The Republican economics are wrong

Discussion in 'Economy' started by tererun, May 21, 2012.

  1. tererun
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    tererun BANNED

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    This is going to show the main weakness in why giving people money to spend does not directly lead to an increase in consumption which would lead to an increase in job creation. This is the main flaw in the republican idea of trickle down economics where we give the rich more spending money to create more jobs.

    What is the difference between spending and consumption? Let us say you have a brand name coach handbag. For all the guys that is a purse that costs around 300 dollars. On the other side of the spectrum is a Walmart purse that costs about 10 dollars. No you have a person who needs a purse. Due to it's brand name the coach purse can be sold for 300 dollars and people still buy them. That is spending 300 dollars. Let us say you decided to spend your three hundred dollars on walmart purses. You would have to buy 30 of them. Buying 30 of them instead of 1 is consumption.

    Now why does this matter? Well it takes about the same amount of resources to manufacture each purse. The walmart manufacturer may save a cent or two per purse in manufacturing costs, but it is not much. So to make a single purse takes a certain amount of man hours of labor. That is not a variable as both are machine made, both are designed, both require the use of the same amounts of resources.

    Now here is the reason why trickle down economics does not actually boost the economy. Let us say i get a lot of money. I am going to start spending more because i will buy more expensive products. However i do not consume more. In my example above it would be stupid to have 30 purses for most people. If people who already have the money to consume the walmart purse they need get more money they simply look for a brand name purse to use the extra money on.

    to bring it a little closer to reality. People who win the lottery or get really great success spend their extra money on names. They buy a porsche. they buy a mansion. They buy the coach handbag. They will consume a bit more than a person of lesser money, but they are only one person. There are diminishing returns on the value of multiple items. You can have 10 big screen TVs, but can you use ten big screen TVs? There is somewhat of an increase in demand, but since manufacturing costs remain a relative constant you simply are not buying in enough mass to make jobs. Unless you have a need to fill, you are not going to make a business just to make a business. Handing people a million dollars in hopes they would go the direction of making a business to employ people is aimless and that business is going to fail like the aimless dot.coms.

    This is where the reverse actually becomes more true. trickle up economics has a much better potential for accomplishing the goals. Let us consider a poor person. this is a person who has to do without some needs and most wants. their consumption is reduced because they simply cannot consume. Let us say i give you 200 dollars for food (Those of you who are not poor) what are you going to do? You might save some of it, you might buy extra, but you would probably go out to eat or buy some higher quality foods. The amount of food you eat will probably not change too much if you are already above the poverty line where you do not have to deny yourself needs. Now if i give poor people money to buy food they are actually going to consume more food.

    The lower echelons of society have more consumption power than the rich. They also have more of a need to consume. So when you give them extra money they actually purchase more for themselves rather than spending on brand names or savings. The profit from those purchases gives business the revenue to increase jobs and production to meet the need that exists.

    This is why trickle down economics has it backwards and fails. If you put money into the rich one percent and hope they get guided into creating jobs with no present need to fill you are going to be really lucky if that does anything at all. Where do you create the jobs? What do the people do? there is no demand from that. On the other hand by giving money to the poor to consume more they create a demand while sales lead to the profit to fill that demand. because they are poor they have to spend, and that spending shows you where to create jobs. That is actually letting the market guide itself.
     
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  2. Two Thumbs
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    IQ fail from the start.

    The Fed can only give what it first takes.


    Better luck next time junior
     
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  3. editec
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    editec Mr. Forgot-it-All

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    Not JUST the Republicans have it wrong.

    Our entire economic system is wrong.

    What we have now is a good system of economics for a society dealing with scarcity.

    Happily for us (sort of) that is not the kind of economy we really have, is it?

    Mostly our economy is one of abundance, not scarcity.

    19th and 20th century capitalism really basically no longer works very well for most people because our natural economy has changed but our economic system hasn't changed to reflect the changes in circumstance.

    I would be shocked to learn that CAPITALISM (as currently practiced) worldwide hasn't changed dramatically by the end of this century.

