The real reason trickle down isn't working ...

I understand the Democratic attacks against 'trickle down' economics. The rich get richer and the poor get nothing (actually, the poor are also getting richer, just at a slower rate). However, their proposed solution, taxing the rich more and giving the money to the middle class in the form of a tax cut, will do more harm than good.

So what happens? You take $25K from someone making $250K, and give 10 families who make $75K a $2500 tax credit ... have you fundamentally changed the lives of that family? Have their career prospects changed? Do they have more opportunities now? Sure, they can afford a bigger SUV, and a nicer Flat Panel TV ... but you haven't really changed their lives.

What happens to the family that is making $250K, they have $25K less ... their lives are basically unchanged, maybe they decide to buy the regular gas SUV since the Hybrid SUV is too expensive now. The biggest impact on this family is that they will likely reduce what they save. They will no longer put $25K into the stock market or bond market. This means companies will see the cost of financing go up. To remain globally competitive, these companies will need to try to reduce costs elsewhere, to make up for the increased cost of borrowing money. One favorite activity has been to off-shore work, to lower cost areas. So, that's what these companies do, they send jobs overseas.

The outcome ... generally speaking, it's the lower skilled (lower paid) jobs that get moved off shore first. So, that family making $75K may start to worry (more) about their job, they hope they don't get laid off.

The sad fact is that wealth isn't trickling down, but it's because those making $40-80K don't have skills that produce enough value to warrant a higher wages, especially when those skills can be performed for much less offshore.

The best way to improve the lives of those in the middle, isn't to take money from the rich, who are investing it, and to give it to the middle who will spend it; but rather re-invest that money you take from the rich to improve the skills of those in the lower and middle wage brackets. Create tax credits for job retraining; encourage (as best you can) people to engage in life-long learning ... gone are the days when you learned one trade and practice it your whole life.

Removing invested money from the market and giving it to someone to spend, is the exact opposite of what the US needs to be doing.