Does Trickle-Down Economics Actually Work?

Frederick Foresight · Aug 8, 2023

notagain · Aug 8, 2023

Economic system needs to be broad and accessible.
Jump start the smaller companies to take market share away from the monopolies.

newwurldmn · Aug 8, 2023

Frederick Foresight said:

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this time he’s right despite the tone.

Frederick Foresight · Aug 8, 2023

newwurldmn said:
this time he’s right despite the tone.
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What tone would you take if you were being fed the same horseshit for decades?

And speaking of horseshit, supply side aka trickle-down "economics" was referred to in earlier generations as horse-and-sparrow theory: If you feed the horse enough oats, some will pass through to the road for the sparrows.

murray t turtle · Aug 8, 2023

newwurldmn said:
this time he’s right despite the tone.
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%%
MAYBE right ;
on the rich get richer+ tax cuts are great idea. Silly + stupid to pretend tax cuts are bad;
also all Americana are rich, he confuses that fact of rich with super rich. .
And whines about the super richLOL; while failing to disclose his super wealth/
$4 ,000,000.IF he is really that stupid give all $4,000,000 to the gov

newwurldmn · Aug 8, 2023

he’s smug and gets on his high horse. This was especially evident in the last third.

but I agree that trickle down economics doesn’t work.

Frederick Foresight said:
What tone would you take if you were being fed the same horseshit for decades?

And speaking of horseshit, supply side aka trickle-down "economics" was referred to in earlier generations as horse-and-sparrow theory: If you feed the horse enough oats, some will pass through to the road for the sparrows.
More...

ph1l · Aug 8, 2023

Do Robert Reich's Economics Actually Work?

https://www.hoover.org/research/economic-fantasies-robert-reich

The Economic Fantasies Of Robert Reich

He thinks progressive taxes and unions will help the poor. What wishful thinking!

Monday, October 12, 2015 5 min readBy: Richard A. Epstein

Richard A. Epstein

Saving Capitalism: For the Many, Not the Few, he argues for a set of policies that would cripple the American economy. A better title for his book would be Dooming Capitalism, For Everybody.

Reich makes no bones about his central contention, which is to support “an activist government that raises taxes on the wealthy, invests the proceeds in excellent schools and other means people need to get ahead and redistributes to the needy.” In his view, only with these reforms and by “other means,” most of which are left unspecified, can we return to the glory days of his father, when union members could afford to give a good life to their children, which cannot be done today. Reich offers no explanation for why the decline has taken place, but contents himself with denouncing the “myth of the free market” and the idea that the government should not “intrude” into the business of its citizens.

More concretely, Reich starts by insisting that it is a fantasy to assume that there can be a free market without government to create property rights, control monopoly, and enforce contracts. But he fails to note that this exact list of tasks is what classical liberals like myself assign to government as well. In fact, his list is too short. First, he ignores the role of government in controlling crime and pollution. Second, he does not discuss the limits that should be imposed on the subsidy of some businesses by others. Third, he leaves to one side the difficult questions about the organization and financing of public infrastructure and the management of public resources. A good government is ironically a lot larger than Reich seems to understand.

The real differences between progressives like Reich and classical liberals like myself come then not in the proposition that markets depend in multiple ways on public support. Rather, the disagreement is over the means chosen to generate social improvements. It is here that Reich repeatedly misfires. In dealing with property rights, it’s nice that Reich comes out against slavery—but it is troublesome how he dismisses the right of all persons to determine what job offers to accept for work in the open market. The issue comes to center stage on the question of the minimum wage, where Reich takes the sunny view that the huge increase of the minimum wage to $15 per hour from its current level of $7.25 will largely be a transfer of wealth from rich CEOs and their shareholders to workers, who can use the money in question to get off of public assistance.

Dream on! Reich is in serious denial when he assumes that hard pressed firms in competitive markets won’t make serious changes in how they do business when labor costs move sharply higher. If the minimum wage shoots up, it will start to make more economic sense for these firms to replace low-skilled labor with machines and technologies that can do the same work. The employees that do remain will be, by and large, more skilled, shutting out the poor further. For example, Reich never considers the exceedingly high levels of unemployment among minority teenagers, whom regulation has shut out of the labor market.

