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The Tiffany trickle-down

 |  NCR Today

Congress heads back to, er, "work" this week -- and high on the agenda is what to do about the economy. The battle lines are as dug-in as they are familiar: short-term government spending versus immediate budget cuts.

Over the summer, you'll recall, the president's "grand bargain" over economic policy fell apart on the question of taxes for the top 3 percent or so of income earners. Republicans could not agree to this -- calling such taxes a job-killing burden on a group of people once called "the rich," but now termed "job creators."

This push is a variation on trickle-down economics of the 1980s: if the rich are taxed less they will spend more, and that prosperity will fuel the rest of the country. It makes a kind-of-sense, and yet a look at the numbers shows otherwise.

Figures compiled by The New York Times in an analysis by former Labor Secretary Robert Reich detail the story of middle-class economics since the birth of trickle-down economics. From 1980 to 2009, people at the bottom fifth saw incomes drop 4 percent; workers in the second fifth saw a slight 7 percent rise. But people in the top fifth had incomes increase 55 percent.

That was in contrast to the U.S. economy of 1947 to 1979 -- where growth was more evenly spread: the bottom fifth saw wages jump 122 percent; the top fifth about 99 percent. Everyone prospered in that era, compared to the imbalances of the last three decades.

Real-life proof came recently in the latest quarterly report for Tiffany, the high-end jeweler. In the midst of turbulent financial times and a stagnant job market, Tiffany raised its economic forecast for the year. At its flagship Manhattan store on Fifth Avenue, sales are up 41 percent. That's an impressive trickle.

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Government spending in an economic crisis is usually aimed at the middle and working classes: funding for projects the spur construction jobs or prevent teacher layoffs. A hike on taxes for the very rich to help cover those costs looks like money well spent -- those middle class families buy things like washing machines, groceries, dishes and bath towels -- purchases that send money flowing throughout the economy.

Putting all that money in just one place, for just one purchase -- say a bejeweled bracelet at Tiffany's -- doesn't seem to work as well.

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August 1-14, 2014

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