a “smarter economic pathway for Delaware.”

Daniel Pritchett

Facebook Comment