First off let me take a Marco Rubio moment and say that, I want to dispel the notion that trickle down economy is not logical, it is. A lot of economists have put time into it and it is a logically sound theory. It is just a disaster when put into actual practice.
Trickle down can create jobs. The rich do have to invest the money instead of just keeping it in the matress. The problem is it doesnt necessarily have to create jobs in your economy. When the geniuses made the theory they never considered that there would be more than one economy you can invest in.
Which leads me to my main problem with it. Trickle down is the most anti nationalist economic system you can come up with. It relies on giving the money to the rich. I don’t have anything against people being well off , nor do I have a problem with the class in general. I have a problem with the spending habits of the class itself. When you give money to them there is a greater likelyhood that they will spend it in another economy. After all they have the resources to visit other places for vacations, have the mass of wealth necessary to make effective investments in another country, and have the incentive to get the best possible return for their money. In case the unthinkable happens and a country collapses they are also the class that can emigrate and avoid the chaos, which means they are less protective of the state of the local economy in general. I am by no means saying that all the money given to another class is spent inside the economy but a greater percentage of it is. To summarize any money given in a trickle down economy is more likely to help another economy rather than yours.
How does Trickle up work? You give the the money, in the form of tax cuts, incentives, or whatever else you may want to call it, to the poor and middle class. These classes particularly the poor tend to spend everything that they earn. They also spend it in their local communities, to buy food, services, and other things they may need. This then leads to more demand in that area for these things and other things that people never needed before which leads to more industries to produce them. Which of course leads to more workers employed by these industries, which then leads to more demand and production. Leading to a very happy circle of economic velocity.
I want to focus on that demand diversity for a moment before we go on. It is hard to fathom why I would count on people to buy things they never bought before. Consider this. If you had $100 dollars in income and needed $99 of that to buy food would you consider buying books? Or maybe taking up rabbit hunting as a hobby? What if you had $200 dollars and had to spend only $99 of it? You would be tempted to engage in a hobby or spend it on something you would never have considered before. This leads to more economic spaces opening up and more opportunities for diverse business ventures.
The most important thing is that trickle up causes a sense of positive thinking about the economy. People are happier when they have some breathing room, they feel more prosperous, and they are more likely to spend that money. People with a negative view of the economy, like for instance those who see that the rich get all the ta breaks and have not seen a pay raise in years, tend to not spend whatever they money they have. They even reduce their basic demands so that they can save which leads to less demand, less workers, and pretty much what I call the trickle down death spiral. If your main concern is morality, equality amongst people and all that hippie stuff well this works too. People with a more positive economic outlook tend to be more accepting of outsiders as they dont see them as a threat. They also tend to be more tolerant as they don’t have that much stress affecting them.
Trickle up also lets the consumer be the final arbiter of which companies suceed as they chose which to buy from as opposed to the government which chooses who to favor in a trickle down economy. This is important as it means consumers can hold companies to account for their actions. Realistically you will never be able to regulate a company to have perfect behavior. They will always see loopholes and they will always try and take advantage of them. Unless in this case the people have the power to take them into account for it. This soft regulation is actually more powerful than anything the government can put out as companies are now governed by morals rather than laws. For instance in trickle down as long as you kept to the letter of the law you were fine even if you did reprehensible things. In trickle up if the public had a problem with the things you were doing, even if technically legal, would cause them to support your competitors.
Of course there are challenges. You have to make sure the amount of credits people receive is not enough to cause an inflation and you have to put in protectionist policies to make sure that things are produced inside the country rather than out as creating the supply to meet the demand is part of the circle. I don’t see it as a more daunting challenge that creating current economic policy though. The biggest challenge is reducing private debt to a manageable level, preferably thru outright forgiveness, before attempting this. If you were to do trickle up in our current climate then it would still end up being trickle down as the money goes straight into paying for existing credit card and student loan debt. In effect the money goes straight back to the government or to the rich and we are faced with our original problem.
As always Trump is the only one with an inkling of this economy as everyone else is still stuck in trickle down.
Vote Trump 2016 🙂