"Trickle Down Economics" was the brain child of Ronald Reagan, the theory being that the rich were the 'job creators' and if they were able to keep more of their money they would spend more and the money would fall like fiscal manna to the masses below. Sounds good in theory and it seemed to work... for a while.
There is only one problem... eventually the rich will run out of things to spend that money on and instead start socking it away in banks, both foreign and domestic, and will start closing their companies at 'home' and opening them in foreign countries where labor is dirt cheap without having to worry about pesky child labor laws, workplace safety laws or having to pay a 'living wage'. (Thanks to NAFTA, they would be able to do this without having to pay import taxes since they are an American owned company)
Things stopped trickling down and the bottom rung of society grew as factories closed, meaning more people had less money to spend on consumer products so the small Mom and Pop stores suffered as "big box" stores flourished and grew because they could buy in bulk and sell at a lower cost (often from those same companies that once manufactured their products in the USA but now do so overseas).
People had to start buying everything on credit... and the nation as a whole started the slippery slide into debt.
The Government tried to counter this by lowering interest rates and people jumped on the chance to buy a new house or refinance their old one and large banks set up loans that far exceeded the ability to repay them... balloon payments that were decades away in the 1980's were suddenly due. People were selling their homes at higher and higher prices as more people were qualified for house loans that they never thought possible and buying the "American Dream" with little thought of the crisis looming. House prices skyrocketed... personal property taxes on those same homes kept pace as the cities and townships dipped their hands into the pot for their own share... it could not continue for long...
People were adding rooms, pools and more... then... **POP**
The housing bubble burst... it started with the retirees that did not refinance because their homes had been paid off for decades that were suddenly losing their homes as the property taxes doubled, tripled and more and they could no longer afford to keep the home they had owned free and clear longer than their new neighbors had been alive.
People suddenly had homes with half a million dollar mortgages that were suddenly worth a hundred thousand dollars... people stopped buying pools... stopped putting on new rooms... fell behind on payments and where "for sale" signs once dotted neighborhoods now "Foreclosed" notices appeared on doors and homes were standing empty on once bustling streets.
Gas prices rose... it cost more to ship the flour to grind for flour and that was added to the price of flour... it cost more to ship flour for bread and that was added to the cost of bread... it cost more to ship the bread and that cost the stores more... so they charged more for the bread and people could buy less. Companies had to cut back on hours... slow pay increases... raises stopped... people were laid off.
Unemployment reached an all time high... people had less money to spend on anything and without the majority of the people being able to spend money companies did even worse... more layoffs... more closures... more companies shutting doors and moving out of the country... more people out of work and now unable to spend...
This is what "trickle down" has managed to do... and remember... IT IS STILL IN PLACE!!!
This is what the tax cuts for the rich has given our country... a fast and furious boon followed by a crash that we all are suffering for.
The GOP and Fox News will try to tell you that the Healthcare Reform is the cause of what is going on right now... but I ask you, how can something be the cause of actions that were happening before it even came into reality and in fact how can companies say they are laying people off NOW when the policies they say are ruining their business will not even take effect until 2014?????
That is like telling your child that you will not get them braces now because in two years they might break their leg and you will need the money to pay for a cast!
Just ask yourself... how has the "trickle down" been doing for you?
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