The unintended consequences of regulations count. The early returns on the minimum wage increases in Seattle are a loss of 1,000 restaurant jobs in the city compared to an increase of 2,300 restaurant jobs in the rest of the state. And this is only for the first round of minimum wage increases. It is unlikely that Reich knows more about the restaurant business than the businesses themselves who will likely turn to customer self-order kiosks and other adjustments to offset rising labor costs. It is just foolish to project that the relatively small declines in employment levels from small increases in minimum wages will carry over when they increase the wedge between the market and the minimum wage.

Reich takes an even odder view in his discussion about the control of monopoly power. There is no classical liberal who looks with indifference on the creation or toleration of cartels or monopolies, especially when propped up by state power. But the same cannot be said of Reich. In his discussion of labor unions, he starts from the fantasy that employers in competitive markets can “dictate” the wages that they pay their employees. The obvious rejoinder is that workers will play one employer against another, so that competitive wages will rise in times of high demand, and fall in times of slack demand. Reich then fails to acknowledge that the entire fabric of labor law since the passage of the 1935 National Labor Relations Act has conferred government-backed monopoly power on unions who, when recognized, have the exclusive bargaining rights to all workers within the appropriate bargaining unit.

The exercise of this monopoly power is far more dangerous than the power held by firms, because it can lead to the imposition of grotesque work rules, while increasing the risk that strikes and lockouts will shut down essential services when the two sides butt heads. The system also tends to collapse under its own weight as new nonunionized firms, both domestic and foreign, can deliver better goods at lower prices, to low income families, than firms hobbled with onerous union contracts. It is no wonder that the percentage of union membership in the private sector has dropped from a high of about 35 percent in 1954 to about 6.6 percent in 2014.

It is only the rise of public union membership, which now stands at about 35 percent that keeps overall union membership at around 11 percent today. Many of those public employee union members are teachers who exact a heavy toll in their nonstop efforts to maintain a public school monopoly in the United States. Reich wants to invest the proceeds from higher taxation into education, but at no point does he discuss the dangers teacher unions pose to that mission. Nor does he mention the possible role that nonunion charter schools play in improving education. There is no doubt that charter school kids in New York, for example, decisively outperform non-charter public school students—which is why parents are clamoring to get their kids into charter schools. There is a stark choice here. Does Reich think that a commitment to unions should take priority over educational excellence?

Next there is the question of how to fund Reich’s ambitious, if misconceived, program of income redistribution. Reich is silent on the question of what programs advance growth, and his prescription for higher taxes on the wealthy for ordinary income and for capital gains only makes matters worse. He gets no quarrel from me on the proposal to tax unrealized gains (i.e. those from unsold stock) at the time of death, and, similarly for allowing deductions for unrealized losses. These have been part of the classical liberal agenda for ages, given that any exemption of large quantities of income from the tax system casts extra burdens on others, which slows down the rate of capital formation and voluntary exchange.

Yet his call for progressivity that targets the top one-percent will backfire. He cannot grow the economy by fleecing the most productive members of the workforce or on investment income from a low-growth economy. Reich laments the inordinate power of the nameless rich, but never explains how that amorphous group contrived in 2012 to pay roughly 38 percent of the taxes on 21.9 percent of income, when the bottom 50 percent paid about 2.8 percent.

Nor does he consider the risk that higher levels of taxation on ordinary income will tend to dull the incentive to work, inclining people to retire sooner or pass up on second jobs. Likewise, he is oblivious to the risk that high capital gains rates make investors reluctant to dump low performing stocks which would then allow them to invest in more productive companies—the very mistake that Hillary Clinton made in her problematic proposal to increase short-term capital gains rates.

