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Trickle Down Government Economics

Forget the sly jokes and sneers-- today everyone is a believer in Trickle Down Economics, the only divide is over where the trickle is supposed to be flowing down from. This administration has been an experiment in unusually aggressive trickle down government economics.

The left and the right don't disagree that the money goes from the top down, from funds controlled by small groups of people down until it reaches the bottom of the pile. They disagree who that 1 percent, the small groups of people should be. Should they be CEO's or Washington officials.

Does the economy grow when businesses hire workers to make products or provide services, or does it grow when as much money as possible is vacuumed up by the government into a central revenue stream which it uses to fund infrastructure projects, subsidized companies and government employment.

The left's chief defenses of its methodology is that elected officials represent the public will and that its wealth redistribution programs reach the bottom first. But Democrats clearly don't believe that being elected makes one a representative of the public will-- as they certainly don't treat Republican elected officials that way. Its wealth redistribution is an even bigger hoax.

Companies redistribute resources down through their chain of officers and employees, then to other companies which redistribute them in the same way (not counting the incidental benefits created by their economic activity). Governments are no different.

A government redistributes resources through its higher officials, down through its vast army of employees, various companies that lobby for grants or contractors that work for the government. The process is not all that different from the way that companies do business. The difference is that some of the "product" created through this process consists of providing social services and a social safety net to those on the bottom.

Setting aside the question of whether the "product" should exist, the great deception of the current system is that the "product" is actually incidental. The system does not exist for the benefit of the product, but for the benefit of the process. As in many non-profits, the system exists for the benefit of the system-- for the benefit of its officers and employees.

That is one of the major reasons why Social Security is insolvent. Social Security was the "product" but the money meant for it was spent on the "process" and on other "products" that would provide more of an advantage for those in control of the system.

This problem is not unique to the government, most corporations spend far more on process than on product, both for reasons beyond their control and for reasons entirely under their control. This is a symptom of declining civilizations which become more inefficient and like an inefficient motor throw off a lot of sparks but don't go anywhere. 

But government is on average far more inefficient than the average company because the "product" is mostly optional. It's the process that matters. Even the worst CEO will eventually have to turn a profit or leave. Bad CEO's can sell off company assets, solicit investors through bogus expansion plans, merge, split and go through a thousand gymnastics-- but the game can't go on forever. And the average company cannot work that way or the roof will fall in for everyone and the economy mirrors a Third World nation where everyone is trying to steal and bribe their way to personal wealth and national failure.

The government uses the illusion of a product to finance its process. Give us more money and we'll build more hospitals, hire more firefighters, give everyone free health care and a free education. But these products are only ways of financing the process. The process inflates the cost of the product and decreases its value. What comes out the other end has a high cost and a low value.

A vibrant economy does trickle down money to the bottom, and more importantly improves the general cost of living. An American who is living on the street is still far better off than a Russian living on the street. A Chinese citizen living on the street is better off than a Nambian living on the street. Living on the street is not a good thing, but a prosperous economy makes life at the bottom more viable by providing cheap food, clothes and other essentials.

An American homeless man in the 1970's with a ham sandwich, a transistor radio and a coat was the envy of many Soviet citizens who had government apartments and government jobs, but had trouble coming by that ham, radio or coat.

The problem is that the government is not an efficient distributor of resources and creates very little in the way of incidental value. A government can authorize and finance the construction of a 1000 apartments, but they will be made as cheaply as possible and with no thought to pleasing the residents. The construction will create jobs but only for as long as it's in progress. If it is done with a minimum of corruption, then it's static. But "products" at the government level exist primarily for the benefit of the "process" so that the process will actually comprise the majority of the costs of the product benefiting the officials and the bureaucrats who oversee the project.

The planned economy seems seductive to progressives with its illusion of control, but it benefits a small number of people at the expense of far larger numbers, and its static nature combined with a high load of corruption brings it down sooner or later.

Government was never meant to be the core of the economy, but rather a contractor handling areas that require stability and are not profit based. The idea that all trains should run through D.C. and that the entire economy should be a government dispensary is a destructive one that would suck all the vibrancy out of the economy and replace it with a new feudalism.

Pitting trickle down economics against trickle down government economics isn't much of a contest, but it's the core of the election which will come down to whether people want to pool all the money in Washington D.C. and let the government spend it as it pleases. That's what the last three years have been and the only vision coming out of the White House is more of the same.

The big sell of trickle down government economics is that the benefits come directly to you, but they don't. They come down to the people at the top, and then the people below them and the people below them. That's how it works in all hierarchies regardless of their stated ideals. The hierarchy always pays itself first.

