Bottom Up and Middle Out – A Socialist Deception: “Middle Down and Bottom Out” – A National Reality
Don’t you just love the ability of the democrats in Washington to spin good sounding, unrealistic and deceptive phrases, that are, in reality, economic nonsense? They are using their economic and social policies in a relentless push to transform our free market economy into a socialist welfare state. In a previous paper titled “Twisted Terminology” still accessible at www.georgeeconomics.com, I discuss the misuse of the terms liberal and progressive in detail. This paper scrutinizes the Democrats relentless repetition of a completely fallacious phrase “Bottom Up and Middle Down”, which is another clever, but totally deceptive mechanism designed to add appeal to their economically disastrous socialist agenda. This phrase is designed to support the Democrat’s socialist agenda. The methodology employed in this paper to determine the efficacy of this phrase, is to evaluate the impact of each of Biden’s major decision making and administrative actions on the well being of the mid and low income segments of the US.
The first well publicized administrative action that Biden took upon taking office was to terminate the permit for the Keystone XL Pipeline and make it clear that oil production on Federal land would be limited. Without considering the issue of energy independence or energy security, these actions have diminished the availability of low cost North American oil to American refineries which, in turn, inevitably translates into higher prices for gasoline and all other petrochemical products. Note that in all of his spectacular wisdom, on August 11, 2021, approximately seven months after his brilliant move to kill the Keystone XL pipeline project, Biden requested OPEC to increase oil production to counter the rise of crude oil prices. Surprise, surprise, OPEC told him to “pack sand”. It is hard to believe that Biden would be so naive to believe OPEC would take action counter to their ongoing interest to assist the Biden overcome his politically driven pipeline blunder, especially given his approval of the Russian Nord Stream 2 project in Europe. Unfortunately, the income classes that are most negatively impacted by the rising cost of gasoline and other petrochemical products are the low and middle income individuals. The reality of this strategy will be Middle Down and Bottom Out .
Neoclassical growth theory, whether or not the factors of production are exogenously or endogenously determined, is based on the intuitive fact that growth is a function of capital, labor and technology. Bidens’s socialist inspired open border policy relating to the southern border with Mexico, designed to increase the number of future left wing voters, has and will continue to add millions of illegal immigrants to the already large illegal alien population in the US. In essence, this move will substantially increase the labor factor in any production function format measuring economic growth. Unfortunately, virtually all of the near to mid term increase in available labor falls into the low income (low or non skill) category. Without an even distribution of skill level immigrants, the Democrats’ misguided socialist plan to pack the country with extremely low skilled left leaning voters skews the existing distribution of low, middle and high income (skilled) individuals in the US further to the low income and low skill category. This expansion of illegal immigration will result in a greater number of individuals and families receiving federal assistance (either the illegal immigrants or the low income wage earners they displace). In other words, more people will be dependent on the welfare state. Unfortunately someone has to pay for big government transfer payments – the wage earner, particularly middle income skilled individuals. The reality will be Middle Down and Bottom Out.
Spend, spend, spend and then spend some more has become the mantra of Biden and the Socialist left Democrat party. The promise of “Build Back Better” and “everybody must pay their fair share” are slogans, much like “Bottom up and Middle Out”, that sound good but do not represent the realisticresult of moving the American economy from a relatively efficient free market format to a socialist welfare state. The proposed 3.5 trillion dollar green new deal budget bill, with lots of free stuff, big government spending, if passed, will devastate the American economy. Given all of the trillions of Pandemic related bailout dollars injected into consumers pockets and shuttered business bank accounts in 2020, the additional proposed spending spree, aimed at aggressively moving the US economy towards the socialist model, will make inflation a much longer term issue than projected until recently. The 3.5 trillion dollar Build Back Better Bill, aimed at radically changing America, contains a plethora of transfer payments and government spending that radically expands the government portion of GNP. Couple the ominous problem of dealing with inflation, which will have to be dealt with much sooner than projected by wishful thinking gurus, with the impact of a myriad of proposed tax increases on corporate and entrepreneurial America, and a substantial economic slowdown becomes inevitable. Most economists, especially those that espouse fiscal policy where demand and supply side factors are handled in balanced manner, recognize that most of the negative impact of corporate tax increases falls on labor, with much of the tax increase also passed onto consumers (mostly low and middle income individuals). The tax increases that fall on small and medium size entrepreneurial America will have a disproportional impact on middle income wage earners as business models are strangled and both owners and employees are financially squeezed. Once again, the reality of the negative impact of the socialist inspired Democrat tax and spending spree will be Middle Down And Bottom Out.
Virtually all of the non-day to day busywork legislative actions undertaken and fiscal policy pursued by the Democrat party over the past five decades have been aimed at shifting the American free market economy toward the socialist model with the biggest push, by far, occurring right now. Note that every time spending and investment decisions are shifted from the free market private sector to the government (public sector), productivity, efficiency and individual rights are eroded. Aside from the Clinton presidency years (held in check by a Republican Congress), the socialist inspired policies of the Democrat presidents have not gone well. The massive spending on social programs initiated by Linden Johnson (LBJ) led to an inflationary environment, which when coupled with Jimmy Carter’s inability to deal with congress coupled with the consequential continuation of the problematic underlying fiscal policy issues gave legs to the crippling stagflation that dominated the 1970’s. The small government, free market friendly economic policies of the Reagan presidency reversed the stifling effects of the two previous Democrat Administrations. The key to the reversal in the country’s economic performance from the Democrat Administrations of Johnson and Carter was the shift in policy from the Keynesian demand oriented theology regarding the household consumption and big government spending to the free market, monetarist approach of Milton Friedman which is primarily based on the intuitively obvious truth that “the best of a country’s abilities come from its free markets while its failures come from government intervention” (Milton Friedman; Rose D. Friedman (1962). Capitalism and Freedom: Fortieth Anniversary Edition. U. of Chicago Press).
The return of Keynesian big government spending and heavy regulatory control during the Obama Administration resulted in what was referred to at the time as “Obama’s new normal” which encompassed slow GDP growth, a stagnant jobs market, and falling real household incomes. The return to the Friedman free market approach to fiscal policy by the Trump Administration once again returned the economy to a healthier path with the lowest unemployment in five decades and the lowest overall poverty rate ever. The wildly socialist agenda of the Biden Administration promises a massive tax and spending spree, which in the light of existing inflationary pressure, if passed, will recreate the stagflation of the Johnson and Carter years. Instead of the “Bottom Up and Middle Out” deception promised by the left, the reality will be Middle Down and Bottom Out. And if the Democrats get everything they want we may have to add another reality, Top Down.