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Trickle Up and Trickle Down

by PAUL CANTOR

Trickle down economics refers to the view that the profits of the rich ultimately trickle down to the poor.  Specifically, for example, tax cuts that benefit the rich motivate them to invest and the growth that results from that investment benefits everyone.

An alternative view, as the humorous Will Rogers famously quipped, is that money trickles up.  “Give it to the people at the bottom,” he said, “and the people at the top will have it before night, anyhow. But at least it will have passed through the poor fellow’s hand’s.”

Had that thought been in President Obama’s mind when Governor Romney coined a new term in the debate on Wednesday by charging him with favoring trickle down government, he might have responded:  “Thank you governor.  You are right.  I do favor programs that help to eliminate poverty.  I favor them since the benefits of such programs trickle down to the rest of us.

“You see governor, the tax cuts you favor were tried by President George W. Bush.  And what was the result?  There were about 33 million people in our country living in poverty at the beginning of his term and about 46 million at the end.

“So even laying aside the argument that poverty amidst plenty is ethically unacceptable I favor trickle down government programs to eliminate it.  I favor those programs because poverty is harmful to rich and poor alike.  Poor adults are less likely to have the education and health care they require to become productive citizens and, therefore, more likely to turn to turn to activities that land them in jail.

“How, then, can we eliminate poverty?  From the point of view of economists absolute poverty is the result of a lack of the potential to produce goods and services and/or the poor performance of the economy and/or a skewed distribution of income.  But the U.S. does not lack the potential to produce enough to lift every one of its citizens above the poverty line.  And, even during the Great Recession years real per capita income in the U.S. was more than sufficient to provide every family with a decent material standard of living. So absolute poverty in our country must be the result of how income is distributed.

“Therefore, when I appeal to the richest among us to pay a bit more in taxes for government programs to support the poor I am appealing to them to do what is in their own best interest.  And since income distribution in our country as measured by the Gini coefficient, is more unequal than in any other developed country, even George Soros and William Buffett, two of the richest among us, agree that what you term trickle down government is called for.”

Had President Obama responded to Governor Romney’s comment like that he would have hit the ball out of the park.   But alas, though the term middle class cropped up 31 times during the debate neither the words “poor” or “poverty” crossed the President’s lips even once.   Score one for the governor.

PAUL CANTOR is a professor of economics at Norwalk Community College in Connecticut.

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