Why We Need Middle out Economics to Replace Trickle Down Economics

We have four decades of evidence comprehensively proving that trickle down economics was a con perpetuated on ordinary citizens to enrich the already wealthy. We need to return instead, to the middle-out economics that fostered the most stable and fastest growing economy America has ever seen.

“Once upon a time, in the middle of the last century, America had a thriving economy in which the middle class was at the center and everyone—poor and rich alike—did better. But then, starting in the late 1970s, a group of self-serving rich people began to sell a promise that if we took better care of them, their wealth would trickle down, and that would help everyone else prosper. The country bought that line. And for three decades both parties yielded to it. The results were great for the very rich—and disastrous for everyone else. Wages stagnated. Inequality became extreme. Mobility slowed. By 2008, things were so upside down and we had so lost our way that the economy collapsed. Out of that ruin, many began to remember the old ways: the truth that lasting growth and shared prosperity come from the middle out and not the top down. Now we are joined in a battle of ideas to see whether middle-out economics can dethrone trickle-down.”

Eric Liu and Nick Hanauer
Under President Dwight D. Eisenhower, from 1953 to 1961, the top income bracket in the United States climbed to a marginal tax rate of 91 percent. Taxes on corporate profits were two times as great as they are in 2017, and that’s before the current proposal to cut that rate to 21 percent. The tax on large estates rose to more than 70 percent. Businesses operated under a relatively high tax burden, and they employed a labor force in which one-third of the workers were unionized and bargained with executives as equals. Corporations served a diversity of stakeholders as opposed to stockholders. The result was a booming economy that benefited most Americans.

Middle-out economics argues that in a consumer-driven economy, national prosperity flows in a virtuous circle built on a thriving middle class whose prosperity feeds both the rich and the poor. Middle-out economics demands a systemic policy focus on the skills, capacities, and income of the middle class.

This means investing more in scientific research and development to maintain and expand America’s lead in technological innovation over the rest of the world, investing in the industries of the future, and most importantly, raising the baseline level of every citizen’s access to high quality infrastructure (particularly the internet), education, and healthcare. There is no level playing field for any citizen who lacks health or a quality education, and certainly no possibility of being able to flourish at their highest level.

Trickle down economics rests on the assumption that rich business people are “job creators.” But they’re not. In a capitalist economy, middle-class consumption is the mechanism that creates jobs. This is why trickle-down economics is false. Prosperity in capitalist societies arises from a feedback loop between consumers and businesses. Middle-out economics supercharges this loop by creating the conditions that allow both middle-class consumers and the businesses that depend on them to thrive in a virtuous cycle of increasing prosperity for all.

A prosperous economy is not built from a tiny number of the super rich. It’s built from a great and growing number of middle-class consumers and small businesspeople. The more the middle class can buy, the more jobs we create.

Middle-out economics is a truer and more effective form of capitalism: more competitive and dynamic by being fairer, and fairer by allowing more true competition. Trickle-down economics is really socialism for the wealthiest capitalists.

We have to make a choice between trickle down economics and middle-out economics. A choice between an economic agenda that de-concentrates wealth and unearned privilege to help small businesses grow, and an economic agenda that focuses on concentrating wealth and privilege at the top.

The claim that rich business people are job creators is nakedly self-serving bullshit. But absent that claim, there is no way for trickle-down proponents to justify the absurd preferential treatment the rich and large corporations receive in the tax code and regulatory regime. Without that claim, trickle-down economics reduces to a nakedly rent-seeking, self-serving agenda by the very rich to extract wealth from the poor and middle class.

It is people like you dear reader—the middle-class of America—who are the real job creators. You, not corporate titans, are, and should be the center of the economic universe.

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