Reich is also not alert to the dangers of subsidies to certain well-connected political groups. The ever-expanding subsidies for wind and solar energy that he recommends are ill-advised. If these forms of power can make it in the marketplace, no one should block them. But if they cannot compete with fossil fuels without the subsidy, then so be it. They should be allowed to languish. The basic point is subject to the simple caveat that fossil fuel subsidies are inappropriate as well, and that all forms of energy should have to take into account whatever externalities they create, be it from polluting the air or killing endangered birds. The same judgment applies most emphatically to lavish ethanol subsidies, which manage to distort both energy and food markets in one ill-conceived program.

There is a large point that comes out of Reich’s social agenda. Notwithstanding his long service in government, he seems to have no understanding of the enormous slip that takes place between an ambitious program for social reform and its successful implementation. I have spent most of my academic life in the weeds, looking at the specific operations of government action as it applies to pharmaceuticals, to the environment, to housing, to securities, to education, to employment, banking, insurance, and other social institutions.

In all of these areas, I have come to the conclusion that the modern progressive state has wrought untold damage for two very simple reasons. First, it has no sense as to when government should intervene and when it should stay its hand. The regulation of competitive labor markets is almost always a loser, and the ever-heavy hand of government in this area does much to explain the decline in working class incomes.

Second, the government has no sense of which means work and which do not. If the risk is monopoly, control it with an antitrust law that is limited to monopoly. But don’t wreck competitive industries, and by all means don’t use government power to prop up monopolies, as in labor markets.

But Reich is blind to all this. There is not a single proposal for deregulation in his disjointed book. Unfortunately Saving Capitalism won’t help the many as it promises to. If its policies are implemented, it will wreak economic and social mayhem on everyone.

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https://www.forbes.com/sites/paulro...s-false-facts-false-theories/?sh=27c23623507a

Robert Reich's F Minus In Economics: False Facts, False Theories
Paul Roderick Gregory
Contributor
I cover domestic and world economics from a free-market perspective.

Sep 10, 2013,01:09pm EDT
This article is more than 9 years old.

Higher Wages Can Save America’s Economy – and Its Democracy (Salon.com) is only one of many examples. As a teacher of economics for over forty years and a co-author of a best-selling 1980s economics 101 textbook, I would have given Reich’s paper a resounding F, if he had submitted it for my elementary economics class.

Reich’s elevated credentials point to an automatic A+. As a frequent TV pundit, author of 13 books, Chancellor’s Professor of Public Policy at the University of California at Berkeley no less, and self-identified as “one of the nation’s leading experts on work and the economy,” many readers will automatically believe his economic nonsense. As a former Secretary of Labor, readers would be surprised to learn that Reich does not appear to understand how wages and labor markets work.

PROMOTED

Reich’s resume raises one red flag: He is not an economist but a lawyer – a Yale Law School classmate of Hillary Clinton, who studied a smattering of economics for his PPE (politics, philosophy, and economics) degree at Oxford – a Rhodes Scholar no less. I am no formal credentials snob. Non PhD economists, such as Robert Samuelson, write very good economics. Robert Reich is not one of them.

My F grade is also not based on Reich’s politics, which are quite different from my own.I award it instead for Reich’s incorrect facts and his embarrassing misunderstanding of basic issues about which economists agree.

Reich’s basic complaint in his Higher Wages Can Save America’s Economy – and Its Democracy is that “monied interests” have forgotten the century-old “basic bargain at the heart of America” that employers pay their employees enough to buy what they are selling.This bargain “created a virtuous cycle of higher living standards, more jobs, and better wages. And a democracy that worked reasonably well.” Reich worries that, with this basic bargain now forgotten, production will pile up in warehouses, vainly seeking buyers as the economy stagnates and jobs disappear.

Reich’s “forgotten bargain” is actually a hackneyed reprise of Karl Marx. In Das Kapital Marx warned of crises of overproduction and under consumption. Capitalists push down wages by exploiting workers, but they themselves do not consume. There is no one left to buy what the capitalist factories are producing. I’ll not mark Reich’s paper down for his failure to cite Das Kapital in his sources.

