# Does the trickle down theory actually work? **URL:** \ **Category:** Great Debates\ **Created:** [January 26, 2010, 10:42pm UTC](https://boards.straightdope.com/t/does-the-trickle-down-theory-actually-work/526583 "2010-01-26T22:42:59Z")\ **Posts on this page:** 20\ **Page:** 1
**Author:** ![randy054](https://avatars.discourse-cdn.com/v4/letter/r/54ee81/32.png) [@randy054](https://boards.straightdope.com/u/randy054)\ **Post date:** [January 26, 2010, 10:42pm UTC](https://boards.straightdope.com/t/does-the-trickle-down-theory-actually-work/526583/1 "2010-01-26T22:42:59Z")
I came across this thread at Something Awful Forums wherein the OP posted quite a compelling argument that trickle down theory is bullshit and that our standard of living as well as class mobility is on the decline. Here is the link (83 page’s on the thread so far) The American Dream is a Myth > **[The Something Awful Forums](https://forums.somethingawful.com/showthread.php?threadid=3256833&userid=0&perpage=40&pagenumber=1)** Please don’t comment until actually looking at the data and arguments presented there. Thanks ---
**Author:** ![begbert2](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/begbert2/32/3357_2.png) [@begbert2](https://boards.straightdope.com/u/begbert2)\ **Post date:** [January 26, 2010, 10:50pm UTC](https://boards.straightdope.com/t/does-the-trickle-down-theory-actually-work/526583/2 "2010-01-26T22:50:48Z")
So you want us to read an 83 page thread before commenting, then? ---
**Author:** ![Czarcasm](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/czarcasm/32/4050_2.png) [@Czarcasm](https://boards.straightdope.com/u/Czarcasm)\ **Post date:** [January 26, 2010, 10:53pm UTC](https://boards.straightdope.com/t/does-the-trickle-down-theory-actually-work/526583/3 "2010-01-26T22:53:04Z")
> [@randy054](#): > > I came across this thread at Something Awful Forums wherein the OP posted quite a compelling argument that trickle down theory is bullshit and that our standard of living as well as class mobility is on the decline. > > Here is the link (83 page’s on the thread so far) > > The American Dream is a Myth > > [Something happened - The Something Awful Forums](http://forums.somethingawful.com/showthread.php?threadid=3256833&userid=0&perpage=40&pagenumber=1) > > Please don’t comment until actually looking at the data and arguments presented there. Thanks Why don’t _you_ go ahead and comment, since you started this thread and(I presume) read that other thread. ---
**Author:** ![randy054](https://avatars.discourse-cdn.com/v4/letter/r/54ee81/32.png) [@randy054](https://boards.straightdope.com/u/randy054)\ **Post date:** [January 26, 2010, 10:59pm UTC](https://boards.straightdope.com/t/does-the-trickle-down-theory-actually-work/526583/4 "2010-01-26T22:59:20Z")
Ok, this may take awhile, I’ll summarize some of the main points I have come across brought up. The opening post however has a lot of information and is where most of the debate is centered around. (I have only read around 10 pages however) ---
**Author:** ![XT](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/xt/32/456_2.png) [@XT](https://boards.straightdope.com/u/XT)\ **Post date:** [January 26, 2010, 11:06pm UTC](https://boards.straightdope.com/t/does-the-trickle-down-theory-actually-work/526583/5 "2010-01-26T23:06:30Z")
Start here. Define what trickle down theory is, so we are all on the same page. Define what ‘actually work’(s) means exactly. Then give some figures on how our standard of living is in decline, and that ‘class mobility’ is less today than in the past. You may also want to define what you mean by ‘class mobility’ exactly, and how you want to categorize the various classes, so we can judge the relative mobility, both today and in the past. -XT ---
**Author:** ![Robot\_Arm](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/robot_arm/32/18280_2.png) [@Robot\_Arm](https://boards.straightdope.com/u/Robot_Arm)\ **Post date:** [January 26, 2010, 11:22pm UTC](https://boards.straightdope.com/t/does-the-trickle-down-theory-actually-work/526583/6 "2010-01-26T23:22:18Z")
That guy just threw everything at the wall and hopes some of it will stick. There may be some interesting facts tucked away in there, but as a coherent argument, it sucks. I’ve heard and read some interesting things about income distribution in the United States over the past few decades, worthy of debate, even, but that thread is just not the way to get started. ---
**Author:** ![BrotherCadfael](https://avatars.discourse-cdn.com/v4/letter/b/977dab/32.png) [@BrotherCadfael](https://boards.straightdope.com/u/BrotherCadfael)\ **Post date:** [January 26, 2010, 11:26pm UTC](https://boards.straightdope.com/t/does-the-trickle-down-theory-actually-work/526583/7 "2010-01-26T23:26:16Z")
_“Not only does it work, in the long run it is the ONLY thing that works.”_ ---
