Trickle Down vs Trickle Up Economics - Which fence do you tether your horse too

[scootrd]

Trickle Down economics
The trickle down effect is usually used to describe a process by which benefits to the wealthy "trickle down" to benefits for the poor.

Proponents of the trickle down effect claim that if the top income earners invest more into the business infrastructure and equity markets, it will in turn lead to more goods at lower prices, and create more jobs for middle and lower class individuals.
They argue economic growth flows down from the top to the bottom, indirectly benefiting those who do not directly benefit from the policy changes.  

The trickle down effect argues a free market, which is uninhibited by heavy taxation and other forms of government controls, will cause an increase in wealth for society as a whole, part of which will "trickle down" from the affluent to the less wealthy, making the latter group better off.


Trickle up economics
The trickle up effect is usually used to describe a process by which benefits to the wealthy will be realized due to an increase in sales relative to the amount of benefits that are given to the poor.

Proponents of the trickle up effect believe that if the lower and lower-middle classes are given benefits, such as tax breaks or subsidies, the increased funds would be spent at a much higher rate than would the upper class, given similar fund increases.  They argue many upper-class individuals do not spend their entire yearly salary to begin with, which is an indication that they will not spend any additional funds.  Instead, they will save additional funds, thereby withholding those funds from the economy and increasing the gap between the rich and the poor.

The trickle up effect argues itself as more effective than the trickle down effect because people who have less tend to buy more. In other words, the poor are more inclined than the wealthy to spend their money. The trickle up effect avoids this pitfall by giving more money to those who would be more inclined to spend it.

[Conan The Librarian]

I never liked those terms because they are black-and-white contrasts. I think those terms were coined for political appeal rather than to model reality. The way I'd summarize a relatively happy reality is:

1) We can't have poor people so deprived that they rebel and become dangerous and unproductive. They need a way out of poverty, but the benefits should be mostly a function of their own effort. This means good entry level jobs with a broad spectrum of other jobs and education that people can graduate to over time, and with experience and accomplishment.

2) Most people need to have a reasonably happy existence, getting some benefits for living in the society that they contribute to. Old age pensions are a good example of benefits that make sense to pay old folks aging from the middle class. The society needs to be attractive enough to keep people who contribute to it.

3) Wealthy people, or more accurately, people inclined and truly aspiring to be wealthy need a field of opportunity where they can gain substantial rewards for all the dedication and risk that they must endure. One of the principle things government does in this regard is establish a system of laws that are enforced and adjudicated consistently and predictably. Likewise for a consistent and predictable tax code.


When I look at it this way, there is very little difference between the right and the left. There are only slight differences of opinion on how the society earns and spends the money it has. The major difference is that political arguments are arguments of extremes, where only one facet of a problem is argued at a time.

[mechanic]

It doesn't matter to me what theory a person subscribes to, as long as they work and take care of themselves.  I also don't mind my taxes going to those who CAN'T help themselves.  Other than that, the government needs to stay out of people's lives and businesses and let them take care of themselves as they see fit.

IMO most of the problems we are now facing are CAUSED by government, so it cannot be the answer to them.

Ben

[Norm1057]

Sounds like justification of some type of European model. Who Cares, lets stop with the modeling and return to the founding principles.

Free Markets are self regulating. You make a product, sell the product, make a profit, expand and hire more employees who are then free to repeat the process! Your product is not good, no profit, no expansion, no employees! The system we allowed to develop punishes both success and inovation. There is not a single enterprise left in any state of this country you could start and prosper at without some type of Government interference. Want to give drunks a ride for a price, get a shofer's license. Want to sell home baked goods, make sure you are in compliance with FDA requirements. Now, lets imagine jumping through the hurdles of government mandates and prosperity finally arrives, the tax structure is designed to protect the ultra wealthy and punishes your success on a progressive tax scale.

While there are ways around all this madness, it is imposible to be 100% legal in the affair. All of this regulation, permiting, and taxing We have ALL allowed into private enterprise has destroyed American production. Try to think of what is actually produced here. Solutions to this delema begin with reducing the size of ALL government so that individual liberty prevails and then introduce a flat tax where all Americans pay the same % of income. The "Fair Tax" sounds good, but we all know that politicians can not be trusted and what we will end up with is a European style Value Added Tax on top of the current structure.

Top Down, Bottom Up I say it does not matter! Use your common sense and stop listening to over educated "experts".

