Horse and Sparrow

horses-assI recently heard supply-side or trickle-down economics compared to a horse and sparrow analogy where if you feed the horse enough oats, some falls to the ground to feed the sparrow.

It doesn’t work.

It was a cute idea in 1980 when Ronald Reagan presented it to a nation coming out of the 1970s malaise of inflation that Nixon left to Ford who handed it off to Carter. But they didn’t talk about the effects of that inflation longterm.

The money that trickles down loses its purchasing power because of inflation and other taxes and issues. If we put a $100 bill in an envelope in 1980 and allowed inflation to act on it, today when we went to get our cash we would only find $33.60. That is a 66% loss in purchasing power. We just cannot purchase the same amount of goods and services today that we could in 1980. Just fill up a grocery bag and see how fast it adds up.

So if you feed the horse enough oats eventually he shits on the sparrow.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s