**Author:** ![Der\_Trihs](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/der_trihs/32/233_2.png) [@Der\_Trihs](https://boards.straightdope.com/u/Der_Trihs)\ **Post date:** [January 26, 2010, 11:26pm UTC](https://boards.straightdope.com/t/does-the-trickle-down-theory-actually-work/526583/8 "2010-01-26T23:26:45Z")
> [@xtisme](#): > > Then give some figures on how our standard of living is in decline, and that ‘class mobility’ is less today than in the past. [As Rich-Poor Gap Grows, Class Mobility Stalls](http://www.post-gazette.com/pg/05133/504149.stm) > [@](#): > > But over the last 10 years, better data and more number-crunching have led economists and sociologists to a new consensus: The escalators of mobility move much more slowly. A substantial body of research finds that at least 45 percent of parents’ advantage in income is passed along to their children, and perhaps as much as 60 percent. With the higher estimate, it’s not only how much money your parents have that matters – even your great-great grandfather’s wealth might give you a noticeable edge today. > > \< snip \> > > Despite the widespread belief that the U.S. remains a more mobile society than Europe, economists and sociologists say that in recent decades the typical child starting out in poverty in continental Europe (or in Canada) has had a better chance at prosperity. Miles Corak, an economist for Canada’s national statistical agency who edited a recent Cambridge University Press book on mobility in Europe and North America, tweaked dozens of studies of the U.S., Canada and European countries to make them comparable. “The U.S. and Britain appear to stand out as the least mobile societies among the rich countries studied,” he finds. France and Germany are somewhat more mobile than the U.S.; Canada and the Nordic countries are much more so. ---
**Author:** ![Sage\_Rat](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/sage_rat/32/399_2.png) [@Sage\_Rat](https://boards.straightdope.com/u/Sage_Rat)\ **Post date:** [January 26, 2010, 11:49pm UTC](https://boards.straightdope.com/t/does-the-trickle-down-theory-actually-work/526583/9 "2010-01-26T23:49:00Z")
So let’s say that we jack up wealth distribution as high as it can go, AKA true socialism. Well, this turns into Communism, which I think it’s safe to say that you don’t need to quote a minutiae of figures to show doesn’t really work. Let’s say that we don’t go that far, we figure out how much money people need to live at the base level, plus put their kids through college, etc. and give them a bit more than that. In return, what we likely see is that business in Las Vegas starts booming, everyone has a car, a big house, and kids going to college. What we don’t see is very much investment or R&D because all money is going to stable markets, food, drink, construction, education. Blue collar workers end up getting even more money by this feedback. But as a whole, the economy shrinks because there’s no growth for this area of the market and there’s no money elsewhere. Eventually the market stabilizes and you’re stuck with an insular country that is happy to just keep going on without any desire to work hard and kick ass. Perhaps an example would be Mexico, Spain, or Greece. Certainly everyone is happy, but you’ve just stalled the economy and technological breakthroughs. ---
**Author:** ![Blalron](https://avatars.discourse-cdn.com/v4/letter/b/35a633/32.png) [@Blalron](https://boards.straightdope.com/u/Blalron)\ **Post date:** [January 27, 2010, 12:01am UTC](https://boards.straightdope.com/t/does-the-trickle-down-theory-actually-work/526583/10 "2010-01-27T00:01:13Z")
Here’s a [powerful](http://online.wsj.com/article/SB118005313993514160.html?mod=home_whats_news_us) cite against the trickle down theory: > [@](#): > > The report also found that between 1947 and 1974, productivity, or output per hour, and median family income, adjusted for inflation, both roughly doubled. Between 1974 and 2000, productivity rose 56% while income rose 29%. Between 2000 and 2005, productivity rose 16% while median income fell 2%, challenging “the notion that a rising tide will lift all boats,” the report says. ---
