The Trickle-Down Lie

Well, it's not just a question of what the administration's doing. The question is the extent to which the public understands what they're doing, not only on particular issues like medical care or things like that, but about the whole way the country's governed. That is, if you can have a president who by executive order can nullify acts of Congress, can decide that some portions of the law that he likes will be enforced and other portions that he doesn't like will not be enforced, then we no longer have, the separation of powers. we have the executive, acting as the overruling, power in the nation.

Yes.

Well, th- the hard fact is that, we've had this enormous, s- length of time that u- unemployment has been up above 8%, and none of the expe- extraordinarily expensive things that have been done have made a real dent in it. and if people were going by things like that, and if they're going by what's happening internationally, that's not even counting the most recent things today of, Am- American, ambassador being killed in a country that's supposed to be going through the Arab Spring as the, as the administration says. that Iran is going towards nuclear weapons with no sign whatever of slowing down. North Korea's already got them. other countries are, siding with our enemies.

A- absolutely. A- and if by some miracle we get through, we have the good sense to, remove this president, the question is will we have learned a lesson, or will we turn off our common sense when there is the first woman president, you know, the first Asian president, the first Latin pres- I mean, are we so hung up on symbolism that we don't understand that being President of the United States means having the lives of 300 million people in your hands, and the future of people yet unborn? If we don't understand that, and we're willing to vote for people on the basis of symbolism, then we're lost.

You know, it's, it's like someone once said, "It's like, it's like being a mosquito at a nudist colony. You don't know where to start." W- I mean, we're not gonna be in the air long enough for me to, to dissect all the falsehoods that this woman has put into those few words. -

Oh, okay. The jobs that you can raise a family on. The new jobs that are being created are disproportionately very low-income jobs. So, I don't know, how you're gonna be raising a family on a minimum wage type jobs or, flipping hamburgers at McDonald's. the other thing is that what is implicit in all of this is that the economy has no recuperative powers of its own, that all the benefits, all whatever recovery there have been, has been due to Barack Obama.

That's it. That's it. Now, w- w- anyone who's studied history knows that for the first 150 years of this country, fed- the federal government did not intervene when the economy turned down. In all that time, the downturns all corrected themselves. One of the, one of mo- one of the most classic examples was under Warren G. Harding. when he, his first year in office, he found the unemployment rate at 11.7%. He did absolutely nothing, and he did not spend more government money. He cut back government spending. the Federal Reserve had the, interest rates up at 6 or 7%, not down at 1% where they are now. the next year, unemployment was at 6.7%. The year after that, it was 2.4%. So, the economy has recuperative powers. I mean, employers have an incentive to hire people. Workers have an incentive to get jobs. Lenders have incentives to lend. So, are, is it your argument- They don't need somebody in Washington trying to micromanage all of this.

If Barack Obama stays out of the way.

No question. I mean, th- there's never been a, a, an, a recovery other than that of the Great Depression of the 1930s that took so long. under Ronald Reagan, in the early years w- got up to 9.7, percent annual unemployment. he did absolutely nothing. The media went crazy. The unemployment came down, and it kept right on coming down.

Yes.

The, th- this shows that Clinto- that Clinton, is truly a masterful politician. And to be a masterful politician, you have to have a lot of brass. And it takes an incredible amount of brass for Bill Clinton, who was the bi- who was the biggest factor in creating the housing boom that led to the bust that brought down the whole economy. it was during the Clinton administration that the federal government forced lenders to change their lending standards, which had been in place for decades and had made real estate one of the safest investments around, bring those standards down in order that they can get the numbers that they want for low-income, minority, et cetera, mortgage, applicants.

He would, he would take, he'd be willing to take the chance that the standards were being brought down too low. More than that, Attorney General Janet Reno, under the Cli- under Clinton, threatened lenders with legal, with legal action from the Justice Department if their numbers, in terms of groups and then income levels of people who were approved, didn't fit her preconceptions. HUD, under Clinton, took, made lawsu- lawsuits against, lenders, charging them with racial discrimination based solely upon statistics.

