Bubble Up and 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 spend more money, and the resulting overflow will trickle down to the lower income class, benefiting them as well.
Bubble up economics is the theory that if you allow more money to flow to the lower income class, people of this class will spend more money that will eventually rise up to the Upper income class, benefiting them as well.
The question 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 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 benefit either the lower or upper income classes more, and stray from a purely free market or capitalist system model.
Laws that benefit the lower income class:
- Anti-blacklisting laws
- Protections for unions
- Child labor laws
- Racial, age, and gender discrimination prohibitions
- Employee rights laws
- Political donation restrictions (so that the wealthy can't steal elections)
- Minimum wage laws
Laws that benefit the Upper income class:
- Land and mineral ownership rights
- Capital gains benefits
- Corporate loopholes
- PATRIOT Act restrictions that limit off-shore dealings for individuals but not for business
- Lobbying permissions (so that the wealthy can influence 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 benefit one income class more than another. A "truly" free market society would have no restrictions, with businesses and individuals being able to do whatever 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, as well as minimum wage laws.
Article comments
— go to most recent comments1 - Arch Conservative
You are correct in that we are in now way a free marketsystem though. Big government and big, international business and banking are in bed with one another and their interests are the same.
if you aint in that elite country club your life, livlihood and general welfare has no value to those who are.
Compared to so many in the world the average American has it pretty damned good. There are parts of the world where children are born into poverty and misery and this is all they will ever know of life. But here in America most of us in addition to the necessities, enjoy many creature comfoirts such as ipods and big screen tv's. We've been inculcated into believing that material possessions and wealth are the only things that matter. We view them as the sole purpose in life. Most of us are greedy. We overextend ourselevs on credit cards because of this greed. We buy homes and cars whose primary function is to serve as a status symbol that we may display to others.
It is our comfortable lifestyles and mind numbing pop culturte and media that has put so many Americans to sleep. We are for the most part completely complacent while politicians and corporate jackals rob us blind. Those who do become engaged for the most part fail to avoid the pitfall of the broken corrupt two party paradigm. Too many of us fight the futile battles of left vs. right, dem vs rep. etc etc While we're doing this it's the power elites on both sides of these battles that are actually a unified entity who merely pay lipservice to the contrary, that are cornholing more each and every day. Those who try to tell the truth are labeled as fringe or nuts. Evidence of this can be seen inthe way that Ron Paul is treated. He speaks the truth and as a reward is ridculed by the corporate media and those in his own political party as well as many ignorant citizens. What have we become as a nation when we first seek to riducule and deny the truth and those that speak it because we either don't want to hear it or are to ignorant to recognize it?
Prior to the creation of the federal reserve in 1913 we were the largest creditor nation in the world. less than 100 years later with the advent of the Fed, the UN, and credit cards among other things we are no the largest debtor nation in the world.
Forgive me for not addressing the points of your article directly Jon but I find the socioeconomic much more interesting than the purely econimc which can be rather dry and boring.
The way I see it America has two choices. We can continue to remain complacent and allow the politicians and globalists to sell us down the river until we are nothing but a broken down third world wasteland of misery or we can awaken, turn off the TV, and engage, en masse, in a full on socioeconomic revolution. As with pretty much all things in life, the choice to do the best thing is the choice to do that which is most difficult.
2 - Silas Kain
Arch, your last paragraph sums it up. We both agree 100%. Now, there's a start. Think we can facilitate more dialogue or is this a pipe dream?
3 - Dave Nalle
Forgive me for not addressing the points of your article directly Jon but I find the socioeconomic much more interesting than the purely econimc which can be rather dry and boring.
If you actually read the article you'd find it full of amusing and somewhat delusional views of economics. I've rarely seen so many biased statements putting a political spin on economic issues in one place at one time.
Dave
4 - Arch Conservative
I don't know if we're beyond the point of no return Silas. Our inane, puerile, pop culture has successfully deadened the critical thinking of so many.
The fed government has wasted a few trillion dollars in the past year and a half but who cares when the new season of American Idol is going to start in a few weeks.