Reich dates the “basic bargain” back to Henry Ford. Henry Ford announced in 1914 that he would pay workers on his Model T assembly line $5 a day – three times what the typical factory employee earned at the time. Ford, according to Reich, took this step because he understood that the higher wage would turn Ford’s auto workers into customers for his Model T’s.

One side question for Reich: The U.S. became the world’s richest and most powerful economy in the late nineteenth century, decades before Ford’s bargain. Reich may want to explain how that could happen without employers agreeing to pay workers enough like the enlightened Henry Ford.

Ford’s $5 wage to convert his workers into Model T customers is an urban legend that thinking economist dismiss as nonsense. Henry Ford’s employees would have had to buy forty cars each to absorb the half million Model T’s rolling off his assembly line in 1916. Ford could sell his Model T’s only if wages were rising generally throughout the economy, not just in his own factories.

Ford raised the wage to $5 because labor productivity was soaring, not because he wanted to create customers. In 1909, his assembly line produced one Model T at his Highland Park plant every 12 hours. By 1914, it had fallen to one car every 96 minutes, and by 1920 to one Model T a minute. (See Henry Ford and the Model T: A Case Study in Productivity). Ford could afford to pay auto workers producing one car a minute much more than those producing a car every twelve hours. He also expanded his market by passing productivity gains on to customers. The Model T’s price fell from $825 in 1908 to $360 in 1916. With generally rising wages and a falling price, Ford became one of the richest men of his era.

Ford Motors was no exception in 1914.Wages were rising throughout the economy because of massive increases in productivity, not because Ford and other employers wanted to pay workers enough to buy their products. Few principles of economics students would fall for this one, but Reich does.That’s ten points off his grade, right there.

Reich’s essay goes from bad to worse as he explains the causes of the Great Depression. Reich must answer a tricky question: If the 1914 basic bargain explains the “virtuous cycle of higher living standards, more jobs, and better wages,” why should the economy collapse fifteen years later in 1929?

Reich has a ready but false answer:“In the years leading up to the Great Crash of 1929, employers forgot Henry Ford’s example. The wages of most American workers stagnated even as the economy surged. Gains went mainly into corporate profits and into the pockets of the very rich.” According to Reich, greedy and short-sighted American employers fell into the Marxist trap. They wanted everything for themselves. They reduced the wages of their workers, who could no longer buy what was being produced. Per Reich: The myopic capitalists created the conditions for a classic Marxist crisis of over production, which we today call the Great Depression.

Reich draws conclusions without checking the facts first. If he had googled Historical Statistics of the United States 1789-1945 on line, he would have discovered that wages rose sharply from 1915 to the Great Depression. Moreover, Simon Kuznets, in his pioneering statistical studies at the NBER, found that labor’s share of national income was on the rise and capital’s share falling in the roaring twenties. In short, Reich uses false facts to support his proposition that the Great Depression was caused by corporations taking too much and paying their workers too little. Making up statistics to prove a theory is an automatic F. Sorry, but that’s the way it is.

Turning to the present, Reich warns that we are repeating the errors of the 1920s. Corporations are again taking too much and leaving workers with too little: “Nothing fundamentally has changed. Corporate profits are up largely because payrolls are down. Even Ford Motor Company is now paying its new hires half what it paid new employees a few years ago.” Reich sounds the alarm: The share of corporate profits is at an all time high of 11 percent…Without enough American consumers, their profitable days (of business) are numbered…. In order to create jobs, businesses need customers.”

Reich may be excused for getting his facts wrong on the lead-up to the Great Depression. After all, he is a busy man. But the basic facts of the business cycle are known to all bankers, corporations, business persons, and economists: During economic downturns, corporate profits fall (often dramatically), while compensation of employees rises but more slowly. Simple arithmetic and the statistical facts confirm, indeed, that the corporate profit share is low during recessions and rises during recoveries, as it is now.

Anyone who bothers to check government data from 1964 to the present can see that the employee compensation share of national income rose immediately preceding and during recessions. If anything, the long-term trend in labor’s share of the pie is slightly upward, not downward as Reich implies.

