Are corporations & wealthy individuals investing their tax cut savings back into the US economy?

Question

I'm looking for sources that demonstrate whether trickle down economics is really working. Thanks.

Answer 1

This country has a $6 trillion national debt, a growing deficit and is borrowing money from the Social Security Trust Fund in order to fund government services. We can no longer afford to provide over $125 billion every year in corporate welfare - tax breaks, subsidies and other wasteful spending - that goes to some of the largest, most profitable corporations in America.

One of the most egregious forms of corporate welfare can be found at a little known federal agency called the Export-Import Bank, an institution that has a budget of about $1 billion a year and the capability of putting at risk some $15.5 billion in loan guarantees annually. At a time when the government is under-funding veterans' needs, education, health care, housing and many other vital services, over 80% of the subsidies distributed by the Export-Import Bank goes to Fortune 500 corporations. Among the companies that receive taxpayer support from the Ex-Im are Enron, Boeing, Halliburton, Mobil Oil, IBM, General Electric, AT&T, Motorola, Lucent Technologies, FedEx, General Motors, Raytheon, and United Technologies.

You name the large multinational corporation, many of which make substantial campaign contributions to both political parties, and they're on the Ex-Im welfare line. Needless to say, many of these same companies receiving taxpayer support pay exorbitant salaries and benefits to their CEOs. IBM, for example, gave their former CEO Lou Gerstner over $260 million in stock options while they were lining up for their Ex-Im handouts.

The great irony of Ex-Im policy is not just that taxpayer support goes to wealthy and profitable corporations that don't need it, but that in the name of "job creation" a substantial amount of federal funding goes to precisely those corporations that are eliminating hundreds of thousands of American jobs. In other words, American workers are providing funding to companies that are shutting down the plants in which they work, and are moving them to China, Mexico, Vietnam and wherever else they can find cheap labor. What a deal!

For example, General Electric has received over $2.5 billion in direct loans and loan guarantees from the Ex-Im Bank. And what was the result? From 1975-1995 GE reduced its workforce from 667,000 to 398,000, a decline of 269,000 jobs. In fact, while taking the Ex-Im Bank subsidies, GE was extremely public about it's "globalization" plans to lay off American workers and move jobs to Third World countries. Jack Welch, the longtime CEO of GE stated, "Ideally, you'd have every plant you own on a barge."

General Motors has received over $500 million in direct loans and loan guarantees from the Export-Import Bank. The result? GM has shrunk its U.S. workforce from 559,000 to 314,000.

Answer 2

The only way a company or person does NOT reinvest that money back into the US economy would be to provide it as a grant to a foreign power.

If a corporation takes the cash and buys a new widget, then the company making the widget gets the money (the money is now circulating in the economy). If the corporation decides to bank it, then the bank loans it out and earns interest on it (the bank and the person with the loan get the money...who then spurs the economy by spending it).

Ditto for individuals. You get the money and bank it, you earn interest and the bank loans it out just like above. You spend it to buy an ipod then apple and Best Buy are happy they got your money. No matter what, the money circulates.

As for Supply Economics and Laffer...you will find precious few economists who can argue that tax receipts went up after the tax cuts...they went down (duh). Head over to the BEA and look at the income after each cut...down.

On a wider note, the US economy is far too large and complex for one item (like taxes) to have a significant long run affect.

Answer 3

I've heard recently that the CEO's are the benefactors of the corporate welfare. That would make them the wealthy individuals. I haven't heard what they actually do with all that money. I believe a lot of their huge salary is in the form of stocks which may not be considered spendable income that could trickle down. It appears that most of the investments are used in foreign countries. So, maybe it trickles down to the CEO's there.

Reports show that the rich are getting richer, the poor poorer, and the middle class is being eroded.

Answer 4

For trickle down economics to work, Greed would have to be non-existent, in this world. The large corporations, are to selfish to share.!!!!!sm