5 - Baronius
Jon, I think you're missing an important point - maybe the most important point - of trickle-down economics. It's not about letting the rich spend money, it's about letting them invest money. A greater percentage of the rich's income goes into savings, which leads to potentially job-creating business investment.
You also raise the specter of the wealthy spending money overseas. Spending, I don't care about. (I don't care who has how many houses, either, but that's a side point.) What about their investments? Will they be in the US or abroad? There are economic benefits to the US to both, but let's stick with your premise that domestic spending and investment are preferable. So, how can the US increase the rate of domestic investment? By lowering the tax rates on investment income - which is the primary policy recommendation of trickle-down economics.
It's worth noting that projects like the Grameen Bank use the same principle in microfinancing, getting those with extra money to invest in business opportunities for the poor. No one would argue that microfinancing is all about the wealthy, though. Microfinancing works in places that lack the financial markets that facilitate investment. In the US, we have those structures, so the best way to stimulate investment is to cut taxes on it.
6 - Glenn Contrarian
I've referred to the Philippines before as a Republican paradise. Why? Because in that country there are very, very few protections for the lower class, and the upper class is largely unrestricted...and agitating for social reforms such as the formation of unions can get one 'salvaged', which is the local lingo for getting killed.
Thing is, this is fairly NORMAL in third-world countries...whereas there is NO example, not a single one, of ANY first-world country maintaining a high standard of living while having as few restrictions as the Republicans and libertarians want.
On the other side of the coin, every single one of the countries with a high standard of living maintain a social safety net for the less fortunate...and generally speaking, the stronger that safety net, the higher the standard of living of that country as a whole.
Of course the BC conservatives don't want to hear how their theories work out in the REAL world. They only want to pretend their fantasies of a Ayn-Randian paradise...and as with communism, libertarianism sounds wonderful in theory, but in the REAL world it DOES NOT WORK.
Why? Again, just like with communism, while the theory might work for some people, for the vast majority of humanity, it is simply incompatible with human nature.
7 - Arch Conservative
Glenn....have you ever considered the idea that some people just don't deserve sympathy and compassion?
How many of us know someone that drives around in a very expensive car or perhaps makes large unnecessary purchases on credit cards and the complains about how tight money is?
I work in IT services and deal with a client that helps women who are addicted to drugs, may have been battered or have other problems get their lives back together. I have overheard many of the bleeding heart liberal counselors discussing how some of these women, once they get on the state government assistance gravy train refuse to get a job or take any responsibility for themselves. They just want to stay a victim because they get a check for being one without having to do anything to earn that check.
How much of my tax dollars and yours must we give people like that to make you happy Glenn?
8 - roger nowosielski
"Glenn....have you ever considered the idea that some people just don't deserve sympathy and compassion?"
Would God say that, Archie?
9 - Cannonshop
The problem with your theory really comes down to application. YES, we need laws to govern commerce. They need to be enforced, and they need to be Enforceable. YES, we need a 'social safety net', but it can't be everybody, it's GOT to focus only on those who truly can not do for themselves. (and yes, there IS a difference between "Can Not" and "Will Not".)
10 - roger nowosielski
So what shall we do with the rest? Send them to Labor Camps, Soviet style, for the purpose of re-educating them on the virtues of good citizenship and social productivity?
11 - Cannonshop
10: No, Roger, you let them learn the hard way, on their own. It's like reforming a drunk or a junkie-you can enable them for years in 'treatment' that doesn't treat them, you can warehouse them in hospitals and prisons and they don't learn their lesson, you can prop them up on SSI and you'll be paying them for eternity...
Or, you can let them experience hunger, and jonesing, and shitty conditions until they're ready to help themselves.
I have no problem giving someone a hand up, I have a BIG problem giving them a hand-out.
Freedom doesn't just mean free to succeed, to be free to succeed, you have to be free to fail-and that includes being free to suffer the consequences of your failure.
12 - roger nowosielski
Well, let's re-institute then the poorhouses from the Dickensian times.
13 - roger nowosielski
And while we're at it, debtor prisons, too.
14 - Dr Dreadful
Cannon, are you saying that addict rehab programs never work?
Because if not, you'd better abandon it as an analogy.
