Amanduh tackles effective demand

And the result ain’t pretty:

If the goal is to help working people do better — as opposed to helping rich people buy diamond-encrusted water bowls for their dogs — then it’s critical to keep fully funding programs like Medicaid and the Supplemental Nutrition Assistance Program (SNAP), better known as food stamps.

“When you give people money to spend on food or to go out to get health care, then that money is directly being spent on the economy,” explained Kate Bahn, an economist for the Center for American Progress, in a phone conversation.

Conservatives have long argued for “trickle-down” economics, saying that hefty tax cuts for the rich will lead to more investment and more jobs. Instead, it tends to lead to more conspicuous and gratuitous consumption.

But it’s still consumption, isn’t it honey? Which affects demand the same way…..

“In reality, economic growth in the United States since World War II has tended to be greater in times with relatively high top marginal income tax rates,” policy analysts Alexandra Thornton and Harry Stein wrote in a 2015 paper for the Center for American Progress, citing multiple studies analyzing the relationship between tax rates and economic growth.

Sigh. A result that relies upon the manner in which high post-WWII growth happened to coincide both with the rest of the world’s economy having been bombed flat and high tax rates to pay the debt from said war.

26 comments on “Amanduh tackles effective demand

  1. ‘Conservatives have long argued for “trickle-down” economics”: is that actually true?

  2. ““When you give people money to spend on food or to go out to get health care, then that money is directly being spent on the economy”…”

    But diamond-encrusted dog water bowls grow free in the hedgerow for anyone to collect…?

  3. I hear this fallacy all the time. Rich people don’t spend their money: they swim in their money pools like Scrooge McDuck. And the little that they do spend goes on things and causes that they like, rather than things and causes that Amanda likes. By contrast poor people never save: the second any money lands in their account, they rush out to Primark to stock up on shiny baubles and thus contribute to the economy.

    There’s a reasonable argument that our neighbour’s 9-5 job should be teaching or nursing rather than encrusting diamonds on dog bowls. Or to put it in more familiar terms, that we should tax the rich to provide some services for the poor. But we already do that, massively.

  4. Diamond encrusted dog bowls is precisely what you want, because it’s an epic form of wealth redistribution from people who were lucky enough to get together with their wealth in the first place to skilled artisans/exploiters of idiots.

    See also: whatever the fuck appears on catwalks.

  5. dearieme:

    ‘Conservatives have long argued for “trickle-down” economics”: is that actually true?

    No. But Economics does argue that a rising tide floats all boats. Traditionally given as a reason why a bus driver in Helsinki has a higher standard of living than a bus driver in Dhaka.

  6. If you don’t get Say’s Law then you’re not an economist imo. Not in any real sense of understanding the real world anyway.

    This idea that spending money to create demand is the problem is putting the cart before the horse bigly.

  7. “But diamond-encrusted dog water bowls grow free in the hedgerow for anyone to collect…?”

    No, they’re made by other super duper rich people so that the money doesn’t go anywhere near the oiks poking their faces through the gates.

  8. Hm.

    Money paid to the BBC under threat of imprisonment even if you do not use their services is channeled to the Graun in the form of ads.

    This is a GOOD thing.

    It is not cronyism, it is not the State mopping up resources, because it is spent on US.

    And that is why it is GOOD.

    Yeah, right…

  9. Plus there’s another reason why we like the rich spending money on status-signaling goods: often it trickles down to the rest of us, e.g. mobile phones. Stuff like ABS brakes gets put on high-end cars first which the rich buy, eventually it becomes standard.

  10. Gamecock wishes he had a dog, so he could get a diamond encrusted water bowl for it.

    ‘Massive cuts to Medicaid and food stamps will have devastating ripple effects’

    Leaving the people’s money to the people to spend how they want accomplishes the same.

    ‘then that money is directly being spent on the economy’

    IN the economy, not ON the economy. And how does one spend money outside of the economy? Taxes? Overseas?