Reich disputes these irrefutable facts. According to him, recessions are caused by corporate profits taking too much, leaving too little for their employees to buy what corporations are producing. If we believe Reich, the economy should have been booming during each of our recessions and in the tank during recoveries. I do not recall Reich writing a column congratulating corporations when their profits fall relative to wages.

Most alarming, Reich, a former labor secretary, displays a glaring ignorance of how markets work, even labor markets. In his world, big corporations convene behind closed doors to decide how much they deign to give to their workers after they have taken their often obscene profits. He does not understand that wages are generally set in markets, not in smoke-filled corporate board rooms. He displays an even greater lack of appreciation of profits as signals to guide resource allocation and as sources of investment finance. To Reich, profits seem always to be too high, wages too low. I would like to ask him how many workers would be employed if businesses earned no profit, and labor got everything.

Reich uses his F- economics to conclude that “the only way back to a buoyant economy is through a productive system whose gains are more widely shared.”

In Reich’s liberal vision, it is notHenry Ford, Gordon Moore, Jack Welch, Warren Buffet, Bill Gates, Steve Jobs, and hundreds of thousands of medium and small business owners “who make the basic bargain at the heart of America.” Instead, it should be the federal government with progressive taxes, minimum wage laws, and pro-labor regulatory agencies that gives us a prosperous system that, in President Obama’s words, “spreads the wealth around.”

Reich’s F- paper is only one of hundreds or thousands of its ilk. Economics is not an easy subject, and readers can be made to believe all kinds of claptrap, especially if the writer has impressive credentials. We are bombarded with assertions that stimulus should be permanent, deficits do not matter, unemployment insurance creates jobs, higher minimum wages do not cost jobs, marginal tax rates do not affect taxpayer behavior, one out of six Americans are hungry, and welfare programs that give high-school dropouts more than they can earn are good for the economy.

All I can say in my grade school Latin: Caveat lector.

My new book Women of the Gulag: Portraits of Five Remarkable Lives has just been published. It is a great read, if I say so myself.

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https://www.cato.org/regulation/summer-2016/saving-capitalism-robert-reich

Saving Capitalism from Robert Reich
SUMMER 2016 • REGULATION
By David R. Henderson
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Robert Reich, a former U.S. secretary of labor under President Bill Clinton and now a professor of public policy at the University of California, Berkeley’s Goldman School of Public Policy, has written a book whose title suggests that he wants to save capitalism. Well, not quite.

The good news is that Saving Capitalism is nothing like Locked in the Cabinet, his earlier memoir about being labor secretary, in which he literally made up stories that made himself look good, as reported by Jonathan Rauch in his Slate review, “Robert Reich, Quote Doctor,” (May 30, 1997). In the new book, Reich starts by making an important—probably correct—point and, to his credit, documents virtually all of his empirical assertions with checkable citations. But some of his most important empirical claims are wrong, he has a peculiar sense of what is a large amount of wealth and what is a small amount, and one of his claims shows a basic misunderstanding of wealth accumulation.

Government and free markets / Reich starts by decrying the way so many arguments about government economic policy quickly degenerate into whether the free market “is better at doing something than government.” In his view, that makes no sense because, he argues, “There can be no ‘free market’ without government.” The free market, he writes, “does not exist in the wilds beyond the reach of civilization.” That’s true. But according to Reich, civilization is created by government because government “generates the rules.” Yet there were many historical instances in which civilized rules were generated without government. Economist Edward P. Stringham has written about some of these cases in his recent book, Private Governance: Creating Order in Economic and Social Life. And, of course, centuries ago there was the Lex Mercatoria, the Merchant Law, which businesses created and enforced in Europe, completely separate from any government.

But maybe we shouldn’t throw out Reich’s baby with the bath water. He argues correctly, for example, that copyright law, patent law, and bankruptcy law are government creations and that they could be set up differently. He points out that much wealth in the U.S. economy consists of intellectual property. Without patent and copyright law, that property would be worth much less. For instance, in 1998, Congress passed the Copyright Term Extension Act, giving corporations a copyright for 95 years after the date of creation. For obvious reasons, wags at the time called it the Mickey Mouse Extension Act. One cannot argue that this extension was needed to give people an incentive to produce what had already been produced.