The government forcing people to lower the in- the lending standards that had existed for years. and they said, well, the problem was blamed on greed. You don't satisfy greed by lending to people who can't pay you back.

I, I wonder if the fair shot includes the taxpayers. But, the, we've had, we've had things, we've had factories before there was Barack Obama, on, hard as it, that is to believe. You know? and, we've had less of it since he came in.

Affirmative action for presidents

Well, when you realize that the President of the United States has the lives of 300 million people in his hands, he has the future of Western civilization in his hands, he has the freedom that has been inherited f- over the centuries in his hands, and he's already starting to dismantle that, I really don't think this is a question of any individual, whoever's in the White House, being cut any slack. The last thing you need to do is cut slack to people who have power over 300 million other people.

some slack for those 300 million people

Oh, the argument is based on the belief that, people will change their behavior as you change the tax rates. those of the left often act as if, human beings are just like inert blocks of wood or like chess pieces that you can move around on the, on the chess board or put wherever you want to carry out some grand design. But of course, people react to these things. Now, it's a theory, it's a hypothesis, and you could test it. Almost never is it tested. Hmm. People then, people instead say, "Oh, you just wanna give tax cuts to the rich."

The effect on the economy was to increase the rate of growth, increase the revenue received by the government. The rich not only paid more taxes after the tax cuts for the rich, as they call it, they paid a higher percentage of all taxes. and this started back in the 1920s. in the early '20s, the tax rate on the top income was 70, 73%. the r- and the r- and the people making over $100,000 paid something like 30% of all taxes. By the end of the decade, the tax rate on the top had been cut to 24%. People making over 100,000 now paid 65% of all taxes, and the reason's quite simple, that when you have the tax rate at 73%, people simply don't pay it. They put their money into tax-exempt securities and arrange their financial affairs. So what we're really talking about are do you want a symbolic high tax rate on the high-income people to win votes politically, which the, which the rich themselves are not gonna pay, or do you really want, more tax revenue coming into the government?

That's right.

In the second half of the 20th century.

I guess over time, the Democrats moved further and further left, and so you had in the party only th- those people who thought it was wonderful to raise tax rates on high-income people.

Oh, I don't know. It was as far back as the f- as the first, as the, Roosevelt administration. there is absolute, it is a, an incredible, like, thing. It's, there is a nonexistent theory that is constantly being attacked. some years ago in my newspaper column, I challenged anybody to cite any economist outside of an insane asylum who had ever made that argument. Nobody ever th- ever came up with a single person.

Nobody told him.

I don't know of anybody who's ever said it. In fact, when I put this out and I, when it went out, a nationally syndicated column, various people, wrote me and said, "Well, so-and-so said this. So-and-so said it." But sh- find me the person who said it. I don't wanna hear how A said that B said. Find me B and show me where he said it. And that was years ago. Not one example has been offered.

Yeah. In other words, the ar- the argument really is not that they, that you should put m- more money in the hands of the wealthy. It, it's also part of a zero sum conception of the economy. There's the thought that if, you cut the tax rates on the rich, why then there'll be less taxes for the government, or you'll have to raise the taxes on other people to make up the difference or cut programs and so forth. So that, that I hear all the time. It drives me crazy.

and yes. but in, but in the, in the, in the, in the paper I point out where the New York Times itself says, you know, there's been an unexpectedly large, increase, in tax revenues from the wealthy and from corporations which has, reduced the, projected budget deficit. And, of course, yes, expectations are in the eyes of the beholder.

unexpected by The New York Times, exactly. All right. But that's exactly what people have been expecting for more, at that point, three-quarters of a century, and which had been happening, and The New York Times just chose not to, understand it.

Oh, my goodness.

