Barack Obama, Trickle-Down Economist

Part of the Democrat party's playbook is to refer to normal free market economics as "trickle-down" theory, followed up with a smirk, laugh, eye roll or statement making it clear that trickle-down economics is a nutty theory. Spelled out a little, the Democrat narrative runs like this: Republicans, who are rich and pro-rich, want the rich to pay as little in taxes as possible while not giving any special breaks to the poor or middle class. That's OK, say the Republicans, because prosperity at the top will "trickle down" [you know, like urine] to the less well off. Everyone wins. This theory is "obviously" crazy, to Democrats, because those nasty, greedy rich Republicans will want to keep as much of it for themselves - thus the mere trickle. As Barack Obama recently said, "it's not enough just to help those at the top. Prosperity is not just going to trickle down."

This is an effective rhetorical trick, but it's poor economics. First, unless the rich cannibalize each other, they can only get their "more" from the financial activities of the less wealthy buying their products. And that, in turn, can only happen if they have money, which requires jobs. And there are only jobs if those with some money are able to invest it. In short, we're all interdependent - as a random politician recently noted:

Well, Oliver, first, let me tell you what's in the rescue package for you. Right now, the credit markets are frozen up and what that means, as a practical matter, is that small businesses and some large businesses just can't get loans. If they can't get a loan, that means that they can't make payroll. If they can't make payroll, then they may end up having to shut their doors and lay people off.

And if you imagine just one company trying to deal with that, now imagine a million companies all across the country. So it could end up having an adverse effect on everybody, and that's why we had to take action. But we shouldn't have been there in the first place.

Guess who the speaker was? Obama, of course. What he's saying is sensible and basic Republican economic theory; in fact, it's basic economic theory, period. If they would stick to the truth and avoid the class warfare, this country would be a much better place.

HT: The Wall Street Journal's "Best of the Web"