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September 20, 2012

S&P: No, Trickle Down Doesn’t Increase Revenues

by at 7:41 am.

Poor Gov. Chris Christie. Coming off an awful Republican convention in which he was a keynote, Standard and Poor’s “lowered its credit outlook for New Jersey from stable to negative.” Why so? (Bold mine.)

While Standard & Poor’s did not change the state’s AA- rating — one of the worst among the states — it warned the more drastic step of a lower rating loomed if Christie’s nearly 8 percent growth in revenue failed to materialize.

[…]

“We revised the outlook to reflect our view of the risk of revenue assumptions we view as optimistic, continued reliance on one-time measures to offset revenue shortfalls, and longer-term growing expenditure pressures,” John Sugden, a credit analyst for Standard & Poor’s, said.

[…]

Christie has spent much of the year boasting of a “Jersey Comeback” — an assertion that has fizzled in recent months as state revenue has fallen short of expectations, unemployment has risen and foreclosures remain a drag on the real estate market.

What’s Christie’s risky revenue assumption? That cutting taxes will increase the state’s revenues! The Governor’s response to S&P? Double down!

Unswayed by the latest batch of economic news, Christie repeated his call for an income tax cut at an appearance in Bergen County and said it was a “joke” that Democrats had not yet delivered the cut.

I hate having to state the obvious, but…trickle-down economics doesn’t work. Cutting taxes does not increase revenues. It decreases revenues. If I get a pay cut at work, I don’t take in more money than I did before the cut.

Why is basic math so hard for conservatives to understand? Look, we can disagree, and do, about what government should be involved in and how much it should spend. But can we, please, just agree on basic freaking addition and subtraction? George H.W. Bush called Reagan’s supply-side plans “voodoo economics” over thirty years ago - he was right then, and he’s still right. Tax cuts have slashed revenues in states who have implemented them, and destroyed our national budgets. Conservatives complain about deficits but make them worse…the Bush tax cuts account for a very large percent of our deficit right now, along with his war bill, and the severe downturn he left behind him.

If I was a more cynical sort, I’d say that most trickle-down adherents actually know that what they peddle is a crock of snake oil, but they inflict the country with this policy anyway so that when the deficit inevitably balloons, they can slash the budget in places that will hurt the worst off in our country - that they really, underneath it all, mean “trickle-UP” - cutting taxes for the wealthy so their buddies can get even more gawd-awfully rich and the gap between them and the rest of us gets wider.

And a number of conservatives do know this, and do do this, aka the Norquist “drown it in a bathtub” admission. But I believe the real core of the Republican party, especially its voters, are merely obsessed with “supply-side economics” in a religious way, clinging to trickle-down dogma. You know, like when you see an interview with Tom Cruise, and the host tries to talk about the science of mental health, and Tom Cruise bounces up and down on the couch in denial that mental disease even exists, because his crazy ass religion tells him so. You can try to get him to stop bouncing and listen to the empirical evidence, but dogma prevents him from hearing you.

Well, that’s most trickle-down adherents for you. They keep bouncing, because if they stop and actually think logically, never mind view and digest the evidence against it, it would throw their entire worldview upside down, and that is a very uncomfortable place to be.

(Article via dkos.)

5 Responses to “S&P: No, Trickle Down Doesn’t Increase Revenues”

  1. Greg Page Says:

    I don’t disagree with your basic premise (income tax cuts for the rich don’t directly benefit anyone else), but would also add that at some point, their money is better off invested in corporations that will hire people as opposed to the government. I’m not going to argue where that point is — I don’t know whether it’s 39.6 percent, 35 percent, or some other, higher number, but the idea that society benefits from money invested rather than surrendered to Uncle Sam does have some merit.

    Also, what about the cause and effect problem here? The article describes New Jersey’s fiscal woes, which are attributable to larger market forces (i.e. housing bust) and bad state government policies, most of which predate Christie’s term. Yes, he’s proposing tax cuts (and the people in that county are all within an hour’s drive of either NY, CT, or PA), but that’s in response to the current situation…not its cause.

    If national economic problems are still being attributed to Bush and the House (rather than Obama) it seems only fair to say NJ’s problems are the legacy left TO Christie by Trenton and by his predecessors.

  2. Jack Says:

    Unfortunately Greg, when the time comes to reinvest, the place is overseas.

    #trickledownisoutsourced

  3. Joe S. Says:

    Greg, businesses will hire when the market drives their business. That market is established by the millions of ordinary people, each with needs and desires for products and services. A few rich people will not do it.

    However, it may be easier for the people to accept taxes if they could be sure it was not being wasted, or worse taken through fraud.

  4. Mr. Lynne Says:

    Corporations aren’t hiring. Nobody takes their tax break and expands their business in an declining market. The problem is demand - it’s the wallets of people that create demand. So it is not the case that “money is better off invested in corporations that will hire people as opposed to the government.” Compare with infrastructure projects that will hire. Our problem is demand.

  5. Mr. Lynne Says:

    “If national economic problems are still being attributed to Bush and the House (rather than Obama) it seems only fair to say NJ’s problems are the legacy left TO Christie by Trenton and by his predecessors.”

    That would make sense if the only salient variable was time. The reasoning doesn’t really apply because its an over-simplification of a wide variety of policies with a wide variety of effects and that vary in terms of the time their impacts are felt. Lumping them together in order to apply the same thinking to both situations based solely on the one variable (time) isn’t applicable. The world of economics and policy effects are more complicated than one variable.

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