Whatever the optimal length of a copyright is, I’m fairly confident that it is well below 95 years. But the bigger‐picture point is that Reich is right that these rules, which many free‐market economists like me favor, are government‐made. For that reason, in fact, some free‐market economists go so far as to oppose patent and copyright as unjustified government‐created monopolies, and they make a stronger case for that policy than you might think.

Some serious problems / Unfortunately, this is the high point of the book. The rest of it reads like one of the standard books that “progressives” write advocating heavy government regulation of human affairs. And Reich’s case is about as unpersuasive as the cases made by others for those same or similar interventions. It’s impossible, in a short review, to cover all of his arguments for all of his regulations, so I will single out five of the most important.

One of his biggest objections is to the 2010 U.S. Supreme Court decision in Citizens United v. Federal Election Commission. Citizens United is an incorporated nonprofit political group that released a movie criticizing Hillary Clinton when she was running for the Democratic presidential nomination in 2008. That violated the McCain‐Feingold Act of 2002, which forbade such actions for the period just before an election. The Supreme Court found for Citizens United. One of the majority’s arguments was that just as media corporations such as the New York Times are free to advocate the election or defeat of a federal candidate, other corporations should have this same freedom.

Reich does not deal with that argument. Instead, he writes, “As a practical matter, freedom of speech is the freedom to be heard, and most citizens’ freedom to be heard is reduced when those who have the deepest pockets get the loudest voice.” Actually, freedom of speech is not the freedom to be heard; it’s—as the term implies—the freedom to speak. There is no guarantee, nor should there be, that you will be heard. Moreover, the New York Times is heard, or read, more than I am. Without the New York Times around, my work might be read a little more. Reich’s reasoning, taken all the way, would argue for prohibition or at least regulation of the New York Times.

In his discussion of antitrust laws, Reich contradicts himself in the space of a page. He criticizes—correctly, in my view—Amazon’s successful urging of President Obama’s Justice Department “to sue five major publishers and Apple for illegally colluding to raise the price of e‑books.” Just two paragraphs later, he complains that “the new monopolists have enough influence to keep antitrust at bay.” But his own example shows that Amazon did not keep antitrust at bay, but used antitrust to go after competitors. So, apparently for Reich, antitrust is good except when it’s not.

At places in the book, he makes one wonder if he understands the importance of incentives. Consider his discussion of student loans. Former students are “laden with student debt,” he writes. He mentions that in 2014, student loans were a whopping “10 percent of all debt in the United States.” He then writes, “But the bankruptcy code does not allow student loan debts to be worked out under its protection.” The “but” makes no sense. It’s precisely the fact that student loans cannot be discharged in bankruptcy that gives lenders an incentive to make such loans, causing the loans to be such a big percent of all debt.

Reich advocates letting students use bankruptcy to get out of loans that “were made to attend schools whose students have low rates of employment after graduating.” That would create a huge incentive problem: students would have even less incentive than they do now to get into schools and/or majors that give them a good shot at a job. On the other hand, maybe his proposal is not so bad. Lenders would respond by charging huge interest rates for students in such situations, and maybe students would get the market‐induced hint.

Reich has long advocated a high minimum wage, and in this book he calls for raising it to half the median wage. How does he handle many economists’ concern that a high minimum wage would destroy job opportunities for people with the fewest skills? He cites work by economists who have found little negative effect of minimum wage increases to levels well below that which he advocates. Interestingly, California Gov. Jerry Brown recently signed a law that will raise the minimum wage to about 69 percent of the median by 2022, considerably above what Reich advocates. It will be interesting to see if Reich opposes such a move.

In response to a claim that many poor Americans do not work hard, he claims that, au contraire, they do. He writes, “The reality is that America’s poor work diligently, often more than 40 hours a week, sometimes in two or more jobs.” But the U.S. Bureau of Labor Statistics study he cites to back that claim is not of the poor, but of the “working poor.” It’s not surprising that the working poor work, but that says little about the work habits of poor people in general.