**Author:** ![XT](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/xt/32/456_2.png) [@XT](https://boards.straightdope.com/u/XT)\ **Post date:** [January 27, 2010, 12:07am UTC](https://boards.straightdope.com/t/does-the-trickle-down-theory-actually-work/526583/11 "2010-01-27T00:07:48Z")
Here is the [Wiki](http://en.wikipedia.org/wiki/Trickle-down_economics) on ‘trickle-down economics’, which I thought might be a good place to start, so that we are all on the same page: > [@](#): > > Trickle-down economics > > “Trickle-down economics” and “trickle-down theory” are terms of political rhetoric that refer to the policy of providing tax cuts or other benefits to businesses in the belief that this will indirectly benefit the broad population.[1] The term has been attributed to humorist Will Rogers, who said during the Great Depression that “money was all appropriated for the top in hopes that it would trickle down to the needy.”[2] > > Proponents of these policies claim that if the top income earners invest more into the business infrastructure and equity markets, it will in turn lead to more goods at lower prices, and create more jobs for middle and lower class individuals.[citation needed] Proponents argue economic growth flows down from the top to the bottom, indirectly benefiting those who do not directly benefit from the policy changes. However, others have argued that “trickle-down” policies generally do not work,[3] and that the trickle-down effect might be very slim.[4] > [@](#): > > Proponents’ views > > Stockman placed supply-side economics in a long tradition in economics, and maintained that laissez-faire will benefit not just those well-placed in the market but also the poorest. A more general version argues that increases in real gross domestic product are almost always good for the poor. > > Economist Thomas Sowell has written that the actual path of money in a private enterprise economy is quite the opposite of that claimed by people who refer to the trickle-down theory. He noted that money invested in new business ventures is first paid out to employees, suppliers, and contractors. Only some time later, if the business is profitable, does money return to the business owners–but in the absence of a profit motive, which is reduced in the aggregate by a raise in marginal tax rates in the upper tiers, this activity does not occur. Sowell further has made the case that no economist has ever advocated a “trickle-down” theory of economics, which is rather a misnomer attributed to certain economic ideas by political critics. [9] > > Although economists do not use the term ‘trickle down’, some economic theories reflect the meaning of this pejorative. Some macroeconomic models assume that a certain proportion of each dollar of income will be saved. This is called the marginal propensity to save. Many studies have found that the marginal propensity to save is considerably higher among wealthier people. Policies, including tax cuts, that seek to increase saving are often aimed at the wealthy for this reason. [10] > > In the early 1990s Congressional Record, non-pejorative uses of the term are rare but do appear.[11][12][13][14] > > A May 16, 2006 editorial in the Wall St. Journal stated, “The Pacific Research Institute has crunched the tax numbers in all 50 states and published the ‘U.S. Economic Freedom Index’ ranking all states according to how friendly or unfriendly their policies were toward free enterprise… In 2005, per capita personal income grew 31% faster in the 15 most economically free states than it did in the 15 states at the bottom of the list. And employment growth was a staggering 216% higher in the most free states.” > [@](#): > > Criticisms > > The economist John Kenneth Galbraith noted that “trickle-down economics” had been tried before in the United States in the 1890s under the name “horse and sparrow theory”. He wrote, “Mr. David Stockman has said that supply-side economics was merely a cover for the trickle-down approach to economic policy—what an older and less elegant generation called the horse-and-sparrow theory: ‘If you feed the horse enough oats, some will pass through to the road for the sparrows.’” Galbraith claimed that the horse and sparrow theory was partly to blame for the Panic of 1896.[16] During this period, in his Cross of Gold speech, Democrat William Jennings Bryan said: > > ``` > There are those who believe that, if you will only legislate to make the well-to-do prosperous, their prosperity will leak through on those below. The Democratic idea, however, has been that if you legislate to make the masses prosperous, their prosperity will find its way up through every class which rests up on them. > > ``` > > Proponents of Keynesian economics and related theories often criticize tax rate cuts for the wealthy as being “trickle down”, arguing tax cuts directly targeting those with less income would be more economically stimulative. Keynesians generally argue for broad fiscal policies that are direct across the entire economy, not toward one specific group. In 2008, after President George W. Bush’s Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke requested $700 billion in immediate Congressional funds, and with Lehman Bros. gone, Bear Stearns and Merrill Lynch acquired by others, and Goldman Sachs seeking a federal bank charter, the Wall Street Journal ran a 1/13/2009 article ’ We’re All Keynesians Again ’ in praise of government intervention. -XT ---
