Saturday, April 11, 2009

Trickle down economics, again?

Ever since Reagan introduced the theory of "trickle down economics" (focus spending and tax cuts on the rich, and the money will "trickle down" to the poor through increased spending and hiring by those with disposable discretionary income), all self styled progressives have agreed that it was an inefficient method of spreading government largesse, because it usually missed its targets.

So, are we aiding the auto workers with financial support for re training and/or re location? Nope, we're propping up their dieing, dinosaur industrial employers with federal payments to the manufacturing giants, in the hope that it will "trickle down" to the workers (after their unions make suitably major concessions on wages, hours and benefits, of course).

In order to solve the mortgage crisis, and remedy the effects of the residential property crash, are we focusing our aid on the individual "upside down" mortgagors? (It's been estimated that, for a fraction of the cost of the financial bailouts to date, we could have simply paid down all residential first mortgages in the country to a 90% loan to value ratio, at current market prices.) Nope, we're bailing out the lenders, in effect subsidizing the losses they incur after foreclosure, rather than paying down the mortgages and preventing foreclosure.

Are we in any way assisting those whose 401K's and Keogh's and IRA's have fallen by as much as 50% in the past year, destroying middle class financial security and delaying retirement? Have the consumer victims of the Wall Street manipulators been given tax credits or deductions to ameliorate the losses? Nope, but the financial institutions (those who steered the consumers into their investments and administered their funds, all for pretty nice commissions) are getting billions of dollars in federal bailout funds.

"Trickle down" is an inefficient method of distributing federal aid. It's inefficient when Reagan and the Bushes do it. It's inefficient when anyone else does it, too.

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