    I still think we'll have a form of capitalism, but one that recognizes the necessity and responsibility to serve ALL the people, rather than just the winners of the captialists' game.

    Either those changes will be made to our economic systems or mankind's societies are going to collapse from a lack of support by the people in it.

    No police state, that fails to meet the needs of the majority of people is stable -- no matter how repressive it is.
     
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    Last edited: May 21, 2012
  4. tererun
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    tererun BANNED

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    So you say that I am wrong without giving any reasons. Do you understand what I said? Because if it is so wrong you most certainly could have pointed it out better.


    Yeah, the fed takes money. Let us think for a moment what would happen if instead of giving 3 billion dollars to a few companies the fed gave that money to everyone. In the first case a bunch of rich guys get some more money they can spread around to their friends. Maybe they create a business for the fun of it. But now we have the government sending every citizen a stimulus check of 100 dollars. I am using very simple math here.

    Let us look at the two situations. In the first let us say you have the one percent. That is 3 million people who already have a lot of money getting 3 million a pop. Now they are going to spend some of that money, but they are going to piss a lot of it away. 3 mil can get them a new house, some new cars. It is a pretty groovy amount of money to be had. Do you really see them going out and creating a bunch of businesses with that money while they do not have any reason to think about that.

    Now let us say we sent 100 dollar checks to every citizen. Now everyone has an extra 100 dollars. Huge number of those people will have to spend the money because they are poor. The ones who don't "have" to spend the money who are on the poor end of the totem pole will probably just go out and buy a few things anyway.

    You have the difference of 3 million people consuming and 300 million people consuming. you are going to need more shit for the lower class because they have the numbers
     
  5. Warrior102
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    Warrior102 Gold Member

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    The Fed doesn't have any money to give, numbnuts. The Fed is NOT a revenue generating machine. It's fed by taxpayers.

    Moron much?
     
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  6. DSGE
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    DSGE VIP Member

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    Ah, it actually is a revenue generating machine. It earns seigniorage from buying assets with created money, which it remits to the Treasury. Also, it can create money, so... But how does the Fed even enter into this? I don't see the Fed mentioned anywhere in the OP? :eusa_eh:


    The problem with Republican economics (which Democrats also don't seem to show they understand) is that there aren't finitely many jobs, and if we want more employment we need to incentivise some Job Creators to go and create new jobs by giving them more income. Anybody with the most elementary knowledge of economics knows that natural economic forces push the economy to full employment. It may deviate from it during short run business cycles (which may last a while depending on what's causing them), but in the end it always comes back. It doesn't matter who income goes to. It doesn't matter that rich people save more of their income than poorer people, consumption creates jobs too. And any savings that poorer people have enters the banking system and results in investment which creates jobs the same as it does for a rich person. Income distribution is completely irrelevant for job creation.

    The Republicans talk about the rich being job creators. The Democrats talk about exporting jobs to China. Both are bullshit.
     
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    Last edited: May 21, 2012
  7. CrusaderFrank
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    CrusaderFrank Diamond Member

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    How is letting people keep more of the money they make "Giving" them something?

    Progressives have it totally backwards and that's why their economic ideas come with a Guaranteed 100% Fail Rate

    At some point, after watching failure after failure all over the planet, you'd think they'd learn
     
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    Last edited: May 21, 2012
  8. rdean
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    rdean rddean

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    Republicans don't really have an "economic policy". They can't even say the words "supply and demand" and have zero understanding that the job creators are the American consumers.

    What they have are called "schemes" to move money from the middle class to top 1%. They don't even try to hide it. The Republican base has been convinced that to do anything else is "class warfare".
     
  9. Two Thumbs
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    good fucking lord!

    give us all 3 billion?

    they would have to take 6 billion to cover the cost of passing out 3 billion.



    sorry dood, I can't get passed the fist line with you. You start off totally wrong, with a utterly false premise.

    better luck next time
     
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    One can only assume it's intentional.

    They all think they are Robin Hood, when in reality, they hurt the working poor even more than they help
     
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