**Author:** ![randy054](https://avatars.discourse-cdn.com/v4/letter/r/54ee81/32.png) [@randy054](https://boards.straightdope.com/u/randy054)\ **Post date:** [January 27, 2010, 12:12am UTC](https://boards.straightdope.com/t/does-the-trickle-down-theory-actually-work/526583/12 "2010-01-27T00:12:58Z")
Trickle down economics otherwise, also known as supply side economics implies that tax cuts, or other benefits to business’s will indirectly benefit the population over the long term through investments creating new business, rises in wages etc. With this in mind, increased productivity is a direct benefit to business and as a consequence should benefit the population as a whole overtime. But wages have stagnated over the past 30 years as productivity as skyrocketed [![](https://endofcapitalism.files.wordpress.com/2009/10/wolff_real_wages.jpg) ](https://endofcapitalism.files.wordpress.com/2009/10/wolff_real_wages.jpg) Also from the Wall Street Journal [http://online.wsj.com/article/SB118005313993514160.html?mod=home\_whats\_news\_us](http://online.wsj.com/article/SB118005313993514160.html?mod=home_whats_news_us) \*\*Not Your Father’s Pay: Why Wages Today Are Weaker \*\* American men in their 30s today are worse off than their fathers’ generation, a reversal from just a decade ago, when sons generally were better off than their fathers, a new study finds. The study, the first in a series on economic mobility undertaken by several prominent think tanks, also says the typical American family’s income has lagged far behind productivity growth since 2000, a departure from most of the post-World War II period. The study, the first in a series on economic mobility undertaken by several prominent think tanks, also says the typical American family’s income has lagged far behind productivity growth since 2000, a departure from most of the post-World War II period. The findings suggest “the up escalator that has historically ensured that each generation would do better than the last may not be working very well,” says the study, which is scheduled for release today. The study was written principally by John Morton of the Pew Charitable Trusts, which is leading the series, called the Economic Mobility Project, and Isabel Sawhill of the Brookings Institution. Other participating think tanks are the Heritage Foundation, American Enterprise Institute and the Urban Institute. In 2004, the median income for a man in his 30s, a good predictor of his lifetime earnings, was $35,010, the study says, 12% less than for men in their 30s in 1974 — their fathers’ generation — adjusted for inflation. A decade ago, median income for men in their 30s was $32,901, 5% higher than 30 years earlier. Ms. Sawhill said she isn’t sure why men’s wages have stagnated. “It seems there’s been some slowdown in economic growth, it’s possible that the movement of women into the labor force has affected male earnings, and it’s possible that men are not working as hard as they used to.” \*\*The study suggests that absolute mobility \*\*— the rate at which an entire generation’s lot improves relative to previous generations — has declined. But within a particular generation, individuals can still get ahead if relative mobility, the rate at which the rich and poor trade places, remains high. Poor fathers may have rich sons, and vice versa. **The report also found that between 1947 and 1974, productivity, or output per hour, and median family income, adjusted for inflation, both roughly doubled. Between 1974 and 2000, productivity rose 56% while income rose 29%. Between 2000 and 2005, productivity rose 16% while median income fell 2%, challenging “the notion that a rising tide will lift all boats,” the report says.** Average wages have not risen over 30 years [http://img.waffleimages.com/49b668a4e387cc6697d14d221ebddfe808e3ee0b/wage.png](http://img.waffleimages.com/49b668a4e387cc6697d14d221ebddfe808e3ee0b/wage.png) Also, while the cost of imported goods may be cheaper because of all this outsoucing, the costs of housing, health, food, etc have also skyrocketed and kept up with inflation while wages have not. The costs of housing actually has a long ways to fall as well in order to be in the range of 2 to 3 times most peoples wages. The US government in collusion with the big investment banks however want to keep the party going. It would have been cheaper to pay off everyones mortgage than to bail out the banks. The banks would have got thier money and people would be kept in thier homes. Instead, the banks like Goldman Sachs, being leveraged 30 to 1, received not only thier winnings from betting on a housing fail, but will also in the end, kick the people out and get the property as well. \*\*Banks Bundled Bad Debt, Bet Against It and Won \*\* [http://www.nytimes.com/2009/12/24/business/24trading.html](http://www.nytimes.com/2009/12/24/business/24trading.html) “The simultaneous selling of securities to customers and shorting them because they believed they were going to default is the most cynical use of credit information that I have ever seen,” said Sylvain R. Raynes, an expert in structured finance at R & R Consulting in New York. “When you buy protection against an event that you have a hand in causing, you are buying fire insurance on someone else’s house and then committing arson.” Class Mobility [http://img.waffleimages.com/ba92c28ccd32d94ac9ac378470c0270b7dbe3466/classcolor.JPG](http://img.waffleimages.com/ba92c28ccd32d94ac9ac378470c0270b7dbe3466/classcolor.JPG) The higher you go, the more income mobile you are, but people in the bottom two quintiles don’t really make it that far, and people in the upper-middle quintile seem to have nowhere to go but down! furthermore, the top 1% controls 46% of the wealth and 19% control 44% and 80% control the remaining 9%. I propose a tax increase and dismantling NAFTA for starters. Oh Ross was right when he said you would hear a great big sucking sound when NAFTA was activated. Look at this graph showing the tax rates from the current era all the way back to 1920. Under Bush 36% Under Regean 50% Under Nixon 70% Under Eisenhower 91% Clearly we did fine when it was at 91%, and while there would be many complaining, there would still be people to take thier place since there would be needs that need to be met. Currently the tax rate for the upper percentile is 35%, but most of thier wealth is stashed in capital gains which is only taxed at 15%. ---
**Author:** ![randy054](https://avatars.discourse-cdn.com/v4/letter/r/54ee81/32.png) [@randy054](https://boards.straightdope.com/u/randy054)\ **Post date:** [January 27, 2010, 12:19am UTC](https://boards.straightdope.com/t/does-the-trickle-down-theory-actually-work/526583/13 "2010-01-27T00:19:38Z")
One of the main causes, we find ourselves in this depression, and it is a depression is because of this inequality of wealth. [http://www.gusmorino.com/pag3/greatdepression/](http://www.gusmorino.com/pag3/greatdepression/) The maldistribution of wealth in the 1920’s existed on many levels. Money was distributed disparately between the rich and the middle-class, between industry and agriculture within the United States, and between the U.S. and Europe. This imbalance of wealth created an unstable economy. The excessive speculation in the late 1920’s kept the stock market artificially high, but eventually lead to large market crashes. These market crashes, combined with the maldistribution of wealth, caused the American economy to capsize. If you don’t believe it is a depression, then picture 36 million Americans in the BreadLines. [http://www.frac.org/html/news/fsp/2009.07\_FSP.htm](http://www.frac.org/html/news/fsp/2009.07_FSP.htm) In July 2009, SNAP/Food Stamp participation continued to break records, rising to a record 35,851,176 people, an increase of 725,621 individuals from June 2009, the prior record level, and an increase of nearly 6.8 million people compared with the prior July. Currently, nearly one in eight Americans receives SNAP/Food Stamps. This is the highest share of the U.S. population on SNAP/Food Stamps.Click here to see a state-by-state analysis (share of total participation - pdf). All states reported increases in caseloads between July 2008 and July 2009. Five states experienced increases over-the-prior July percentage caseload increases above 40 percent: Nevada (49.2%); Utah (46.8%); Idaho (42.3%); Washington (41.8%); and Florida (40.2%). Eight states experienced increases above 30 percent: Vermont (38.2%); Colorado (36%); Wisconsin (35.8%); Arizona (35.6%); New Hampshire (33.7%); Maryland (31.8%); Wyoming (31%); and Georgia (30.5%). Furthermore, unemployment as measured in the great depression, rather this U1 through U6 crap is over 20% ---
**Author:** ![randy054](https://avatars.discourse-cdn.com/v4/letter/r/54ee81/32.png) [@randy054](https://boards.straightdope.com/u/randy054)\ **Post date:** [January 27, 2010, 12:41am UTC](https://boards.straightdope.com/t/does-the-trickle-down-theory-actually-work/526583/14 "2010-01-27T00:41:14Z")
I think I have shown a good case on while Trickle Down Economics does not work, at least as things are right now. Apparently it is going to only get worse, now that corporations will be able to throw unlimited funds at the people they want us to choose from. I think ones running the ship hoped that the Chinese would all of a sudden be massive consumers like Americans. In hard times people learn to save money and spend only on what they need. Re- Poor Chinese Farmers - and many people that went through the Great Depression were the same way. It takes a generation to create a high consumerist lifestyle like America had. Here is a graph depiciting the distribution of wealth in the Great Depression and now. It appears things will only get worse based on the level of disparity. [http://www.mrunlucky.com/wp-content/uploads/greed.jpg](http://www.mrunlucky.com/wp-content/uploads/greed.jpg) ---