  11. In order for taxes or overseas spending to be considered outside of the economy we have to only focus on a limited portion of the economy. What we need is something that takes money out of circulation and provides no return that can be monetized. The only thing I can think of at the moment is a kid squishing coins on railroad tracks.

    Even still I have seen squished coins for sale for far more than face value. A kid that sells a squished coin is still participating in the economy. In order to consider the money as spent outside of the economy the coin must be discarded leaving only a memory no one is willing to pay for.

  12. BiND

    “No, they’re made by other super duper rich people so that the money doesn’t go anywhere near the oiks poking their faces through the gates.”

    Don’t forget the diamond miners, their managers, the shareholders in the mining companies…the agents…the wholesalers…the designers…the craftsmen…the brand’s PR…the retail jobs….The oiks benefit significantly from such spending.

  13. “A result that relies upon the manner in which high post-WWII growth happened to coincide both with the rest of the world’s economy having been bombed flat and high tax rates to pay the debt from said war.”

    And fucking US apartheid. Both as a matter of principle and practice, every time one of those crypto-Nazi fuckers on the left mentions how great things were in the fifties and sixties, they need to have their noses rubbed in their racist defecation.

  14. “And fucking US apartheid.”

    How did alleged US apartheid result in

    “economic growth in the United States since World War II has tended to be greater in times with relatively high top marginal income tax rates”

    Did you stop taking your meds?

  15. The rich spend money. Just they don’t spend all their money.
    They spend more than the poor on an individual level but there are a lot more poor people spending overall.

    Has the writer ever considered that to a good chunk of the world, Amanduh is rich.

  16. This week I was standing behind a couple using WIC coupons to buy groceries. They had identical brightly colored hair pulled up into a bun, numerous tats, and many piercings. It was so nice to know that the government would support them in the necessities while they could use their fungible assets to so visibly and expensively support the Arts. /s

  17. Theo,

    “Don’t forget the diamond miners, their managers, the shareholders in the mining companies…the agents…the wholesalers…the designers…the craftsmen…the brand’s PR…the retail jobs….The oiks benefit significantly from such spending.”

    Of course. As far as I can find no serious economist talks about trickle down, but that is what is generally meant by those who do you use the term.

    IIRC Tim found an interesting example after the finincial crises – among the first to be hit in London were the dog walkers of those bankers who lost their jobs.

  18. Aye, BiND. Got a friend that does work around the home. Most regular customers were well-healed. During the Great Recession times got tough ‘cos said friend’s services were one of the easiest expenses to drop.

  19. Dave – “And fucking US apartheid. Both as a matter of principle and practice, every time one of those crypto-Nazi fuckers on the left mentions how great things were in the fifties and sixties, they need to have their noses rubbed in their racist defecation.”

    Insane level trolling there Dave. So oppressing Black people and keeping them from voting caused the great post-War economic boom? Do tell. Anyone who thinks the Fifties were great, especially if they are crypto-Nazis, probably is not unaware of the racism.

  20. LY, so the pleasure of squashing money can’t be given a monetary value? Sure you don’t want to rethink that?

    Cynic, was your friend some kind of aquatherapist? I mean, if their regular customers were healed in a well…

  21. SMFS>

    Whut?

    Yes, of course keeping half the population as a drastically underpaid underclass kept things pretty rosy for those on top. The fifties and sixties were economically hard times for ‘non-whites’, not good times.

    The basic proposition, that the fifties and sixties were good economic times, is just plain false. They were pretty average times unless you only look at ‘whites’.

  22. @Nemo

    You, you pendant!

    (it did look wrong when I typed it, but I couldn’t suss out why)

    🙂

  23. Thomas Sowell describes with data the economic evolution of the black family.

    All heading ver much in the right direction until the early sixties. Coincidentally?? it (the black family) all starts to fall apart with the introduction of welfare.

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