Instead of prosperity trickling down, the pain has trickled up – from the struggles of hardworking Americans on Main Street to the largest firms of Wall Street.
- Barack Obama, Sept. 15, 2008.
In the 1980s, we learned a new term - Reaganomics. This word, though it actually describes several economic theories that Reagan subscribed to, is most associated with the idea of Trickle Down economics. Trickle down economics was not originally a Reagan idea, actually; it is the simple idea that a prosperous investor class has collateral benefits on others in society. The idea itself is not heretical, and John F Kennedy himself said, "A rising tide floats all boats." However, Reaganomics took this simple truth and turned it into a specific goal: make the rich richer by eliminating progressive taxation. Then, it was hoped, they would take their savings and reinvest them in their communities (either by consuming things that would result in jobs, or by literally reinvesting in venture capital, R&D, etc.)
Of course, there is a nugget of truth to the notion, but only enough to damn Reaganomics further: those who could afford to could and did consume copiously - goods increasingly made in China, Mexico, and Indonesia, creating jobs only for a handful of overpaid hired gun CEOs, some concept development staff (though that would come to be outsourced as well), and customs brokers. As for the rich reinvesting in venture capital, well a seismic shift happened in who gets rich - the institutional investor, long the engine of American investment, hasn't gotten rich under the reduced scrutiny of Reagan's red tape clearing efforts: quite the contrary, the institutional investor has gone broke financing the obsessive-compulsive gambling of the professional investors, who as we are learning, have spent all the chips that they didn't themselves pay for. And their partners in crime? Hired gun CEOs who have nothing at stake, unlike the self-made men of yesteryear heading the companies they founded: if they succeed, they are lauded and make the cover of Forbes; fail, and the golden parachute sets them up for a life most of the rest of us can only dream of. Freed of fear for their own finances, these men gamble with our money, and are almost as far ahead if they lose it all as they are if they win with it. And like all addicted gamblers, they will play until they lose it all.
We have allowed ourselves to be smooth-talked into recreating the gilded age: an age when the very rich traveled among the very rich, and the poor traveled among the poor. And unlike the gilded age, when at least some of these wealthy aristocrats (or one of their ancestors) created their wealth through their own ingenuity or skill, this gilded age is characterized by the stolen wealth of a professional class, who have taken our pension funds, our mutual funds, our investment certificates, our savings, gambled it all away until they are standing at the craps table wearing nothing but a barrel with suspenders - having lost all the money we entrusted them with. Until recently it wasn't them standing there in a barrel - this brand of compulsive gambler has until recently only gambled away everything WE owned.
This is who has gotten rich, this is who is given the benefit of the doubt regarding de-progressivized taxation. Sure we've rewarded the risk takers; but what they risked was not their own. It was yours. And it was mine.
The good news? Finally the pain has caught up with even then. The bad news? It's only because the quicksand is already over the heads of those of us that they are standing on.