Tricke-down vs Trickle-up effect

College Confidential Community
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<p>Trick-down effect:

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Proponents of the trickle down effect believe that 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. In this model, relative poverty may increase, but proponents state that this is a moot point because absolute poverty decreases. Opponents to this theory may point out that a large gap in the distribution of wealth can lead to a similarly large gap in power and influence, thus making this economic model undesirable.</p>

<p>The trickle down effect is usually used to describe a process by which benefits to the wealthy "trickle down" to benefits for the poor. The trickle up effect, in a corollary to this, states that benefiting the poor directly (for example through micro loans) will boost the productivity of the society as a whole and thus those benefits will, in effect, "trickle up" to benefits for the wealthy.

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<p>Trickle-up effect:

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The trickle up effect states that 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. 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. This being so, 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. Furthermore, the trickle up effect argues, 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 avoids this pitfall by giving more money to those who would be more inclined to spend it.

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Info received from wikipedia.</p>

<p>What theory do you feel works better? Obviously we've had a government which believes in the trickle-down effect using supply-side economics the last 8 years and it seems if Obama wins in November that we would have the other side of things with the trickle-up effect.</p>

<p>Both theories utilize wealth distribution. With trickle-down the wealth is distributed to the rich in hopes it trickles down to the middle and lower classes. With trickle-up the wealth is distributed to the poor and middle class in hopes that it trickles up to the rich.</p>

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<p>I believe in trickle-up. The rich are not going to cut back on spending because of higher taxes, but the poor will spend more if they are given more. For example, poor people are paying the bare necessities, but if given a break they would do more things such as buy a better car or go out to eat. The rich, however, are not going to spend more if they are allowed to keep even more of their money, they are still going to go out and eat, buy new cars, etc, even if they lose a bit more of their money. </p>

<p>I realize that was kind of a spacey paragraph, but I hope I got my point across lol.</p>

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<p>It’s really a lot more complicated than one theory “working better.”</p>

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<p>I believe in neither. Absolutely no redistribution of wealth at all. Purly classical economics where there are no taxes or very little taxes in the form of excise. Everybody pays there fair share on goods. When I say small, I mean sub 1%, not insane taxes some folks pay today. In this the market controls the economy, Government can retain order, but it stays small and has limited power, it does only its job given solely by the constitution. Power remains to the people and the private sector. Economy prospers, people make the best decisions for themselves. Everybody wins. Fair.</p>

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<p>Trickle-down economics didn’t cause our economic crisis.</p>

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<p>Dr.Horse: how exactly is the government supposed to do the bare minimal to protect us if we don’t pay taxes? are they supposed to pull money out of thin air to fund the FBI, CIA, NSA, Military, etc.?</p>

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<p>pugfug90: no one said that trickle-down caused our economic crisis. i only made the distinction that we have witnessed trickle-down recently and could see the exact opposite if Obama wins.</p>

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<p>Lower taxes have paradoxically brought more government revenue in the past. I don’t know if lowering taxes distributes income in an equitable way, but it certainly helps the economy in some form.</p>

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<p>Are there any studies focusing on the recipients of the tax cuts? Is it more effective to cut taxes for the wealthy, the middle class, or the working class?</p>

<p>I think it would help the most if the tax process were just simplified. It would be cool if taxes were based on actual constant percentages, and there weren’t a bunch of loopholes in the system. I would be much happier if the system were simplified, even if I’d be paying more money in the end. The tax system in the US really causes too many headaches.</p>

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<p>No they aren’t supposed to create money out of thin air. First of all the ability to do such should be restricted, no fiat currency’s should be supported. The constitution does say this, but I guess people don’t look at that thing anymore.</p>

<p>Now as for taxes, programs like the IRS, FBI, BOE, CIA and NSA among many many others are not truly needed. These programs spend a lot of money and don’t give good results. In fact there is a correlation with these acronym agency’s, that in the more you spend on them the less there results. In fact we are trailing in intelligence in the global front, but spend the most on it. Our constitution gives us direct orders and guidance on what government entities should exist, and I am yet to find any of these in the document.</p>

