Trickle Downers

The Prospect's ongoing exposé of the folly, dysfunctions, and sheer idiocy of feed-the-rich economic policies.

Tax Cuts for the rich. Deregulation for the powerful. Wage suppression for everyone else. These are the tenets of trickle-down economics, the conservatives’ age-old strategy for advantaging the interests of the rich and powerful over those of the middle class and poor. The articles in Trickle-Downers are devoted, first, to exposing and refuting these lies, but equally, to reminding Americans that these claims aren’t made because they are true. Rather, they are made because they are the most effective way elites have found to bully, confuse and intimidate middle- and working-class voters. Trickle-down claims are not real economics. They are negotiating strategies. Here at the Prospect, we hope to help you win that negotiation.

Trickle Downers

An Alternative to Puzder

Fast-food CEO Andy Puzder, Donald Trump’s pick for labor secretary, is a big fan of robots—and not so much of humans. In an interview with Business Insider last March, Puzder had this to say about our robotic little friends: “They’re always polite, they always upsell, they never take a vacation, they never show up late, there’s never a slip-and-fall, or an age, sex, or race discrimination case.”

Correspondingly, Puzder’s record makes clear that the wants and needs of human workers repel and disgust him. He’s opposed increases to the minimum wage, and the extension of overtime eligibility to workers making more than $23,000 a year. His fast-food outlets have been penalized for violating minimum-wage laws. And as his Business Insider disquisition makes clear, things like employee vacations and slipping on the job—things that come out of Puzer’s profits, that is—drive him batty.

When the Senate convenes in January to consider Trump’s cabinet nominations, it might be prudent for the solons to apply Puzder’s tests for human frailty to the nominees—at minimum, to Puzder himself. Is he always polite? Has he been known to take vacations? Or slip? Or fall? If so, wouldn’t a robot do a better job? Any robot programmed to become labor secretary, after all, would likely understand better than Puzder that its mission is to advance rather than retard the interests of American workers.

The senators should heed Puzder’s advice: Reject his nomination and petition Trump to send them a robot, which, by any criterion, including that of human empathy, would be more qualified than the current nominee. 

What Economists Learned in 2016 -- Long After Everyone Else

Alex Milan Tracy/Sipa via AP Images
Alex Milan Tracy/Sipa via AP Images Protesters gathered outside a World Affairs Council meeting on the Trans Pacific Partenership with the U.S. Ambassador to Brunei in Portland, Orgon. trickle-downers.jpg T his week, Bloomberg’s Noah Smith published a list of “ten excellent economics books and papers” that he read in 2016. Number three on his list was the now celebrated paper, “The China Shock: Learning from Labor-Market Adjustment to Large Changes in Trade,” by economists David Autor, David Dorn and Gordon Hanson. Here’s Smith’s summary of the work and its consequences: This is the paper that shook the world of economics. Looking at local data, Autor et al. found that import competition from China was devastating for American manufacturing workers. People who lost their jobs to the China Shock didn’t find new good jobs—instead, they took big permanent pay cuts or went on welfare. The authors also claim that the China Shock was so big that it reduced overall U.S. employment. This...

Larry Kudlow: Trickle Downer of the Week

Trump may tap cable news’ most diehard devotee of supply-side policy as his top economic adviser, cementing his administration’s adherence to a malicious scheme. 

(Photo: AP/Seth Wenig) Kudlow speaks at the New York State Republican Convention in 2014 trickle-downers.jpg I f we needed a clearer signal that Donald Trump’s administration will go all in for amped-up trickle-down economics—that is, tax cuts for the rich, deregulation for the corporations, and wage suppression for everyone else—consider that the president-elect is likely to tap Larry Kudlow to chair his White House Council of Economic Advisers. For those who aren’t familiar with him, Kudlow is a prolific cable news commentator who has a stellar reputation for being wrong—a lot. Like, a lot a lot . Given that he has no formal education in economics, Kudlow also neatly fits Trump’s preference for putting “unconventional” people (i.e., he sees them frequently on cable news) to top White House posts. As David Dayen aptly puts it in The Nation , “Kudlow isn’t an economist, but he plays one on TV.” To put a sharper point on it, he plays a trickle-down economist on TV. As a ubiquitous...

Trickle Upper: Portland Cracks Down on Excessive CEO Pay

In 2017, Portland, Oregon, will become the first city to impose a surtax on companies with CEOs who make more than 100 times their workers’ median pay—an idea that was floated by Prospect executive editor Harold Meyerson two years ago.

“If congressional liberals want to diminish economic inequality, they should also promote legislation that would link corporate tax rates to the ratio between CEO pay and the firm’s median pay,” Meyerson wrote in 2014. “They [CEOs and their boards] would … have a self-interest in raising their workers’ wages.”

The Portland rule, which Councilmember and City Commissioner Steve Novick told Meyerson was inspired by Meyerson’s writing, requires companies to pay an additional 10 percent in taxes if their CEO pay is 100 times their median worker’s pay, and an additional 25 percent if the ratio is more than 250 to 1. Novick told Meyerson that there were 540 such corporations doing business in Portland—five of which are based there.

A similar bill was proposed in California in 2014, but died on the state Senate floor. The 2010 Dodd-Frank financial-reform law required the Securities and Exchange Commission to publish U.S. corporations’ CEO-to-worker pay ratios.

“When I first read about the idea of applying a higher tax rate to companies with extreme ratios of CEO pay to typical worker pay, I thought it was a fascinating idea,” Novick told The New York Times after the measure passed on December 7. In The Guardian, economist Branko Milanovic was also quoted praising the idea, saying “it seems [to be] the first tax that targets inequality as such. … It treats inequality as having a negative externality like taxing carbon emissions.” 

What Workers -- Black, White, Hispanic, and Asian -- Need

(Photo: Sipa USA via AP)
(Photo: Sipa USA via AP) Airport workers on strike hold a protest seeking a $15 minimum wage at O'Hare International Airport in Chicago on November 29, 2016. trickle-downers.jpg A ll happy economies may be alike (there have been so few it’s hard to generalize), but each unhappy economy afflicts its victims differently. So it is for America’s working class, in which both minority and white workers suffer, but in different ways. Last week, Eduardo Porter’s New York Times column propounded the notion, supported by data from the Economic Cycle Research Institute, that despite the recovery of the past half-decade, whites in aggregate still had lost jobs, while minorities had gained them. When measured against the pre-recession employment high point of November 2007, the number of employed whites, Porter wrote, is now more than 700,000 below that apogee, while the number of employed Hispanics has increased by roughly three million, Asian Americans by 1.5 million, and blacks by one million...

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