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Trickle Down Economics doesn't work says Alan Blinder. Here’s what does.

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  • Redirecting money from the expiring Bush tax cuts to unemployment benefits would be a net job creator and give the economy a much-needed boost.
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  • Long-term Economic Pain
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Posted by rmontero, AlterNet

Top Economist Alan Blinder wrote this article last week supporting letting the Bush tax cuts on the rich expire.

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The Basic idea behind it is that an unemployed person or a lower income person will spend any extra money he gets right away (he doesn’t have a choice) and thus stimulate the economy, whereas a rich person will save it and thus not stimulate the economy.

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One thing that’s left out in almost all discussions is class. Most of the rich people that received the Bush tax cuts will make most of their money through investments and controlling businesses for a profit, most of the poor make their money on their labor. Any sound businessman knows the way you make a profit is to spend the least amount of money while profiting the most, any of the money you give to businessmen will be used to make them more money. That money won’t trickle down, hiring won’t increase simply because those doing the hiring have more money, hiring will only increase if those doing the hiring must hire more in order to make more profit, which will only happen when demand increases.

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More...

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Related:

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Long-Term Economic Pain, Bob Herbert, New York Times | NY

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  • Simply stated, more and more families are facing utter economic devastation: completely out of money, with their jobs, savings and retirement funds gone, and nowhere to turn for the next dollar.
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  • Reich and Krugman Agree: The Government Needs to Forget About the Deficit and Fix Unemployment
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  • Krugman: US "Depressed Economy" Could Last 5 Years
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