**Author:** ![Kobal2](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/kobal2/32/20_2.png) [@Kobal2](https://boards.straightdope.com/u/Kobal2)\ **Post date:** [January 27, 2010, 12:43am UTC](https://boards.straightdope.com/t/does-the-trickle-down-theory-actually-work/526583/15 "2010-01-27T00:43:54Z")
> [@](#): > > Mr. David Stockman has said that supply-side economics was merely a cover for the trickle-down approach to economic policy—what an older and less elegant generation called the horse-and-sparrow theory: ‘If you feed the horse enough oats, some will pass through to the road for the sparrows.’" I love this. “Don’t worry, y’all can eat our shit” became "Don’t worry, we’ll be pissing on y’all ". Hey, at least they’re upfront. ---
**Author:** ![Dick\_Dastardly](https://avatars.discourse-cdn.com/v4/letter/d/c4cdca/32.png) [@Dick\_Dastardly](https://boards.straightdope.com/u/Dick_Dastardly)\ **Post date:** [January 27, 2010, 12:49am UTC](https://boards.straightdope.com/t/does-the-trickle-down-theory-actually-work/526583/16 "2010-01-27T00:49:57Z")
The policies espoused by the trickle down gang have caused wealth to tricle up over the past few decades. The share of wealth of the top 1% has more than doubled since Reagan took office, tax cuts have left us with subpar economic growth but massive deficits. Even the guys who brought you supply side economics like Bruce Bartlett are now saying it was a dumb idea that backfired. Guys like David Stockman are now even advocating cracking down on Wall Street. Unfortunately the whole thing that tax cuts are always good is now an article of faith for the dumbass wing of the GOP, which is just about all of them these days. This doesn’t bode well for our economic future, we can only hope they get back in power as soon as possible and screw things up so badly next time that the bond markets reimpose economic sanity on the country. ---
**Author:** ![Dick\_Dastardly](https://avatars.discourse-cdn.com/v4/letter/d/c4cdca/32.png) [@Dick\_Dastardly](https://boards.straightdope.com/u/Dick_Dastardly)\ **Post date:** [January 27, 2010, 12:52am UTC](https://boards.straightdope.com/t/does-the-trickle-down-theory-actually-work/526583/17 "2010-01-27T00:52:28Z")
“There are two ideas of government. There are those who believe that you just legislate to make the well-to-do prosperous, that their prosperity will leak through on those below. The Democratic idea has been that if you legislate to make the masses prosperous their prosperity will find its way up and through every class that rests upon it.” William Jennings Bryan Democratic National Convention 1896 Plus ca change and all that. ---
**Author:** ![Algher](https://avatars.discourse-cdn.com/v4/letter/a/3d9bf3/32.png) [@Algher](https://boards.straightdope.com/u/Algher)\ **Post date:** [January 27, 2010, 1:02am UTC](https://boards.straightdope.com/t/does-the-trickle-down-theory-actually-work/526583/18 "2010-01-27T01:02:44Z")
Income mobility is the key measurement. The Michigan Study is the one most cited, but here is some information using tax returns and panel data: > **[Homepage](https://www.entrepreneur.com/)** > > Your ultimate resource for small business news, entrepreneurship, business management, franchise opportunities, growth strategies and making money. Learn how to succeed. > [@](#): > > - There was considerable income mobility of individuals in the U.S. economy over the 1996-2005 period. More than half of taxpayers (57.5 percent by one measure and 55 percent by another measure) moved to a different income quintile over this period. About half (56 percent by one measure and 42 percent by another) of those in the bottom income quintile in 1996 moved to a higher income group by 2005. > > - Median incomes of taxpayers in the sample increased by 24 percent after adjusting for inflation. The real incomes of two-thirds of all taxpayers increased over this period. Furthermore, the median incomes of those initially in the lowest income groups increased more in percentage terms than the median incomes of those in the higher income groups. In contrast, the real median incomes of taxpayers who were in the highest income groups in 1996 declined by 2005. > > - The composition of the very top income groups changed dramatically over time. Less than half (39 percent or 42 percent depending on the measure) of those in the top 1 percent in 1996 were still in the top 1 percent in 2005. Less than one-fourth of the individuals in the top 1/100th percent in 1996 remained in that group in 2005. > > - The degree of relative income mobility among income groups over the 1996-2005 period was very similar to that over the prior decade (19871996). To the extent that increasing income inequality widened income gaps, this was offset by increased absolute income mobility so that relative income mobility neither increased nor decreased over the past 20 years. > > - Upward and downward mobility is affected by many factors. Based on a regression analysis, we find that initial position in the income distribution and changes in marital status are among the more important factors associated with changing positions in the income distribution. ---