Reich says that he wants to save capitalism for the many, and he may believe that. But to save capitalism we need to eschew most of what he proposes.
The data on how much poor people work are not hard to find. According to the U.S. Census Bureau, in 2013, 61.5 percent of households in the bottom fifth of the income distribution (and that would include all poor households because they are about 70 percent of the bottom fifth) had no one working at any time during the year, even at a part‐time job. Only 13.4 percent of households in the bottom fifth had someone working a full‐time job for more than 27 weeks.

Reich does give some news that most Americans would welcome, though he does not: in order to get certain kinds of government aid—in particular, the Earned Income Tax Credit—one must work. He comments, “In effect, the new work requirements have merely reduced the number of poor people who are jobless, while increasing the number of poor people who have jobs.” It’s unclear why he thinks it’s bad for poor people to get jobs.

In a paragraph about Bank of America’s $16.65 billion 2014 settlement with the federal government over practices connected to the previous decade’s housing bust, he shows a peculiar sense of what a big number is. That settlement, he writes, “paled in comparison to the bank’s earnings.” And what were those earnings? In 2013, he writes, they were $17 billion. So $16.65 billion pales in comparison with $17 billion? It’s 98% of $17 billion. If Reich were making $300,000 a year and the government forced him to pay a fine of $294,000, would he think the fine “paled in comparison” to his pre‐tax income?

One of Reich’s important empirical claims about wealth betrays a misunderstanding of how wealth is accumulated. See if you can spot it: Referring to a 2013 poll of Americans with more than $3 million of investable assets, Reich writes:

Nearly three‐quarters of those over age 69 and a majority of boomers just below them are the first in their generation to accumulate significant wealth. For the rich under the age of 35, however, inherited wealth is more common.
Of course, it’s more common. Accumulating wealth takes time. So, naturally, the ones who have great wealth at age 35 are necessarily more likely to have inherited it. I’m a good example. When I was 35 and my wife was 36, our combined net worth, including all our IRAs, was about $20,000. If I continue working full‐time until age 69, our investable assets should be about $1.5 million. That’s what a 30‐plus year stretch of saving and investing does.

Conclusion / Reich says that he wants to save capitalism for the many. He may genuinely believe that. But he has two problems.

First, he rarely if ever notes the regulations that keep the fruits of capitalism from the many. Consider housing. He tells how his modest‐income parents were able to buy a house in the 1950s. Left unsaid but implicit is that it’s much harder now, especially—as he well knows—in coastal California. But why? Could it have something to do with restrictions on building houses? Harvard’s Edward Glaeser and Wharton’s Joseph Gyourko have shown that a huge part of the premium for houses in high‐priced areas is due to restrictions on building (“Zoning’s Steep Price,” Fall 2002). But Reich says not a word about such restrictions.

Second, the various regulations that he advocates would make economic growth even more tepid than it is now, making it even harder for the many to rise. We do need to save capitalism for the many, not just the few. And to do that, we need to eschew most of what Reich proposes.
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murray t turtle · Aug 8, 2023

Frederick Foresight said:
And speaking of horseshit, supply side aka trickle-down "economics" was referred to in earlier generations as horse-and-sparrow theory: If you feed the horse enough oats, some will pass through to the road for the sparrows.
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%%
LOL try eating more than horse sh*t, sparrows or oats Forbes may help.
Another good reason for fossil fuels, much cleaner+ not so slick roads

Snuskpelle · Aug 8, 2023

The irony is trickle up economics is what actually happens over time, and it is what is supported by data on wealth concentrations in the US and elsewhere. Trickle down is a fairytale to pacify people.

newwurldmn · Aug 8, 2023

Snuskpelle said:
The irony is trickle up economics is what actually happens over time, and it is what is supported by data on wealth concentrations in the US and elsewhere. Trickle down is a fairytale to pacify people.
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yeah. as middle class grows, so do uber wealthy - like in China and India.