We are swiftly heading toward a planned economy, which is a fancy name for an oligarchy and the permanent installation of crony capitalism and party mafia as the decision making machinery. That's already partly the case, but it is not yet wholly so. When the line is crossed, the dice are cast and the red flag rises, then all the other options will be foreclosed.

The appeal of a controllable economy paradoxically leads to an uncontrollable economy that is run by a small number of people for their benefit with far less benefit for ordinary people and whose corruption and dysfunction is centralized and embedded in its decision making process and cannot be reined in. And its static and inflexible nature makes vibrancy and an improvement in standards of living all but impossible.

Much as the search for happiness leads to unhappiness, the pursuit of mandated equality leads to inequality. Centralization puts a single hierarchy at the center of everything, and that is a formula for complete inequality. The vibrancy of a free market tore down the old hierarchies of feudalism and replaced them with a wild careening collection of hierarchies based on wealth, status, power and that can be attained by the individual. Replacing them with a stratified government hierarchy will not bring equality.

The way we live is not ideal, it's chaotic and unpredictable-- and that's a good thing. The free market challenges hierarchies through its flexibility and innovation. It's a game that can be won or lost. That makes it difficult for any small group of people to control the system for too long. Especially if there isn't much of a system.

Inequality is a matter of hierarchy. The system that challenges hierarchies the most is also the closest to equal, not because it imposes a planned equality, but because it makes it difficult for a hierarchy to impose its own form of inequality on the system. Systems of planned equality however are system of planned inequality because to impose a plan requires a hierarchy and the broader the plan, the more power the hierarchy gains.

Trickle down economics works by harnessing the chaos of clashing hierarchies and individual opportunism to benefit the society as a whole. It isn't an instant elevator that goes right to the top, but it's better than getting rid of the elevators and making everyone take the stairs, while chopping off most of the upper floors.

Trickle down government economics replaces that chaos with a planned hierarchy which makes the decisions and reaps the benefits, which impoverishes the economy to feed its own power. We have seen that more clearly than ever in these past three years. It's a new feudalism wrapped in a smile and the consequences of such a system are not just economic, they are political. The more power shifts to a single hierarchy, the less freedom and equality of opportunity there is for everyone.


  1. Anonymous6/11/11

    Should be required reading for schools, universities and business schools and anyone with an affinity for productivity/truth/freedom.


    MOR MD

  2. Mr ED6/11/11

    I like the analysis. Process and product are as good a way to sum up this mess as any I have read.

    To take the analysis a bit further, this is about focusing all of their loving attention on the supposed good intended by to be addressed by the "process" while attempting at all costs to hide the product (results) of that process. This is why the Left begins their assault on society by gaining control of the media and infotainment, because that is the only way they can hope to hide the catastrophic effects of their policies, and, more importantly, their true objective - POWER. Modern Liberalism always was nothing more than a clever ruse, aggressively pursuing absolute power for the usual selfish and venal reasons, but wishing to be LOVED for doing it. The criminals of the Left are not just aggressive, power-hungry narcissists, they are sociopaths.

  3. Dear Sultan Knish
    I hate the vindictive politics that has overtaken our public discussions in this country. But your cogent analysis here is one of the best I have seen. Now is the time to pull the weight of this argument back to the supply side, before its too late.

  4. Anonymous6/11/11

    I recently purchased some row cover material for frost protection from a company that supplies both growers and individuals. This company supplies seeds that it purchases from seed growers. It packages the seed for small and large farmers, who grow produce for farmers who feed it to cattle, who sell to slaughter houses, who sell to large and small retailers who finally sell to customers.

    They also sell seed to growers of flowers who sell to local nurseries who sell to the public. But they buy the seed from seed growers who purchase greenhouse materials to protect their seed crops from improper fertilization. These seed growers purchase hybrid products from university agricultural units and agro-companies that develop new strains.

    Can the government run such a system?

  5. Anonymous6/11/11

    Not everyone believes down in "trickle down" economics. I for one. Along with, Reagan, Laffer, Mundell, Thacther, Kemp, Gilder and even Bibi in the 90's as finance minister are strong proponents of Supply Side Economics. Some have mistakenly, through ignorance, put the trickle down moniker on it

  6. Anonymous14/11/11

    Once you start talking about a trickle down effect, you have already lost the argument. This concept is a straw dog invented by socialists so they could knock it down and justify their redistribution policies. For once they are correct. There is no trickle down effect. What there is, is a "get up off your butt and get to work effect."

    The great thing about capitalism is that is makes this latter effect possible. Socialism and corporatism (fascism) preclude it, leaving a government-manufactured trickle down effect as the only possible way of getting any wealth to a large and growing part of the population.


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