Chubby Nickel Audio Vlog

I would really like to see the model of how trickle down economics is supposed to work, because it looks like a stupid idea to me. Even if it did create jobs (which it doesn’t), it would still not work. All it does is hurt people that aren’t rich.

Lets look at the model in a very simple way. Tom makes $5,000,000 a year and Jim makes $80,000. Tom gets to keep $500,000 more of his because of tax breaks for the rich. That $500,000 can pay about 6 Jims, so lets say Tom starts a new company and hires 6 more Jims. Each Jim only gets to keep $50,000 after taxes. Jim needs a place to live which costs $1,200 a month, a new car at $400 a month, car insurance at $200 a month, cell and home phone at $100 a month, medical insurance at $100 a month, water, garbage, fuel and electricity at about $600 a month, food at about $500 a month, finally $300 to college loans a month, car maintenance at about $1,000 a year, clothes and home necessities at about $1,500 a year and other unforeseen needs about $2,000 a year. That leaves each Jim only able to afford $4,700 a year for himself to spend on things he likes, like going out, video games and all the extra things that make the American economy strong. Now Jim could cut back on things and get cheaper things maybe even saving up $5,000 more a year, but if he does that will be saving for things which may not get into the economy for some time.

That is about $400 a month ($800 if he really cut back), to spend on extra things. Is Jim likely to spend the money on extra things? Only rarely, that is why so many industries are faltering, because Jim will not go and see just ok movies since it takes so much of his spending money, he will  only see movies he really wants to see. Jim will not go and buy just any video game system and games because it takes so much of his spending money. Jim has hardly any money to save for things or invest in things so he is pretty much stuck where he is unless he cuts way back and doesn’t do anything that he enjoys (unless he enjoys staring at a wall when he isn’t working).

So the even if the trickle down effect initially created  more jobs, there are only so many jobs for grocers, banks, gas stations, insurance companies, schools, renters, home builders, hospitals and pharmacies. The reason our economy was strong was because people could afford to support industries that supplied wants and not only needs, so if you cut out the spending power of most of the people to give rich people the spending power to create more jobs, this will result in the secondary industries failing. Mainly because Tom isn’t going to watch every movie each Jim would watch 6 times, isn’t going to buy 6 video game systems, isn’t going to buy 6 of each game, isn’t going to go to a bar and drink 6 times the amount Jim would, wouldn’t buy 6 boxes of cookies each week… etc.

So even if the model did initially create more jobs, unless the more jobs are going to be in a need industry, those jobs won’t last and all the jobs from the secondary industries are going to be lost as well. If you want a stronger economy then just have every one pay the same percentage of income. This will allow the Jims to do things they enjoy and also allow Tom to do the things he enjoys and Tom will still have enough extra money to start a new company that is more likely to succeed in an ecnomy where the Jims can spend more money.