The Trickle Down Dam
Americans love capitalism; it is the backbone of our economy; it is the load bearing column of the United States; and it is the driving force behind our government. Capitalism allows for people of all communities to profit and our country to maintain its high rank in the world. Or does it? Nicholas Kristof, writer for the New York Times states, “ The richest 1 percent in the United States now own more wealth than the bottom 90 percent”(Kristof). Although we need economic inequality for our civilization to thrive, we might have come to a point where it is more hurtful, than helpful.
The lack of wealth distribution in our country is driving America into the ground. Kristof explains that, “In 2010, 93 percent of the additional income created in America went to the top 1 percent” (Kristof). Although this may be a satisfactory situation for the wealthier people of our country, the bottom 99 percent aren’t benefiting to quite the same extent. Not only the majority of our country not gaining much from this setup, but it is also degrading our country as a whole. With so much of our community riding on capitalism in our country, we can’t expect to flourish when most of us can’t afford anything.
Although some might argue that the “trickle down” effect will solve America’s economic crisis, they are wrong. The trickle down theory is the idea that if the wealthy get money from tax breaks, then they will support our economy by creating jobs for the lower classes, by producing new companies. This theory, while sounding nice at first, has three main flaws.
The first flaw of the trickle down theory is that the companies, who are paying people to make the products, are then selling those products back to the people who made them. This means that any money the rich would pay, would just circle back to them. There would be a monopoly of companies only owned by the top one percent. If all the money eventually circled back to the top one percent, it would completely exclude the other three hundred and seventeen million people in America from gaining any economic boost. Because of the lack of money distribution, people would not be able to create their own companies or even have many people to buy certain products. This would take away the need or even possibility for multiple companies selling the same products, which would lead to even larger issues such as price gouging.
The second flaw of the trickle down theory is that the wealthy aren’t investing in new companies. As Robert Reich, a political economist, states in one of his latest articles on inequality,
But the wealthy aren’t investing in new companies. Between 1980 and 2014, the rate of new business formation in the United States dropped by half, according to a Brookings study released in May. Corporations aren’t expanding production or investing in research and development. Instead, they’re using their money to buy back their shares of stock (Reich).
The rich are not using the tax break money to benefit society, but rather only further benefit themselves. With the freedom granted by the government they are the quintessential example of the rich getting richer, and the poor getting poorer.
The third and final flaw in trickle down theory is that because all of the money stays with the rich people, they would be the ones that would be the base of the United States capitalism. It is not possible for the top richest one hundred people to buy six million cars in order to stimulate our economy. Capitalism relies on large masses of people to buy and sell products. No matter what people say, the top one percent is not the support of capitalism, that role goes to the middle class.
The American middle class, although sometimes disregarded, is a drastically important part in the American lifestyle. The middle class is important because the people in it are wealthy enough to spend money, while the group is immense enough to make a difference in our economy. We need the middle class to keep the cycle of the economy going, with their consent spending.
America is known for it’s for its love of consumerism. Every day thousand of people in the United States shop. They shop for toys, food, clothes, things that they need, thing that they don’t need, our society as a whole is based on shopping. It is the tread of our society. They are all connected by the need and the supply for good. But what happens if this is broken.
If the middle class is weeded out because not enough money is going into their pockets, then it will be the downfall of our economy. The middle class allows for diversity of companies, which creates competition and pushes people to create new or better inventions. This also keeps price gouging down, because people aren’t relying on one company for a product. America needs to learn to balance the classes.
America is not too far off from these economy-crippling consequences either, but with so many different perspectives it is hard to judge which path to take on the way to fixing the economy.
One option that is commonly talked about is economic distribution. Economic distribution is when the government redistributes money though acts like taxing certain groups while giving tax breaks to others. Some people find this arrangement unconstitutional and unjustified, saying that it is not fair that the government would tax certain groups higher than others. This however is not an unconstitutional act. Amendment 16 states, “The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several states, and without regard to any census or enumeration”( 16th). In this amendment it clearly states that the government has the right to collect taxes on income.
I for one am for economic distribution. Although I am not smitten with the idea of the government discriminating against certain groups, John Rawls’s veil of ignorance theory convinced me that it was government’s job to boost equality in America. The veil or ignorance theory is basically designing a government based on the idea that no one would know who he or she was in the world. Placing this thought process into law making would eliminate biased laws, and rules that would benefit only the wealthy. If our government created laws for everyone, then economic distribution would not only be seen as reasonable, but also necessary.
If America wants to keep its strong, healthy capitalistic system that it prides itself on, then our economy needs to learn balance. We are coming to a point where the inequality in our economy is starting to hurt us. America cannot sustain our current capitalistic practice, and if we continue, it will be our downfall. No longer can we allow the one percent to monopolize the benefits our world, while the rest suffer. Only when America finds equality, will it truly be able to prevail.
Bibliography
Kristof, Nicholas. "An Idiot’s Guide to Inequality." The New York Times. The New York Times, 23 July 2014. Web. 30 Oct. 2014.
Schlesinger, Robert. "The 2014 U.S. and World Populations." US News. U.S.News & World Report, 31 Dec. 2013. Web. 30 Oct. 2014.
Reich, Robert. "Why the Economy Is Still Failing Most Americans." Robert Reich. N.p., 28 Sept. 2014. Web. 29 Oct. 2014.
"Veil of Ignorance." Wikipedia. Wikimedia Foundation, 24 Oct. 2014. Web. 30 Oct. 2014.
"16th Amendment." LII / Legal Information Institute. N.p., n.d. Web. 30 Oct. 2014.