Let’s Do It Again – Not!

by Errington C. Thompson, MD

In 1975, Sidney Poitier and Bill Cosby teamed up in a movie called Let’s Do It Again. This was a sequel to their very successful Uptown Saturday Night. The title of the movie had a double meaning.

First, of course, Cosby and Poitier wanted to see if they could follow Uptown Saturday Night with another hit.

Secondly, the plot of the movie had to do with these two blue-collar workers hypnotizing an extremely unlikely fighter, Jimmie Walker, who weighed 150 pounds soaking wet, into believing that he was a ferocious force in the ring, not once but twice.

Somehow, it seems to me that the same thing is playing out in Republican politics. The GOP is trying to hypnotize the American people into believing that trickle-down economics worked during the Reagan and Bush administrations and will work now.

A proven failure

The basic theory of trickle-down economics is very simple. If you give tax cuts to the rich, they will have more money to spend. The rich will then turn around and spend this money; companies hire more workers because of the increased demand, and because of their increased profits, they’ll also increase wages. Finally, because there are now more workers working and companies have increased wages, the government gets a windfall of increased tax revenues. Everyone benefits. Wonderful. Problem solved. A beautiful theory!

The only problem is that it doesn’t work. It has never worked.

Trickle-down economics is the Holy Grail for Republicans. It reminds me of that Spanish explorer, Ponce de León (remember him from Grade 8 American History?) who continued trudging through the southern United States looking for the fountain of youth. Just as the fountain of youth was too good to be true, the whole theory behind trickle-down economics is simply too good to be true.

Growth versus no-growth

It has never worked. When Reagan instituted massive tax cuts (personal income tax and corporate income tax) in 1981, there was no magical increase in tax revenues. Tax revenues decreased. When George W. Bush instituted three separate tax cuts, all targeted to the wealthy, when adjusted for increase in population, there was no increase in tax revenues. There was no magical increase in wages. And, of course, wages for the middle class and lower class were stagnant during the Bush administration. In fact, during the eight years of his presidency, there was NO net job growth in the United States. None. Nada. By the end of his term, we were losing 700,000 jobs per month!

I’m not making this up. This data is widely available for anyone who wants to read it.

There they go again

The Paul Ryan budget is nothing more than trickle-down Reaganomics. Ryan’s GOP budget plan, supported by 95 percent of the Republicans in the House, proposes that we cut the current 35-percent top tax rate down to 25 percent. That’s a 28 percent decrease for the richest Americans!

It also proposes that we drop corporate income tax down to 25 percent and eliminate taxes on foreign profits of U.S.-based multinational corporations, helping them move more jobs overseas while simultaneously diminishing their already pathetic support for American’s infrastructure, education, military, and other needs.

At the same time, the GOP budget plan will severely cut Medicaid, food stamps, Pell grants, and a supplemental security income program designed to help the disabled and the elderly. Basically, the GOP plan asked the middle class and the lower class to pitch in even more to help balance the budget, and they asked the upper class to do absolutely nothing besides sit back and wallow in their tax cuts.

The thing that I find it is so frustrating is that we’ve tried this before. If we give tax cuts to the rich, they simply pocket the money. They already have their two (or three, or seven) houses. They already have a butler and a maid, nannies and gardeners and chauffeurs to drive their many cars. They might remodel, or build a car elevator, but they won’t invest in long-term job growth. If we give them an extra $100,000 or $200,000 or even a few million, they put that money in a Swiss bank account or in the Cayman Islands, or into a tax-free trust fund for their children and grandchildren to live off of the rest of their lives

As a case in point, the trust set up to benefit the five Romney sons is worth $100 million. That’s right: one hundred million dollars. $100,000,000.00. For one family’s five “boys,” aged 31 to 42.

A virtuous cycle

On the other hand, if we give an extra $1,000 or even $2,000 to low- and middle-income families, we know what they will do with that money, because we’ve seen it before. They’ll spend it. The GOP has done this: they have given tax cuts to the middle and lower class, and those tax cuts actually stimulated the economy. Gerald Ford did it back in the mid-1970s. It worked then and it work now.

It works because when you have to spend everything you earn on basics, and still fall short, when you get more money in hand, you spend it, too. And when you spend it, it goes to the grocer, the clothing store, the dentist, the car repair shop, and all the other local merchants whose goods and services you need but couldn’t quite afford. And guess what happens when you spend money with them? They spend it, too! They go out to dinner, or buy a new refrigerator or TV, or get the drip in the bathroom sink fixed, or pay for a new set of tires for their car.

Those dollars keep circulating around the community, putting more and more people to work. It’s called a virtuous cycle, as opposed to the vicious cycle of a recession when everyone cuts back.

Trickle up economics

Yet just last week, Governor Romney was railing against the president and his economic policies. He stated, “But in fact anything over 8 percent (unemployment), anything near 8 percent, anything over 4 percent, is not a cause for celebration.” I happen to agree with the governor. The unemployment rate is too high. The last time the unemployment rate was at or near 4 percent was at the end of the Clinton Administration, which had invested heavily in infrastructure, teachers, firefighters and police officers. There was no trickle-down economics: it was TRICKLE-UP economics. They made investments in the middle class and the lower class, and the entire economy, from the bottom to the top, grew enormously. This is exactly what we need to be doing today.

The focus of our economic recovery must be on the middle class. We need jobs. We need state and local governments to quit firing employees and start hiring some of the 600,000 Americans that they’ve laid off. Working Americans are the ones that need the tax breaks. Working Americans need a living wage. We need to focus less time on the rich because they can take care of themselves. We need to focus more time on those who seriously need our help. When we fix the middle class, we’re fixing America.

So, like Cosby and Poitier, “Let’s do it again!” – let’s fix America.