Drip, Drip, Drip

Supply-side economics, (AKA trickle down, Voodoo, Horse and Sparrow) operates on the premise that if the government allows wealthy (business owners and private citizens alike) to keep more of the money they earn that they will then re-invest that money into job creating endeavors like increased production or increased investment in companies that will then hire working class folks down the economic food chain.  It's called supply side economics because it comes at growth from the perspective that it all starts from the supplier or goods and services.

The problem is, this totally ignores the supply/demand dynamic.  Let's look at the one of my favorite metaphors used to explain this; The Horse and the Sparrow.  The idea is, if you feed a horse enough grain, some of it will come out the other side for the sparrow to eat.  The metaphor breaks down quickly because with a horse, there is a biological necessity for it to defecate.  What if the horse could just store up all that grain, only eat what it needed and never had to actually pooped.  Or, when it did poop it went over to Mexico to poop and only the Mexican swallows could benefit from the horse cookies?  The horse could just sit on all of that grain in its stores and invest it in non-job creating money markets until there was enough demand for its poop and a bigger horse proof fence on the border. 

If you got lost in the metaphor let me help out.  Corporations are currently flush with cash.  They have more than enough money to invest in American manufacturing and job creation, but they don't do it.  Why?  Because increasing supply only results in increasing the need to store that supply somewhere because nobody is buying it.  There are many reasons for this, such as stagnant wages for the middle and working class, and because American goods (with a few exceptions) are being seen as of lesser quality for the price than many foreign goods. 

This is the root of the difference of opinion between progressives and conservatives when it comes to tax cuts.  Conservatives think that cutting taxes on suppliers will improve the economy.  This has never been shown to be the case.  On the other hand, conservative talking heads make a big deal about JFK's support for tax cuts to spur the economy.  Well, if you cut the taxes enough on the lower and middle class they will more likely use that windfall to buy new things, like a down payment on a car or a new color TV.  (Back in the day those things were likely made in the USA so the simulative effect on the economy was more US-centric.)  So they buy things and the suppliers stocks get depleted and they have to hire people to buy more.  Think about it.  If your son and daughter had a lemonade stand but none of the kids in the neighborhood hand enough pocket change to buy any, would you just give your kids more money to buy more lemons, sugar and cups?  Do you think that is going to solve the main problem?