[magooch]

I don't want to be trickled on from above, or below.  However, I believe that wealth does trickle both ways and without that dynamic, things remain static and that doesn't work to anyone's benefit.

[mcwoodduck]

Trickle Down works.
Lower taxes allow rich people to invest in projects.
Investing in speculation, companies, or providing investment capital is what fuels the economy, creates new products, New technology and jobs.
Taking a Million dollars away from a rich person in punnitive taxes feeds 600,000 back into the economy in the form of government workers and programs. Destroying wealth.  That same million dollars as investment capital creates 3 Million in economic growth.  Will sustane more in taxes to the government over the long run and creates jobs that raise wages and drive most prices down with economies of scale.  It is cheaper to make 100 of something than it is to make 10.  
Now if they steal a million from the 100 wealthiest corperations or people in the nation, Prices are going to go up to cover the new taxes, where prices can not rise cost (labor and materials) will be cut to stay competitive.  
If that same 100 Million were given to the poorest 1 million people.  They would not invest it, start new companies, or Hire people.  There would be a small bump in sales of common items, Prices would rise on items and the next year GNP would fall by twice the rise.
Wealth creation comes from risks.

But the best way to tell the difference between the two is:
Do you think you can better spend the money you earn or do you think the govenment can do a better job with your money?
Do you think the government can better run a business or do you think the business can better run its self?
If you think the government can run things better you are a bottom up person and need to take a few economics classes.
Ronald Reagan said that Governemnt is not the answer to the problem most often it is the cause of those problems.  If you look at the economy now, the housing, the financial markets, education, and health care are all having problems due to the government regulations and rules.  Making more rules and regulations will only cause more problems.

[Conan The Librarian]

I wish I could believe in concept as clean and pristine and elegant as a society without government regulation, but then I recall so many of the abuses of the days before government regulation. A small middle class, sweat shops, pathetic child labor conditions, widespread poverty, chalk added to milk and bread to increase profits, the tendency to monopoly, 16 hour work days 6 and a half days a week, boom and bust farming, horrifying pollution that affected public health, low individual prosperity, widespread malnutrition, electricity for a prosperous few. These things happened within living memory. A period of great wars happened about this time too, but maybe the connection is weak so I don't want to argue too hard about that point.

I'm no socialist, but I don't look at the past through rose colored glasses. Some regulation is good. But it's like having a tiger by the tail. We constantly have to decide what needs adjustment.

[Pat/Rick]

How about just "stopping the trickle" of so called foreign aid? Our imbecile gooberment gives it away and then borrows to replace it, just to spend money they used to have.     

[Cabin4]

I fall into the category of “scale back the size of government and its spending”. Lower taxes on everyone and everything. Align the lower government spending with lower tax revenues. Tax revenues should never exceed say a flat 10% income tax rate or some fair progressive rate never to exceed 25% bracket at the top. Inflation is not a reason to increase taxes. Tax revenues will increase as the economy expands or contracts as it shrinks, naturally. Just like a business with an operating budget, it can scale (up or down) accordingly to tax revenues and the demand level for its required services based on our constitution. Spending can never exceed tax revenue and tax revenue can never exceed the required spending rate over a projected 3 or 4 year term.

[mcwoodduck]

I
I'm no socialist, but I don't look at the past through rose colored glasses. Some regulation is good. But it's like having a tiger by the tail. We constantly have to decide what needs adjustment.

The problem is everyone has a different idea of what rules and regulations need to be in place.
Rules and regulations were set up to stop people like Ponzi from douping people out of their money.
Those same rules and regualtions made it possible for Bernie Madoff to steal Billions from people that thought the rules and regulations were there to protect them.  The rules give a false sense of security and keep people from doing their home work on firms, people, and profits.
These same rules being tweeked have made the riskier investments no longer risky and the we are now paying off firms that gambled big because there was no loss.  Worst they could do was break even.  The government bailed them out, with tax money they have paid in and left the rules in place for the same thing to happen again in a few years down the road.
In Health care, I remember going to the doctors as a kid, the office was a doctor and a nurse.  Went there got what I needed and left, usually with a sore butt from a shot.  If we had the $ mom handed it over, if not made arrangement to pay the doctor, then we had health care in the form of Insurance, HMO, PPO, and the doctor retired and our neighbor's son in law bought the practice.  He had to add two people to the staff just to do the paper work.
A few years ago the company went from blue cross to some other insurance, I was hurt nad needed a doctor.  Walked in with the old card in my hand and the desk told me it was not valid, long story short I paid cash for the doctoring.  After handing over what the doctor said, I asked what would have beenmy co pay with the insurance to see what I would have saved had I had the right card with me.  -With the co-pay I would have paid more.  The two follow up visits I had to pay for at 45 each but still cheaper to pay $ than the co pay.  The rules and the regulations are adding to the costs.