There you are. It so happens that, that both those things happened in the '20s after Mellon finally got his tax cuts on the,... And they were across the board tax. These were not tax cuts for millionaires. But a- it was precisely after the tax cuts that the government revenue increased, and they brought down the national debt by about, one fourth, as a result of the money pouring into Washington.

Well, that's, that's the problem with Republicans, that they really don't go out there and, and make the case. You know, -

That's right.

Well, he didn't... The, oath that he took, of office was that he would faithfully execute the laws. Now, I don't think they meant execute in the same way that the mafia means it.

One of the great problems is that people do not react. I mean, when all is said and done, the Constitution of the United States, is a set of words on pieces of paper. The only way that the Constitution can protect us is if we protect the Constitution. I- if we rise up and revolt, if we vote out of office people who violate the Constitution, then of course it will mean something. If people can do this, say a few pretty words, and we say, "Oh, well," then the Constitution will, over time, erode to the point where it will mean absolutely nothing. There'll be nice words on paper, but people with power will just do what they feel like.

It is, but they alone can't do it. And more importantly, if Obama gets reelected, he's probably gonna have one or maybe two more members to appoint, and from that point on, it will just be a rubber stamp for whatever he chooses to do.

Absolutely. Absolutely. If they don't care, it'll, it'll be, it'll be walked. Already we have the Senate violating the explicit rule of the Constitution that each year they must present a budget to the pu- to the public.

Tha- that's right. Now, as long as no one does anything about it'll, it'll go on. And whenever it's inconvenient for the, any administration to reveal what they're gonna do, then they'll, then they simply won't present a budget.

For one thing, we start running out of money. Ju- and that's the problem of Greece. See, the secret of the welfare state is you can do almost anything in the short run, juggling money from here to there and so on, but in the long run, the arithmetic, can't be ignored, and in the long run, you're gonna run out of money, which is what's happened in Greece, which is starting to happen in Spain, and which can happen, in the United States

That's right. They, what, but it makes a difference how it comes to an end.

The question's how long can you skate? Greece discovered that there does come a point where, where there is no more money. In Spain, people are already leaving Spain in drove and taking their money out of the, out of the Spanish banks with them. one of the, one of the things that you could, you can do in the long run or be forced to do is simply print more money. And as they pr- as they print more money, that is simply a hidden form of taxation. I mean, when the Federal Reserve creates money to buy government bonds and keeps the interest rate low in order to k- make the price of the debt, service low, what that means is that if you have your money put aside in the bank and, and y- and you're getting 1% and the inflation rate is 3%, that means they're taking 2% of your, savings, every single year. And you know how compound interest is.

and even under the current conditions, in, $100 bill in 1998 would not buy as much as a $20 bill would've bought in 1960. So the, the thievery that goes on through inflation is huge.

That's right.

Yes.

And if, and if that was what makes for success, we'd be in good shape. they don't ha- get a decent education. I mean, I, I had to pay, a lot of money for my daughter to go to a private school to get an education almost as good as I got from a public school when I was growing up in Harlem. You know, All right.

There are two things. There's the lack of, a, it's the one-parent family.

The illegitimacy is the way we can measure it statistically.

right but if you had, if you had, you know, what used to be called common law marriage in which hus- wives stayed together for the whole time, there'd be two parents.

That's right. Right. Okay. That's right. my gosh, I mean, the crime statistics, almost any statistics you look at, people raised in one-parent families by mothers, the crime rate among them is vastly greater. The poverty rate is vastly greater. If you look at, Black husband, wife families- -hmm... their poverty rate has been in single digits every year since 1994.

That's right.

