Saturday, January 15, 2011

Trickle Down Economics From Bernanke & The Left

Advocates of tax cuts are often accused by the left of advocating "trickle down economics", which is the idea that if you give the rich a lot of money, it will trickle down to the rest of the population.

In reality, the economic case for tax cuts certainly doesn't lie in any "trickle down" idea, something which is illustrated by the fact that it applies to tax cuts for people with low or moderate income as well. Instead, it is based on the insight that if you improve incentives, then more wealth will be created.

However, as is pointed out here,  Bernanke is in fact making the case for "quantitative easing" on the basis of "trickle down economics", when he says it will boost the economy by the "wealth effects" that higher stock prices creates. And as the richest 1% in America owns 51% of stocks and mutual fund assets while the bottom 50% only owns 0.5%, "quantitative easing" is thus a big redistribution scheme in favor of the wealthy.

Ironically, most of the leftists that complains the most about the increase in inequality is in favor of this inequality increasing scheme.