<p>The Military has to big of a foreign presence due to our protectionist and interventionist mindset. Simply our military is to big and is spread to far out. It should concentrate itself on protecting America rather than the rest of the world. In that the cost of Military is a lot but could be handled by just excise taxes. Now if we get rid of our foreign bases and the rest of the bloat and make the Military Mean and Lean, cost could be cut in half and be more effective. I mean yesterday at my school they had army recruiters, about 10 of them all with there own H1 Hummer. Now it wasn’t just the $100K vechicals, no they were all done up like from the MTV’s pimp my ride tv show. This is where tax dollars are going and its utterly foolish. We have multiple wars going on and they have the money to have 10 H1 hummers with 40" plasma tvs and multiple others in the back with PS3’s. </p>

<p>If we shrink down the size of government to the size it was in 1998, we could abolish the income tax and everything currently would still run perfectly as it is now. If we go to the size of government in 1992 we could abolish all sales and corporate taxes and things would run normally. If we go back to pre-fdr, the government has enough investment strategies to be able to not even collect taxes, at all, not even excise. </p>

<p>There is no place in the constitution that says anything about a income tax and its like that for a reason. sure you could say what about the 16th amendment, but that was never properly ratified. Theirs a reasons Americans first 100 years were its most prosperous, the economy was allowed to function as it needed to without any action upon it. </p>

<p>Government as with anything with power functions best when it is constrained. Let it roam free and it will abuse and take advantage of people with that power. </p>

<p>The income tax and well most other taxes are just tricks that the rich use to manipulate the poor. In the late 1800’s the poor people were getting mad that the rich were getting richer and they were saying the same. So in there own best interest the poor people demanded taxes on the rich. What the poor didn’t realize, is that the rich actually wanted this to happen. So it flowed out like so.</p>

<p>-Only the top 6% of America was taxes at all
-Rich people are also usually politicians.
-Politicians are given a budget, lets say $500.
-Politicians have choice of saving money for next fiscal year or spending it all.
-If they save it, maybe they save $250 and spent the other $250
-Now state looks at such and only gives politician $250, but last year they got $500.
-So if he spent it, he would get $250 more.
-No incentive to save.
-So he spends $500 fully.
-Next fiscal year he spent all so needs more to improve.

  • So now state gives $750.
    -Now faces same dilemma, again spends it all. as no incentive to save.
    -people think politician is helping them. but they are the ones paying for it.
    -What politician buys, comes from the rich factories and services.
    -Rich are actually buying from themselves.
    -Then next fiscal year comes, they spend all $750
    -State wants to give $1000, but cant.
    -The current taxing of only 6% doesn’t hold.
    -Now they tax the top 10%.
    -A few years pass
    -The current taxing of only 10% doesn’t hold.
    -Now they tax the top 15%
    -A few years pass
    -Now they tax the top 20%
    -A few years pass
    -Now they tax the top 25%
    -A few years pass
    -Now they tax the top 30%
    -A few years pass
    -Now they tax the top 35%
    -A few years pass
    -Now they tax the top 40%
    -A few years pass
    -Now they tax the top 45%
    -A few years pass
    -Now they tax the top 50%
    -A few years pass
    -Now they tax the top 55%
    -A few years pass
    -Now they tax the top 60%
    -A few years pass
    -Now they tax the top 65%
    -33% are not taxes currently.
    -Now the top 67% of the country is paying for everything, and the tax burden shifted from the rich to the middle class/poor, as there are certainly more middle class and poor than rich. Now the poor and middle class are struggling with high taxes, but they were the ones who wanted this.</p>

<p>You need to learn you will never beat the rich class in a system where they control it. It just will never happen, theirs a reason they are so rich. The best way to win is to take away the control they have.</p>

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<p>^^ I surely do like this post.</p>

<p>One thing that makes politicians weep, wail and tremble; and I would LOVE to see, is a Constitutional Convention.</p>

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<p>“Trickle down” doesn’t work - as Bush I stated, “it’s voodoo economics”.</p>

<p>Dr. Horse seems to think that the high earners in the country - the CEOs and other top execs, Wall Streeters, etc. deserve what they earn, but in reality, most of them aren’t nearly worth what they make.</p>

