The drums sound. The town crier roars, "Fleecing the rich! Fleecing the rich!"
But who is fleecing whom? And is the only fleece here just wool for pulling over eyes?
Fleecing the rich is a red herring. We have a demand-driven economy. There aren't enough folks in the very top to take care of all the demand. If the middle and lower classes combined don't have enough money, they can't keep commerce flowing fast enough. That matters, because jobs come from spending. Sure, they come directly from business, but business gets its money from spending at that business. Without enough spending, we can't support as many jobs. There's a minimum level of spending the economy needs for businesses to bring in enough money to need the current workforce to meet the demand. More commerce than that level means more jobs are needed. Less commerce than that level means fewer jobs are needed.
"But wait", the supply-siders say, "the wealthy will buy more Bentleys with their tax cuts or vacation more or something and cover that commerce."
Will they? Let's leave aside the fact that Bentley Motors Limited, like Rolls-Royce, is a British manufacturer and a Bentley purchase may not be as likely to create American jobs as a Fiesta or a Cruze purchase. Even more importantly, each wealthy person only needs so many cars, even if they were purchasing American made cars. The 400ish billionaires in the US can only wear so many clothes, eat so much food, or use so much of anything themselves. Yes, there are more millionaires -- several million of them -- but still, they only need so much each. It's the hundreds of millions of people who are less affluent who will always make up the bulk of need for goods and services. It's not strictly for any lack of patriotism among millionaires; it's just that there aren't enough people at the top to need enough goods and services themselves to keep everyone employed.
With the amount of wealth held by the middle and lower classes declining, we have a serious problem. That's all of us ... not just the middle and lower classes, but the wealthy too. The rich may be more insulated from unemployment and stagnant wages than the rest of us, but if the level of commerce falls too low it can fail to sustain their investments. And the bigger argument for those of us who would like to join the ranks of the wealthy: if commerce is shrinking rather than growing, there's not much chance for new members of the upper class. In order to have rising affluence, you have to have a healthy economy. In order to have a healthy economy, the middle class can't be declining ... because the middle class is the core of spending and the heart of the economy.
"But wait," they defenders of trickle-down say, "if we cut they're taxes, they'll have more money to invest. You're saying that if people have more money to invest then the natural inclination is to NOT invest that money? You're saying that if there's an opportunity for a greater return on that investment, people are less likely to invest that money?"
Sure, they'll invest. Many of them will sink the cash in things that don't create jobs (or at least not in significant numbers) such as buying stocks, foreign bonds, money markets, and commodities like gold. If one billionaire buys a zillion shares of Corporation X from another billionaire, that's generally 0 jobs created ... although it may help maintain a job at a brokerage and then the broker's income may help create or sustain a few other jobs (but still, effectively close enough to no jobs versus what certain other uses for that money could do).
Some few of them might invest in venture capital funds that specialize in US startups or expansions. Some few of them might directly invest in US entrepreneurship. But with raw no-strings-attached tax cuts there's no guarantee that any of them will. If other investments look more profitable, most of them won't invest in such American job-creating investments.
Some might also invest in venture capital or direct entrepreneurship in other countries that compete with our own ... thus destroying American jobs. It is entirely possible that some large amount -- potentially even 100% -- of the tax cuts for the top 1% could end up being invested in foreign companies that will end up killing jobs here. It's not likely that every penny will go abroad, but there's no guarantee that any of it will stay. And it is very likely that at least some of it will go to foreign investments that compete with us. Growth in China is currently high, so odds are good that quite a few of them will risk the possible Chinese housing bubble and such in order to capitalize on their high growth rate. Chinese entrepreneurs are probably thrilled that we're considering borrowing money from China to free up no-strings-attached cash from our wealthy such that some of our wealthy will have more money to invest in China.
Of course, it's probably just a coincidence that this is coming right after Republican wins that saw large chunks of their add money coming from the US Chamber of Commerce that gets large chunks of their money from foreign members such as state-owned Chinese companies. Surely it's entirely unrelated that some of the most lucrative investments around are Chinese companies that compete with American companies. I'm not saying there's any cause and effect there. Probably a coincidence, but a very unpleasant one for our prospects of this tax cut for the wealthy being a good thing for the nation.
Perhaps the most interesting potential: The top bracket could all invest the cuts into Treasuries, so we'd be freeing up money for them to lend back to us at interest to cover the money we gave 'em interest free. Merry Christmas to them, eh?
But the long and short of all this is that while tax cuts for the wealthy will mean more investment, that investment won't necessarily help the American economy and may in fact hurt ... because the bulk of it could be investment in our competitors.