That's absolutely correct, but it has been remarkable the way there's been no money flowing to the poor and middle class.
Supply-side economics clearly doesn't work, but it wasn't totally insane. If money was pumped into corporations you'd expect at least some of it to turn into more conventional demand. Buy a private jet or a yacht (built by workers and maintained by more workers), or start a company that pays wages, or something.
Instead, all of the money just gets shuffled among each other. It's not just that trickle-down doesn't work; it's that it doesn't seem to trickle at all. Even to non-Chicago economists that's a little surprising. Chicago School turns out to be more than just incorrect, but utterly at odds with reality. Rich people simply don't behave the way they imagine they do.
About the closest it comes is messing with the real estate market -- mostly in the form of pricing lower-class renters out. That benefitted the existing homeowners, and maybe that's helped stem middle class decline a tiny bit, but there are too many other forces working against them. Instead, it just trickles more money back up.
It'll be interesting to see what happens as COVID eases off. That's a very unusual kind of shock, and I'm surprised it hasn't been even more economically disastrous than it is. Part of it is that the government has done a weak form of the right thing, pumping money directly to consumers. If not for that we'd have seen a deflationary spiral of truly catastrophic proportions.
Supply side economics works if you have a nation that is doing so many productive investments that it has trouble getting enough financing for everything. By cutting taxes and lowering interest rates you are making it easier for businesses to acquire enough capital to do even more investments.
The US economy is the exact opposite. It's difficult for the investment rate to catch up with the savings rate. Things like home construction are being delayed. Public infrastructure suffers from cost overruns, etc.
>It's not just that trickle-down doesn't work; it's that it doesn't seem to trickle at all.
For obvious reasons. Money doesn't trickle because consumer/worker behavior tends to lag behind business behavior. When a company has a good year, it can wait until the labor market tightens before it has to increase wages. If companies invent automation then they have a first mover advantage where they save a lot of money in the first 5 years and then once competitors join the market the margins are driven down. That delay is costing consumers money and it's costing workers money because the company doesn't employ anyone with it. Business oriented politics also tends to encourage inefficient (from a macroscopic perspective) corporations who lobby for bills that benefit them at the expense of everyone else.
>Part of it is that the government has done a weak form of the right thing, pumping money directly to consumers.
Supply-side economics clearly doesn't work, but it wasn't totally insane. If money was pumped into corporations you'd expect at least some of it to turn into more conventional demand. Buy a private jet or a yacht (built by workers and maintained by more workers), or start a company that pays wages, or something.
Instead, all of the money just gets shuffled among each other. It's not just that trickle-down doesn't work; it's that it doesn't seem to trickle at all. Even to non-Chicago economists that's a little surprising. Chicago School turns out to be more than just incorrect, but utterly at odds with reality. Rich people simply don't behave the way they imagine they do.
About the closest it comes is messing with the real estate market -- mostly in the form of pricing lower-class renters out. That benefitted the existing homeowners, and maybe that's helped stem middle class decline a tiny bit, but there are too many other forces working against them. Instead, it just trickles more money back up.
It'll be interesting to see what happens as COVID eases off. That's a very unusual kind of shock, and I'm surprised it hasn't been even more economically disastrous than it is. Part of it is that the government has done a weak form of the right thing, pumping money directly to consumers. If not for that we'd have seen a deflationary spiral of truly catastrophic proportions.