Trickle Up Trickle Down

According to former President Reagan, tax policies that favor the wealthy will have two positive effects. First, the wealthy will spend the tax savings on goods and services that will add to the economy. Second, economic stimulation resulting from lower taxes will actually result in higher tax revenues. History has proved both of these hypotheses to be wrong. Tax revenues as a percentage of GDP are actually lower and spending on the part of the wealthy has not added to the economy. In reality, unemployment is at an all time high and even though there is some economic growth and a small glimmer of optimism, according to the 2010 census figures nearly 50% of Americans are poor or near poor. When such a large segment of the population is having financial difficulty demand for non-essential goods and services is depressed. This lack of demand is reflected in an absence of hiring and continued high unemployment. Additionally, a large percentage of Americans are not earning enough income to pay taxes. The decrease in tax revenues increases the federal. State and local governments also suffer from a decrease in tax revenues as well. Fewer federal dollars flow down to the states and lower family income results in lower sales which brings in lower sales tax revenue and lower state income tax revenue. State and local governments, unlike the federal government cannot operate with a deficit so the results of increased low family income is reduced state and local government employees or more unemployment. Many on the right have labeled the problem of income disparity as class warfare. However, the issue should not be whether or not it is class warfare because at some point in time, this will effect everyone. If half of the population cannot afford anything but the basic essentials, they surely cannot afford to purchase houses. Without demand, the value of existing homes will decline. The poor cannot afford to but stocks and bonds. Like houses, without demand, the price of stocks and bonds will decline. Poor people cannot afford the services of lawyers, accountants, investment advisers, hedge fund managers, and others that are part of the top 2%. Poor people cannot afford to purchase many of the products and services the sales of which result in enriching the top 2%. Many of the top 2% worry about market share and today, 50% of the market is no more and tomorrow, unless there are significant changes in income distribution, that loss of market potential will increase. If no one can afford to buy products and services, where will the top 2% continue to derive their wealth? We have seen from history that wealth will not trickle down but we can also see how poverty can not only trickle down but poverty can trickle up. Some of the top 2% may never lose enough of their wealth to join the poor, but there are others who are far more dependent upon the 98% to contribute to the growth of their wealth and those people best be concerned about the ways they will be affected by continued income disparity