Trickle Down Vs Bubble Up Economics

Bubble Up & Trickle Down Economics, What are they?

Trickle Down Economics is the theory that if you allow more money to flow to the Upper income class, people of this class will invest in business and use more money, and the resulting overflow will trickle down to the lower income class, benefiting them in addition.

Bubble Up Economics is the theory that if you allow more money to flow to the Lower income class, people of this class will use more money that will ultimately rise up to the Upper income class, benefiting them in addition.

The question posed here is which form 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 decide 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, usually benefiting either the Upper or Lower income classes more. The market dictates much but certainly not all of “who gets what”.

Our tax laws of course are the easiest example, with different tax rates applied to different income levels. But there are numerous other types of laws that assistance either the Lower and Upper income classes more, and stray from a purely “Free Market” or “Capitalist” system form.

Laws that assistance the Lower income class:

Anti Blacklisting laws.

Protections for Unions.

Child Labor laws.

Racial, Age & Gender discrimination prohibitions.

Employee Rights laws.

Political Donation restrictions (so that the wealthy can’t steal elections).

Minimum Wage laws.

Laws that assistance the Upper income 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 influence new laws).

nevertheless 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 assistance one income class more than another. A “truly” Free Market society would have no restrictions, with businesses and individuals being able to do at all event they want:

1. Business 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, in addition as minimum wage laws.

An employee who causes trouble (asks for a raise or complains about unsafe work conditions), could be fired and other companies in the area notified that the individual is a “trouble maker”, effectively ruining that employees options for ever finding work. Anti-Blacklisting laws came out of this practice.

2. Mineral Resource Rights – Someone finding a high gold or oil save on their land could keep every penny of wealth from that land. Currently the resource is treated as a public asset and taxed at a much higher rate.

3. Political Donations – An individual or company could give as much money as they wanted to a candidate, essentially ensuring their victory. We currently have many restrictions on how much an individual or business can donate.

Lobbyists could give money to politicians freely to “encourage” laws that favor the lobbyist are passed. There are restrictions here, but lobbyists certainly provide a lot of sway.

The list is really endless, and these are just some obvious examples.

Since we really aren’t a truly Free Market system, how should we decide who gets more? Which Economic form is better for the economy?

The question 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 unprotected to the strongest and healthiest society as a whole: towards the Lower or Upper income class. What happens when we favor one class over the other? Here is a proposition of how each class might use their additional money.

1. Vacation Spending:

Lower:More likely on a destination closer to home, benefiting the U.S. Economy more.

Upper:More likely oversea, 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 expand a small business (certainly inside the U.S.).

Upper:Move part or all of their business structure off-shore.

4. Automobile:

Lower:A family means, economical, average performance, U.S. made.

Upper:A high end means, gas-guzzler, sexy, foreign made.

5. Discretionary:

Lower:More likely to use on education, career advancement.

Upper:More likely to buy luxury items, boats, jewelry.

6. Education:

Lower:Adults more likely to pursue career advancement. Children more able to provide college.

Upper:Already understands the benefits of higher education, can provide it, so probably no additional money would be spent here.

7. Home buy:

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 average a stay at home parent, more time with the family, relief from stress.

Upper:Can already provide a stay at home parent, time with the family, relief from stress.

As you can see, when the Lower income class spends money, it helps the U.S. Economy more.

As this list indicates, putting money into the Lower income class gets that money working by the U.S. instead of foreign economies. It favors U.S. products and business, and provides for a healthier and more productive Lower class.

Additional Economic Benefits when the Lower Income Class gets more.

I would argue that when you shift money to lower income individuals, it will ultimately end up in the hands of the upper class anyways, with these additional advantages.

1. Benefits every part of the U.S. economy – the money will cycle once by 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 assistance local businesses, liquidity, motive for education and career advancement.

2. motive to Invest in the U.S. – the upper class will have more motive to invest in U.S. businesses and the U.S. economy instead of oversea, since there’s more money in the U.S. now to acquire. This provides additional stimulus to the U.S. economy instead of for some other emerging economy.

3. It adds to the U.S. tax base – Larger Corporations often pay far less in taxes than the individual or small business, by corporate loop holes and shifting of the business off shore. Money in the hands of the Lower income class adds directly to products and businesses that increase the U.S. tax base. A higher tax base gives government more to enhance infrastructure (transportation, health, schools), grants and loans for education and small business, and disaster relief.

Conclusion:

satisfy 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 income class, by tax breaks and incentives, benefits the U.S. as a whole far more than flowing money to the Upper income class.

Of course the additional income will ultimately end up in the hands of the wealthy anyways – that’s where it goes. But at the minimum the wealthy will have to earn it, investing more in the U.S. economy to ultimately acquire it. The less wealthy will get to keep up it for awhile at the minimum and develop a taste for it that might encourage them to acquire already more, spurring employment productivity, small business, and education.

The concept here is certainly not that people in the Upper income class are undeserving. In some situations these people inherited their wealth. But in many situations if not most, they got there as a consequence of additional effort, additional talent, and/or additional luck. Any or all of these go into becoming successful and are thoroughly worthy traits.

however, it would be healthier for society as a whole to already out the dispensing between 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 modificated tax rates, investment in public schools, and cheaper and more obtainable college and business 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 really believe it.

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