**Author:** ![Rumor\_Watkins](https://avatars.discourse-cdn.com/v4/letter/r/d9b06d/32.png) [@Rumor\_Watkins](https://boards.straightdope.com/u/Rumor_Watkins)\ **Post date:** [January 27, 2010, 1:35am UTC](https://boards.straightdope.com/t/does-the-trickle-down-theory-actually-work/526583/19 "2010-01-27T01:35:59Z")
[rant] The problem, to me, of the “wealth inequality is good because that way we can enlarge the pie, instead of merely changing the allocation of the same-sized pie” crowd isn’t one of wealth inequality per se - it’s that because of the way our government is fashioned the wealth inequality results in political inequality. i don’t care if bill gates is richer than me by 1000 times or 10000 times even though this is what economic conservatives will believe to be a feature of “economic liberal” thought - that economic liberals are all incurably jealous. indeed, by enriching small groups of capital owners, it may actually create a larger pie for everyone else to become enriched. to the extent that this is true (which it may or may not be - i’m not entirely convinced people enriched by conservative economic policies don’t just hoard the money or spend it entirely on themselves) then i have no real qualms with it. on some primal level, maybe it is better that capital is concentrated in the hands of people who know what to do with it - instead of people who will camp outside a wal-mart for a night just so they can be the first to waste their money on consumables. what is problematic, however, is that because of the way society works (and this isn’t some unique feature of american government - although the way we finance elections and the way our political system works may enhance the problems) those with economic capital have greater political capital. which i’m not cool with. [/rant] ---
**Author:** ![jshore](https://avatars.discourse-cdn.com/v4/letter/j/b5e925/32.png) [@jshore](https://boards.straightdope.com/u/jshore)\ **Post date:** [January 27, 2010, 1:52am UTC](https://boards.straightdope.com/t/does-the-trickle-down-theory-actually-work/526583/20 "2010-01-27T01:52:38Z")
> [@Algher](#): > > Income mobility is the key measurement. The Michigan Study is the one most cited, but here is some information using tax returns and panel data: > > [Homepage | Entrepreneur](http://www.entrepreneur.com/tradejournals/article/print/206340741.html) The problem with those studies is they tend not to correct for factors such as what happens to people as they age, etc. So, for example, even someone from a relatively well-to-do family may not have much income while they are, say, in graduate school or medical school. Likewise, people who earned a lot of money while they were working won’t have a huge income once they retire…at least in years when the stock market isn’t going like gangbusters. I think one needs to look at more comprehensive assessments of income and wealth. > [@Rumor\_Watkins](#): > > what is problematic, however, is that because of the way society works (and this isn’t some unique feature of american government - although the way we finance elections and the way our political system works may enhance the problems) those with economic capital have greater political capital. which i’m not cool with. Yeah…That’s a real problem. Another issue is that people seem to measure wealth relatively…i.e., in comparison to those around them. And, that is not entirely for bad reasons either. After all, housing prices are based in large part on what people are willing to pay for them and thus they tend to get bid up, particularly in areas where there is a lot of wealth. So, those not on the wealthy side of average end up in housing situations that are bad in lots of ways…high crime, poor schools, etc., etc. It is often pointed out that those who are below the poverty line in the U.S. often have median incomes considerably higher than the average in many Third World countries; however, I don’t think it is realistic to believe that this translates into the better lifestyles that this would seem to imply. [Next page](https://boards.straightdope.com/t/does-the-trickle-down-theory-actually-work/526583.md?page=2)