Your Christmas Present From The Democrats: Another Load of Trickle-Up Economics


In the middle of delivering another tedious class-warfare sermon on Capitol Hill last week, Senate Majority Leader Harry Reid (D-NV, current net worth $3.4 million) made the rather startling assertion that millionaires who create jobs are “like unicorns – they’re impossible to find and don’t exist.”

Professor Reid went on to deliver the advanced economic theory that “only a tiny fraction of people making more than a million dollars, probably less than one percent, are actually small business owners, and only a tiny fraction of that tiny fraction is a traditional job creator.” 

Got that?  Only a tiny fraction of small businesses owned by people who make more than a million dollars create jobs in a traditional sense.  The rest of the small businesses owned by people with Harry Reid’s net worth are staffed by ghosts, robots, colonies of super-intelligent ants, and the like.  You probably didn’t make it halfway through that video before you were shouting the names of rich entrepreneurs who created thousands of jobs at the screen.  Don’t bother: Harry Reid can’t hear you, and he wouldn’t hear you even if he was standing in the room with you.

So… if rich people opening businesses aren’t creating jobs in the private sector, then who is?  For the answer, we turn to an even greater economic genius, House Minority Leader Nancy Pelosi (D-CA, current net worth $35.5 million.)  Yesterday she repeated a theory she made famous some years ago, and which has become one of the bedrock principles of the Obama Administration: jobs are created by people who don’t have jobs, through the magic of unemployment insurance, whose extension will create 600,000 jobs.  Why, that’s even better job creation than ObamaCare!  And you know how right she was about ObamaCare!

It’s the return of Trickle-Up Economics, an article of nearly religious faith on the Left these days, despite the rather stunning volume of evidence that it doesn’t work.  Cast a flurry of government dollars across the deserving poor, and their rush to spend Big Government’s largesse will cause businesses to pop up all over the place and begin hiring.

Obviously liberals are in love with this fantasy, because it means Big Government gets to exercise ever-greater control over the private sector.  Taxpayer money is seized and spent, while liberals get to posture as the selfless champions of the little guy.  The fact that it doesn’t work is a feature, not a bug, because it creates ever greater demand for that compassionate welfare spending.  Dependent constituencies are the lifeblood of collectivist politics.

It seems a bit curious that it fails as comprehensively as it does, however.  Why don’t more jobs materialize to scoop up all that unemployment money?  Partially, it’s due to the way unemployed people tend to spend their money – paying off debt, among other things, coupled with an entirely reasonable urge to build up cash reserves to handle necessities when those unemployment benefits eventually run out. 

Another problem is that jobs are a transaction, in which value is created for both employer and employee.  People create value through the work they perform to earn their paychecks, a simple point easily forgotten by those who spend their lives working the halls of Congress.  Giving people money for nothing cuts out half of that value-creating transaction.  Of course the results are anemic.

But the primary problem with Trickle-Up Economics, which is also part of the reason President Obama’s vaunted “payroll tax cut” hasn’t been creating many jobs, is that the stimulus effect of randomly sprinkling small change upon the populace is vastly outweighed by the tax and regulatory burdens currently applied to businesses.  Forming a business, even a small one, is very difficult, more so in some states than others.  When the entrepreneur goes to hire people, he runs afoul of cost-escalating regulatory obstacles, including Pelosi’s beloved ObamaCare. 

Trickle-Up Economics would still be a pathetic joke if businesses really could expand rapidly, hiring people swiftly and at reasonable cost, to scoop the government cheese from the pockets of the unemployed.  The punch line to the joke is coming when we can’t borrow any more money to sustain these insane levels of government spending.  Meanwhile, the world Nancy Pelosi and Harry Reid helped to create simply does not allow people to use their boodle from Washington in the way the Democrat leaders imagine.  Maybe they should study the virtues of economic liberty harder, and stop doodling unicorns in their textbooks.