[beerbelly]

Conan The Librarian , how old are you? I will soon be 72 and I do not remember things the way you do. Before the liberals and echo freaks got control, I remember the coal mines and steel mills rolling! Everyone making good money for the times!
   Now I see dead mills and mines. Birmingham and suburbs now nothing more than a large ghetto with boarded up buildings. More or less ghost towns.
                                Beerbelly

[Brett]

Let me ask you this... how many of you are gainfully employed by a poor person? 

[Cabin4]

Let me ask you this... how many of you are gainfully employed by a poor person? 

Not me.

[mirage1988]

I fall into the category of “scale back the size of government and its spending”. Lower taxes on everyone and everything. Align the lower government spending with lower tax revenues. Tax revenues should never exceed say a flat 10% income tax rate or some fair progressive rate never to exceed 25% bracket at the top. Inflation is not a reason to increase taxes. Tax revenues will increase as the economy expands or contracts as it shrinks, naturally. Just like a business with an operating budget, it can scale (up or down) accordingly to tax revenues and the demand level for its required services based on our constitution. Spending can never exceed tax revenue and tax revenue can never exceed the required spending rate over a projected 3 or 4 year term.

+1 on that
On top of that- the top wage for a govt worker up to and including the coward in chief should be no higher than the average salary of the american taxpayer. If the parasite has a bigger appetite than the host has blood, it will starve.

[Old Fart]

I fall into the category of “scale back the size of government and its spending”.

At the very least this would be a good start.

[magooch]

All I know for sure is that the Dumocrats haven't got a clue about how to manage our economy and I'm not too sure the Republicans can control themselves long enough to stay out of the cookie jar and let the economy flurish, but I'll take a chance on them any time over the commie Dumocrats.

[Conan The Librarian]

Beerbelly:

I've got relatives in their mid-90s that remember those things and personally experienced it, and have stories about it.

What happened in Birmingham? Was that in textile country before all of that went overseas? I don't know anything about how Birmingham made its money. I'd appreciate a lesson. Thanks!

And Merry Christmas!

[Norm1057]

Beerbelly:

I've got relatives in their mid-90s that remember those things and personally experienced it, and have stories about it.

What happened in Birmingham? Was that in textile country before all of that went overseas? I don't know anything about how Birmingham made its money. I'd appreciate a lesson. Thanks!

And Merry Christmas!

That right there is one of the many sources of our problems! A problem in a particular region should be handled by that particular region. See the 10th Amendment! The Bleeding Hearts who attempt to right all percieved wrongs only succeed in spreading the wrongs across the board. The Founders were strongly opposed to this idea. At the turn of the century at which you refer, the Progressive Movement was born and has taken US ALL downhill! No matter what you call it, (Left, Right, Progressive, Socialist, Marxist, Fascist, Bleeding Heart, Liberal) or try to use to justify it (Your own Safety, It's for the Kids, Protect the Environment, the Poor Animals), COMMUNISM does not work for anybody! Wake up! We have been blessed to live in a country that was once, a long time ago, taken out of this World Game by it's founders. Now, we argue on how best to run back in search of an easy course without the required self sacrifice!

I would rather get all the Regulation out of my life and be responsible for my own choices! Even if it means working 16 hr days, 6 days a week, with my kids at my side! My path would then be My path without imposing on anybody else!

[jimster]

I fall into the category of “scale back the size of government and its spending”.

Yup.  The government causes things to "trickle" where they would flow. I don't care much for "trickle" in any direction.

Matter of fact...the entire idea of trickling up or down...refers to government doing it, or making that happen, that can't be good.
All government needs to do is stand aside, roll back needless regulations, stop spending which in turn shuts government programs down, and do basically nothing except protect our borders and do only those tasks given them by the constitution.  Once their offices and programs are dead and their size is cut down 70 percent, things pretty much take off by themselves.  Problem is government turned into a business, using other people's money. Cause they don't have any...of course.

I think if government were very small, things would FLOW...both ways.