15 - roger nowosielski
"Suffering is good for the soul," Cannon, as the saying goes. But it's an adage I'm quite ready to adopt to my own life and situation.
I'd say it's another thing entirely when we're trying to impose some such schema, for better or worse, on others.
It's like playing God, IMHO. And I'm not quite ready to step into Her shoes.
16 - FitzBoodle
Capitalist theory asserts that power resides in the hands of the owners of capital, i.e., land, factories, tools, etc. Others should have no power because they have no vested interest.
Capitalism is antagonistic to "Free Markets", as every capitalist seeks to expand by driving his competitor out of business or buying him out. Capitalism is about growthsupported by power.
The violent antagonism between Capitalism and "Free markets" is the cause of the distress that AC and other rightists feel about the absence of free markets in capitalistic society.
Capitalists don't want to compete, they want to dominate.
17 - roger nowosielski
Quoted for truth. What may have been once humble beginnings necessarily turns into a monster.
18 - Cannonshop
#14, no doc, I'm saying they only work when the Addict is ready to quit, and not before then. You can't "Make" someone get better, all that happens when you try, is they go back to the habit. The've got to be ready to at least Listen first.
I'm speaking as someone who can't ever take a drink of alcohol again. If I do, I'll be addicted again.
Instead, I drink a lot of coffee and sometimes go to AA meetings if my resolve wavers-but it's worked so far because I make it work.
19 - Cannonshop
#15, Roger, I think it's a peach if you want to try and help someone who refuses to help themselves-as long as you're doing it with your own funds, your own time, your own resources. Hell, I might even be talked into helping you-if only because there is always the possibility of being wrong.
I resent being forced to do so. Intensely, and find it to be MORE immoral to force others to do what I wish done, but don't want to do myself.
Get the picture? It is WRONG to force other people to pay the bill for your hopes and dreams.
20 - roger nowosielski
I ain't talking about what you are ready to do, Cannon. That's not really my concern. But the point is, you are a part of a larger community. And whether you agree with the community decision to help all those who need help - whatever that entails - or don't agree, it's your business. So until you change the MO or manage you have your way, you're kind of stuck, aren't you. Of course, you can always leave.
Mind you, I'm not addressing now how you ought to think and feel about your countrymen (soon to become an obsolete term, for sure.) That's not up to me to say. I'm only addressing the pragmatics, the fact that you are happen to live in a society you're increasingly coming to despise.
So what can I say?
21 - Cannonshop
#20, Roger, as I expressed earlier-I have no beef with helping people who actually NEED it. I have a problem with being forced to help those who simply WANT it.
Examples:
Need: People with actual disabilities, including mental disabilities (Low intelligence), Children, the elderly, the unemployed who're actively seeking work. I've got no problem with giving these folks help.
Want: People who refuse to work, Artists who don't do art that sells, Healthy people with no disabiities that aren't actively seeking work or starting businesses of their own, Drug addicts who aren't serious about quitting, CEO's who bankrupt their corporations through fraudulent, criminal, or merely stupid actions.
/examples.
See? NEED help. sure, I've got no problem with helping people who NEED it. I have problems when I'm compelled to provide a living to people who merely WANT it.
22 - Cannonshop
Short form, "Those that will not give, should not recieve."
23 - roger nowosielski
Well, Cannon, should I say I empathize with you? Such is the government you're under, and so am I.
But besides the obvious, I think it's rather uncanny to speak of people who merely want rather than need. Do you have any specific examples in mind? Your family, neighbors, friends? Anyone you know personally.
It's rather callous and highly presumptive to speak of "people" in such general terms, apart from any specific instances. My intellectual integrity wouldn't allow me.
But then again, forgive me because I have no right to speak for anyone but myself. So in that spirit, I concede.
Happy New Year.
24 - Cannonshop
#23 Yes, I have relatives that I wouldn't piss on if they were on fire, as a matter of fact-because they sponge off of the system and consider it their god-given right to force other people to pay for their lifestyles.
25 - roger nowosielski
Well, I'm sorry to hear that. Which is why, no doubt, it's also so personal to you. But you do know, of course, there's a danger there from generalizing to any chunk of the population. A natural predisposition, by all means, but perhaps you should try to resist it.