Saturday, November 27, 2010

Trickling Down: Theory and Practice

Glop Down Economic Theory
Trickle down economics hasn't worked for thirty years. That's the period where we've dumped huge amounts of largess into the top of the hopper to stimulate growth from which everyone was supposed to benefit. Only we didn't benefit. Middle class earnings have actually fallen during this period. The largess enriched the rich, but it didn't trickle anywhere. Instead it fueled a series of bubbles that deluded us into thinking things were going great right up until they burst and stripped us of our wealth our delusions and our hope.

Now we're getting some trickle down, but you couldn't call it a benefit by any stretch. While Wall Street is turning in record profits and policy makers are touting the recovery the stuff dripping out of the pipes at the bottom of our economy doesn't smell so sweet. Today in the Washington Post there is an article about community colleges not being able to fill the needs of workers trying to gain new skills in the hopes of finding work. Classes are full and budgets are shrinking. Community colleges are not able to meet the needs of real people in real trouble because they are in trouble too. Everyone knows, or should, that the jobs that were lost during the Great Recession are not coming back anytime soon...if at all. There may eventually be more jobs, but they will not be the ones we lost. Getting a job at the individual level, the level where economic benefits are supposed to trickle out of the pipes, is going to be a matter of having the skills the market wants. Community colleges and vocational education programs are at the forefront of providing these skills, but find themselves with shrinking resources at precisely the time that they are most needed.

Meanwhile the Fed is trying to stimulate growth by printing money and buying Treasury securities. They call this quantitative easing. This is supposed to drive interest rates down and accelerate the flow of money into the economy. Eventually, they say, it will result in the creation of new jobs. Of course if they let the markets decide where those jobs are going to be, they are likely to be in China.

I don't know were the easing is, but I know down here at the bottom there's a prodigious clog when it comes to benefits and what does manage to seep out onto us is extremely unpleasant. Nothing the geniuses at the top are doing has been any help at all. 


  1. I wrote this post almost a year ago. Not much has changed since. yesterday Republicans in the Senate killed a piece of Obama's jobs plan. He wanted to give the states $35 Billion to hire back teachers and firemen. Conservatives don't want to do that. They want to extend the Bush tax cuts instead. In their own proposed jobs plan they want to cut taxes further for corporations. This is the way to stimulate jobs growth, they say. Give the money to people who don't need it and wait for them to hire the people who do need it. Corporations are sitting on record profits and a $2 Trillion cash reserve. They haven't hired anybody yet. I don't know what makes the GOP think they are going to start now.

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