Bubble Up & Trickle Down Economics, What are they?
Trickle Down Economics is the law that if you allow more money to flow to the Upper wage class, people of this class will invest in firm and spend more money, and the resulting overflow will trickle down to the lower wage class, benefiting them as well.
Bubble Up Economics is the law that if you allow more money to flow to the Lower wage class, people of this class will spend more money that will at last rise up to the Upper wage class, benefiting them as well.
Trickle Up Poverty
The ask posed here is which Model is better for the economy as a whole?
But the U.S. Is a Capitalist, Free market system. Isn't It?
Doesn't the market settle who gets what, not the Government?
The U.S. Is far from a purely capitalist, Free market society. There are numerous laws and tax codes that favor individuals differently, ordinarily benefiting either the Upper or Lower wage classes more. The market dictates much but absolutely not all of "who gets what".
Our tax laws of policy are the easiest example, with separate tax rates applied to separate wage levels. But there are numerous other types of laws that advantage either the Lower and Upper wage classes more, and stray from a purely "Free Market" or "Capitalist" law model.
Laws that advantage the Lower wage class:
Anti Blacklisting laws.
Protections for Unions.
Child Labor laws.
Racial, Age & Gender discrimination prohibitions.
Employee ownership laws.
Political Donation restrictions (so that the wealthy can't steal elections).
Minimum Wage laws.
Laws that advantage the Upper wage class:
Land and Mineral ownership rights.
Capital Gains benefits.
Corporate Loop Holes.
Patriot act restrictions that limit off-shore dealings for individuals but not for business.
Lobbying permissions (so that the wealthy can affect new laws).
Still think we're a Capitalist, Free market System?
This is how it would look if we were.
There are many strictly non Free market regulations that advantage one wage class more than another. A "truly" Free market society would have no restrictions, with businesses and individuals being able to do anything they want:
1. firm Hiring - companies could hire children, at poverty level wages, to work in coal mines because they're smaller in stature and cheap. This was the case for a long time until laws restricting underage employment were made, as well as minimum wage laws.
An worker who causes issue (asks for a raise or complains about unsafe work conditions), could be fired and other companies in the area notified that the personel is a "trouble maker", effectively ruining that employees options for ever looking work. Anti-Blacklisting laws came out of this practice.
2. Mineral reserved supply ownership - man looking a rich gold or oil support on their land could keep every penny of wealth from that land. Currently the reserved supply is treated as a group asset and taxed at a much higher rate.
3. Political Donations - An personel or firm could give as much money as they wanted to a candidate, essentially ensuring their victory. We currently have many restrictions on how much an personel or firm can donate.
Lobbyists could give money to politicians freely to "encourage" laws that favor the lobbyist are passed. There are restrictions here, but lobbyists absolutely yield a lot of sway.
The list is absolutely endless, and these are just some positive examples.
Since we absolutely aren't a truly Free market system, how should we settle who gets more? Which Economic Model is better for the economy?
The ask is, if you're not going to insist that we should live in a purely Free market system, how would you weight taxes and financial benefits to perform the strongest and healthiest society as a whole: towards the Lower or Upper wage class. What happens when we favor one class over the other? Here is a proposition of how each class might spend their extra money.
1. Vacation Spending:
Lower:More likely on a destination closer to home, benefiting the U.S. economy more.
Upper:More likely abroad, benefiting Foreign Economies more.
2. Investing:
Lower:U.S. Products - Bank Savings, Mutual Funds ...
Upper:Foreign Products, Off-Shore High risk/return ventures.
3. Running a business:
Lower:Create or develop a small firm (certainly inside the U.S.).
Upper:Move part or all of their firm buildings off-shore.
4. Automobile:
Lower:A family vehicle, economical, midpoint performance, U.S. Made.
Upper:A high end vehicle, gas-guzzler, sexy, foreign made.
5. Discretionary:
Lower:More likely to spend on education, occupation advancement.
Upper:More likely to buy luxury items, boats, jewelry.
6. Education:
Lower:Adults more likely to pursue occupation advancement. Children more able to afford college.
Upper:Already understands the benefits of higher education, can afford it, so probably no added money would be spent here.
7. Home Purchase:
Lower:Certainly a U.S. Home, maybe a first.
Upper:More likely a second home, possibly a foreign getaway.
8. Stability:
Lower:Additional Financial Resources might mean a stay at home parent, more time with the family, relief from stress.
Upper:Can already afford a stay at home parent, time with the family, relief from stress.
As you can see, when the Lower wage class spends money, it helps the U.S. economy more.
As this list suggests, putting money into the Lower wage class gets that money working straight through the U.S. Rather than foreign economies. It favors U.S. Products and business, and provides for a healthier and more sufficient Lower class.
Additional Economic Benefits when the Lower wage Class gets more.
I would argue that when you shift money to lower wage individuals, it will at last end up in the hands of the upper class anyways, with these added advantages.
1. Benefits every part of the U.S. economy - the money will cycle once straight through the economy before it gets to the upper class. On products and education, every part of the U.S. economy gets to "touch" this money before it makes its way into the Upper class. This will advantage local businesses, liquidity, incentive for study and occupation advancement.
2. Incentive to invest in the U.S. - the upper class will have more incentive to invest in U.S. Businesses and the U.S. economy rather than abroad, since there's more money in the U.S. Now to acquire. This provides added stimulus to the U.S. economy rather than for some other emerging economy.
3. It adds to the U.S. Tax base - Larger Corporations often pay far less in taxes than the personel or small business, straight through corporate loop holes and shifting of the firm off shore. Money in the hands of the Lower wage class adds directly to products and businesses that growth the U.S. Tax base. A higher tax base gives government more to enhance infrastructure (transportation, health, schools), grants and loans for study and small business, and disaster relief.
Conclusion:
Feed the roots and the tree will grow strong. Plant in the desert and the tree will die.
Allowing more money to flow to the Lower wage class, straight through tax breaks and incentives, benefits the U.S. As a whole far more than flowing money to the Upper wage class.
Of policy the extra wage will at last end up in the hands of the wealthy anyways - that's where it goes. But at least the wealthy will have to earn it, investing more in the U.S. economy to at last derive it. The less wealthy will get to hold it for awhile at least and invent a taste for it that might encourage them to derive even more, spurring employment productivity, small business, and education.
The notion here is absolutely not that people in the Upper wage class are undeserving. In some cases these people inherited their wealth. But in many cases if not most, they got there as a succeed of extra effort, extra talent, and/or extra luck. Any or all of these go into becoming successful and are entirely worthy traits.
Yet, it would be healthier for society as a whole to even out the distribution in the middle of the haves and the have-nots - not in a Robin Hood sort of way, but in leveling out the playing field. This can be done with adjusted tax rates, venture in group schools, and economy and more available college and firm loans.
"Bubble Up" far outweighs Trickle Down" in benefits to the U.S. Economy. The U.S. Started as a government "by the people for the people" - maybe it's time to absolutely believe it.
Trickle Down Vs Bubble Up Economics
Post a Comment