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AlterNet reports
When Republicans in Congress passed a big, fat tax break bill in December, they insisted it meant American workers would be singing "Happy Days Are Here Again" all the way to the bank. The payoff from the tax cut would be raises totaling $4,000 to $9,000, the President's Council of Economic Advisers assured workers. But something bad happened to workers on their way to the repository. They never got that money.
In fact, their real wages declined because of higher inflation. At the same time, the amount workers had to pay in interest on loans for cars and credit cards increased. And, to top it off, Republicans threatened to make workers pay for the tax break with cuts to Social Security, Medicare and Medicaid. So now, workers across America are wondering, "Where's that raise?". It's nowhere to be found.
The U.S. Bureau of Labor Statistics reported this week that wages for production and nonsupervisory workers decreased by 0.1 percent from May 2017 to May 2018 when inflation is factored in. The compensation for all workers together, including supervisors, rose an underwhelming 0.1 percent from April 2018 to May 2018.
That's not what congressional Republicans promised workers. They said corporations, which got the biggest, fattest tax cuts of all, would use that extra money to increase wages. Some workers got one-time bonuses and an even smaller number received raises. But not many. The group Americans for Tax Fairness estimates it's 4.3 percent of all U.S. workers.
The New York Times story about this record breaker describes the phenomena this way: "Companies buy back their shares when they believe they have nothing better to do with their money than to return capital to shareholders." So despite promises from the GOP and the President's Council of Economic Advisers, corporations believed further enriching their own executives and shareholders was a much better way to use the money than increasing workers' wages--wages that have been stagnant for decades.
(Score: 0) by Anonymous Coward on Thursday June 21 2018, @11:32PM (5 children)
Isn't trickle down economics the entire basis for the federal reserve system? They make it cheaper for the biggest banks in the US to borrow money and hope this trickles down to everyone else?
(Score: 2) by Thexalon on Friday June 22 2018, @01:52AM (4 children)
Whether or not it's the theory behind the Federal Reserve:
Starting in 2008, the Federal Reserve lowered interest rates as far as they could possibly go in an effort to counteract the financial crash and resulting crash of the "real economy" (production and distribution of goods and services, rather than the financial manipulations of Wall Street and commodities markets). The hope was that the banks would lend out money more easily, which would stimulate demand for goods and services purchased using those loans, and that increased demand for goods and services would in turn get more people back to work producing the goods and services in question.
That action was probably better than doing nothing as some European banks tried to do. But it was also of limited value because a lot of the banks in question took the money they were borrowing from the Federal Reserve and used it to buy US Treasury Bonds rather than take on the risk of loaning it. In short, the money didn't "trickle down".
The only thing that stops a bad guy with a compiler is a good guy with a compiler.
(Score: 0) by Anonymous Coward on Friday June 22 2018, @05:57AM
Interesting, seems like something to be concerned about...
(Score: 0) by Anonymous Coward on Friday June 22 2018, @07:22AM (1 child)
Remember that the banks in question would have loved to extend loans, if they could have.
First: loan regulations were tightened in the wake of the sub-prime thing.
Second: banks were under a lot of pressure to increase their reserve ratios so that they could pass stress tests.
Result: they had to get reserves, not loans, despite Congress thumping tables and looking angry. Politically inconvenient? Sure. But the alternative was not being banks any more. Huzzah for unintended consequences.
(Score: 2) by HiThere on Friday June 22 2018, @06:22PM
It's not a simple problem. Some of the banks were illegally loaning more money than they were allowed to. (They're only allowed to lend a certain percentage more than they actually have.) When people started looking, they started trying to get legal quickly. But the problem was because they weren't legal to start with.
OTOH, it's also dubious when you say "the banks would love to lend money", because those are individual transactions. Corporate entities don't have a centralized consciousness. It would be fair to say "The managers of those banks would love to lend money", but that's not really true, because the managers don't do the individual transactions. They set policies that encourage particular actions, which aren't always the ones that they intend, and they don't always check carefully exactly what actions result. You could say this means that they are incompetent as managers, but they've got lots of other things that they need to do, and those they are supervising will sometimes hide their actions. (Did the Wells Fargo managers know that invalid accounts were being opened? Or did they just set up conditions that encouraged that? And is "just" appropriate in that prior sentence?)
When perverse incentives are created, perverse actions tend to result, even when those actions were ostensibly discouraged. But I don't know of a financial system around (I'm no expert, of course) that isn't full of perverse incentives.
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(Score: 0) by Anonymous Coward on Friday June 22 2018, @04:23PM
So are you for or against the federal reserve system, which you seem to recognize is based on trickle down economics?