Absolutely

It's wonderful how, how long, how long it took capitalism to have that effect, and it only had that effect after the welfare state came in, and that was true on both sides of the Atlantic. If you read, Theodore Dalrymple's, stories of the, of the white lower class in Britain, you think he's talking about, the worst, ghettos in the United States. Yeah. And none of the factors that are supposed to explain what's happening in the w- g- ghettos in the United States, apply to the white w- working class in Britain. What the similarity is that in both cases you had the welfare state intelle- intellectuals create an atmosphere that undermined all sense of self, responsibility, which said that all kinds of, morality were just a, were just a joke, and if people start believing that, then they'll behave in w- ways that make it impossible to have a decent life.

Yes. The Republicans, I think, have a notion that because so many people are unemployed and on food stamps, that is a, is a negative for Obama. Franklin D. Roosevelt was elected in a landslide after ha- having, an unemployment rate higher than Obama's. The... There was not a single month in the first term of Franklin D. Roosevelt when unemployment was not in double digits, and in a number of months, the unemployment was over 20%, and he won the biggest landslide in American history. So th- the people who think that the economy is the key, that you can't win if your unemployment is 8%, forget it.

Yeah.

Yes, absolutely.

Well I don't think that, he's able to do that in one term. I think if he c- if he can just stop the,... It's like as if someone could have plugged the leak on the, Titanic. That's what... That would've been better.

Yes.

No? I don't want him to fix the economy. I want him to stop politicians from trying to fix the economy. That's what's caused the problem. When we ha- when we ha- we had 150 years when nobody thought it was the president's job or anybody else in the government's job to fix the economy, the economy fixed itself.

Well, I'm not usually a dispenser of optimism. I'm,

It's tough, but I'll try. I think Romney knows that all these bright ideas that they're constantly coming up with in Washington have a negative effect, even if the ideas themselves aren't so terrible. Because what it means is that if you're gonna invest, let's say, just for three years, a- and it's gonna take three years for this to pay off, you don't know what the rules are gonna be, of the game are gonna be three years from now. Right. And Obama has stocked the federal bureaucracy with people who think it's their job to come up with unending lists of bright ideas to stop mortgage foreclosures, to do this, to do that, to do the other. There are no rules, and y- and the one thing that has been crucial to economic prosperity here, in other countries, and in other centuries, has been having a set of dependable rules under which people can invest, because investment means putting money out right now in hopes of getting it back. you have, you don't, when you don't have that hope, 'cause you don't know what new costs will be imposed on you and so forth, then you hang onto your money. This idea that the Federal Reserve has to create more money at a time when both the banks and businesses have record-breaking amounts of money sitting idle, the question is why is it idle? It's idle because they're afraid to invest it.

hmm.

Oh, gosh. Well, f- number one, get out, get out there and v- and vote Obama out of office before he makes things even worse. Social Security is not gonna be there for them the way, the way it is set up right now. Something is gonna have to be done. Now, anyone who's proposes doing something will be accused of being heartless and wanting to get rid of Social Security. Now, arithmetic will get rid of Social Security if you don't do anything. So it's not a question. You don't have a, you don't have the option to just let Social Security keep going. people, this is the reason for the welfare states of Europe being in such turmoil, riots in the street, and, austerity and, unemployment rates over 20% and so on, is the chickens have come home to roost. You have unfunded mandates out there. You pr- you essentially promise people things. It's like giving them a, a generous check knowing that there's not enough money in the bank to cover it.

And now we're discovering that the hard way, and it's only a matter of time before the younger generation get there and discover that all the money they paid into Social Security went to pay the pensions of the previous generation, as well as other spending by Washington.

absolutely, and particularly in the case of Social Security. that what they need to do is put their money someplace where politicians can't touch it. That's what... That's the whole- Switzerland? No. No, I... That's the, that's the argument for putting it into private accounts. You see, if a, if a, if a private in- insurance company does what the Social Security system does, you can put the people in behind bars- Right in a federal prison.

Cause you, they have to have enough assets to cover their liability, otherwise it's-

That's right. Right. Congress can do that, but the private people can't, and that's why you shouldn't have the money, subject to Congress's direct control, but put it somewhere else.

Yes.