So, trickle-down economics says that we give tax cuts or money or opportunity to people and/or businesses at the top of the food chain. They use their money to invent new products, to expand their production, to invest in other businesses. As a result, more people have jobs and eventually they can put their money back into the economy by purchasing the products they are helping to make. Right?
Giving the money and/or tax cuts to the people at the bottom of the food chain is seen as not effective for the expansion of business etc. because the people with the ability to do so aren't willing to put their money into production, expansion, hiring, etc. because they have higher tax rates and the like.
The benefit eventually flows down the system to the little guy who sees an improvement in standard of living. And I have heard that in the past it has been effective, but not in time to get a president re-elected - so it takes years.
This is my understanding of trickle-down econ. It could be wrong. If it is, please instruct me!
Here is my question: why not go the other way? Why not give the benefit to the little guy first? If the little guy can pay off his debts, he will feel more secure about spending money and putting it back into the system. She will buy more, and will be able to buy the things she really wants to buy. Companies who make things that people want will gain the profits from those sales. Capitalism will be at work. Eventually the money will trickle UP the system so that the companies who are good at what they do and make products that people want to buy (as opposed to the companies that can get the tax breaks etc.) will benefit and can put their profits into research and development, expansion, hiring etc. In the mean time, increased sales means more people need to work, so more people get jobs. These people who now have jobs can more confidently put their money into the system, and the benefits increase exponentially.
This way seems to reward the businesses that do the best job, who are the best at customer care, and who are innovative at working with what they've got. Which seems very "American way" to me.
Trickle-down econ may work in the long run, but until those benefits make it down to the bottom of the food chain, the majority of the people do not benefit. The big guy benefits.
On the other hand, if you give the money to the little guy first, only the companies with the money on hand to begin with will be able to compete for those dollars that are now going into the system. So bottom-up econ may not work either - I don't know.
But it seems that in this age of a Global Economy, everything is so complex that I don't think anyone can say with 100% confidence that their way is RIGHT. The world is just too complex. There are too many variables. And true experiments are impossible and/or unethical.
So yeah. If I'm wrong, I'm willing to hear it. But know this: I've heard about economists on both sides of a given issue be completely confident in their diametrically opposed viewpoints. So I guess I'm skeptical of the whole thing...
