Trickle Down Economics (Was Re: Inerrantist Clinton (fwd))
Raymond Hicks rhicks@emory.edu
Sat, 24 Jan 1998 12:12:17 -0500 (EST) (00885683537, Pine.GSO.3.96.980124115044.23222A-100000@curly.cc.emory.edu)
On Sat, 24 Jan 1998, walter nusbaum wrote:
> Walt(1/23)
>
>
> For Till on "Trickle Down"
> "Trickle down" is not a theory, it's an economic fact of life. Anyone who
> has ever bought a used(pre-owned) car or a "starter" home or equivalent is
> the recipient of "trickle down". Some one before had the wherewithal to buy
> these new and pass them down. Did you ever ask a poor man for a job? Why
> not? 'Cause he don't have one for you! Every time you contribute clothes,
> furniture, etc., to Goodwill(or equivalent), you are providing "trickle
> down" for others.
>
> Yes, there is "trickle up" that benefits a few, but "trickle down" impacts
> tens-of-thousands and allows them the use of things they otherwise could
> never afford. Our TV's, VCR's, computers, and other similar appliances are
> available to the masses(Us, or at least me), because of the previous
> purchases of the middle-class and above that allowed the manufacturers to
> gear up and provide in quantity these same goods at much lower prices than
> when they first arrived on the market. "Trickle down", for sure. There's
> more, but you get the idea.
> Best wishes,
> Walt
>
>
(Raymond 1/24)
This is not quite right. Trickle down economics is geared towards the
supply-side of the economy. The basic idea was that if rich people and
businesses were taxed less they would invest more in the economy; this
investment would lead to more jobs and a greater income for the lower and
middle classes. Because the lower and middle classes would have more
money, they would also spend and save more, encouraging greater production
and investment in the economy.
Or, theoretically, that was supposed to happen. Actually, the upper
classes did not use their new money for investment, but, instead, a
consumption craze overtook the US. In the short-term this has beneficial
effects for the economy such as lower unemployment and greater growth. In
the long-term, however, it has negative consequences: because there is
less domestic investment, foreign investment is necessary to continue
consumption.
The sole difference between supply-side economics and Keynesian economics
is which side of the income spectrum should start a recovery. In
Keynesian economics, as it has come to be understood, the government
increases spending by giving people money or providing them with jobs.
These people spend more on consumption goods. To satisfy their demands
producers increase their production which entails hiring more people who
will in turn puchase more consumption goods. Again, the key is to
encourage savings and investment.
--------
Raymond Hicks, Dept. of Political Science, Emory University
rhicks@emory.edu