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Trickle Down Bites The Dust

We have what might be the final blow to the ridiculous economic theory that Ronald Reagan made fashionable. The last thirteen years of the lowest effective corporate tax rate made it clear that trickle down is bullshit. But if that wasn’t enough evidence for you, we have the final nail in the trickle down coffin (it was your coffin by design). The plummeting gas prices have given us decisive data to demonstrate that economies grow from the bottom up.

Let’s go through it. According to gasbuddy.com, we’ve been seeing a steady drop gas in prices since last June. CNBC just published a story detailing what the drop in prices means in terms of monthly savings, as well as what people are doing with those savings. The data was collected by Cardlylics, a company that tracks your credit card usage and sells those analytics to different brands. According to their data, the average savings per person was $18.00 per month.

What did Americans do with that money? They spent it. Here’s what they spent it on:

  • 2 gallons more per month of gas
  • 10.3% increase in e-commerce
  • 8% increase in fast food
  • 6.8% increase on full service restaurants
  • 6.2% increase on home and garden improvements
  • 5.7% increase in grocery spending 4.5% increase in auto service and products
  • 3.7% increase in quick serve light fare
  • 3% increase in health and beauty
  • 1.4% increase in bars

Americans actually spent more money than they saved on gas. They spent $27.00 per week. This is what people refer to when they poll "optimism" about the economy. Perception is in fact reality to some extent.

These increases in spending increase what is referred to as "economic activity". Economic activity is (for example) the total impact on the economy when you buy an extra loaf of bread. That includes the jobs created (stock clerk, truck driver, farmer, etc). This is what economists mean when they tell you that every $1.00 spent on food stamps creates $1.72 of economic activity. Every dollar that you spend helps to create demand, which creates jobs.

Here’s what does not create economic activity:

  • giving a millionaire $18.00 per month

They’ve got a few million in the bank already, and therefore have no immediate need to spend the $18.00 so giving it to them created no economic activity since it ends up in an offshore bank (or any bank).

Here’s what doesn’t create a job:

  • a tax cut to a corporation whose demand hasn’t increased enough to warrant hiring more people

The only circumstance under which a company hires more people, is when demand dictates that they need more bodies to keep up with that increased demand.

All that bullshit republicans have sold you about tax cuts for the "job creators" is crap designed to get you to support their greed. That crap that you were told starting on January 21st, 2009 about how government needs to reign in spending during a recession is crap. When you don’t have any money, and your neighbor doesn’t have any money, and Mitt Romney is keeping all his money in the Cayman Islands, the spender of last resort is the government. Recessions are precisely the time when the government needs to spend money on social programs to help you create some economic activity which keeps your neighbor employed. And when the government is borrowing at a 2% interest rate (that’s where it was before the republican shut downs), it’s complete madness to suggest that they shouldn’t borrow to keep money in your pocket.

Trickle down was always a crock of shit, but now it’s a demonstrable crock of shit. Believe your own lying eyes instead of your own lying politician or billionaire.     

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