<p>It’s no coincidence that we haven’t seen such a disparity in wealth in this country since right before the Great Depression (when the top 1% controlled over 42% of the wealth in the nation and the bottom 99% controlled less than 56%).</p>

<p>You can’t have a strong, stable and vibrant democracy w/o having a strong, stable and vibrant middle class.</p>

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<p>Really funny to cite an unpopular president to affirm your position. Heck, why don’t you cite Roseanne :D</p>

<p>[Historical</a> Top Tax Rate](<a href=“http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Docid=213]Historical”>http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Docid=213)</p>

<p>Historically, the top tax rates have been monstrous. Remember, it was JFK that cut it from 90 to 70, and people cheered. Many top tax bracket reductions later, and we have a TON of rich people. Which world would you rather have, a world of a few rich and a lot of middle/poor? Or a world with a good number of wealthy? Because in America, we’re living in the second, thanks to the fact that the rich aren’t taxed to death.</p>

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<p>Uhh, Bush I (GHWB) got a bum deal b/c he ended up paying for Reagan’s economic policies (GHWB is now actually seen as a fair President - can’t say the same for his son).</p>

<p>The same economic consequences that happened under Reagan (which reached its height during the latter part of GHWB’s term) is happening now - it’s just happening a bit earlier since the problem is that much bigger.</p>

<p>And of course tax rates such as 70% were ridiculous, otoh, a modest tax hike on the wealthy isn’t bad since we, as a nation, have to start cutting the deficit (the McCain tax plan would result in a larger deficit than Obama’s) - otherwise, our tax dollars are just going to end up paying our creditors.</p>

<p>Besides, the wealthy get their wealth in part b/c they use more of our national resources (infrastructure such as highways, bridges, tunnels, ports, airports, etc.).</p>

<p>Anyway, it’s not so much the tax rate, but the fact that the top 1% (or rather the top .2%) makes a ridiculous amount.</p>

<p>The fact that a CEO or Wall St. exec makes $30-40 million (esp. when they are driving their business into the ground) is laughable.</p>

<p>What’s better for the overall economy? </p>

<p>The fact that 50 miilion average Americans can buy a new dryer, refrigerator or car or 500k wealthy Americans being able to buy an exotic auto or a yacht?</p>

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<p>I don’t think you understand that high-!!!income people are earnrs: doctors, lawyers, engineers, etc., not CEOs, investors, businessman. Yes, the uber-rich do pay income taxes, but they usually don’t have big incomes.</p>

<p>What do you want to do, micromanage/socialize the economy and target a minute set of people that would only drive them to seek refuge in less burdensome places?</p>

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<p>[Historical</a> Top Tax Rate](<a href=“http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Docid=213]Historical”>http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Docid=213)</p>

<p>Notice 1988 and 2003. When taxes were lowered, the economy went into recession four years later.</p>

<p>Now look at the top tax rate under Reagan and Clinton. 40-50%? Isn’t that what Obama wants? God forbid we have another President like Reagan or Clinton.</p>

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<p>I leave those decisions to the shareholders, and board members. I am a shareholder to quite a large number of companies and can say, CEO’s are worth there weight in gold. One noticeable example was Dennis Kowlowski for me, this guy paid for my first two years of university. Thanks Dave. I’m completely cool and happy to support CEO’s whatever they are worth. Sure some CEO’s aren’t worth there big paychecks, but some are. </p>

<p>I also see absolutely nothing wrong with the wealth disparity, its a product of the economic choices people make. In a free market people have options, in a regulated system they don’t. people choose to work for the wages they currently do,if there wasn’t so much regulation, there would be more competition and thus more room for employment change. Employers would feel obligated to pay good contributing employees there true market worth. Not a artificial worth, which is a product of our economics choices.</p>

<p>The market chooses what people are worth, if you want the government to interfere in the balance, deal with the consequences.</p>

<p>Logic don’t forget to mention the recession in 2000 and the booms and busts. Recession cycles are a fact in fiat regulated economy’s. There is really no difference in the result of them from higher taxes and types of wealth distribution.</p>

<p>To say Reagan was bad is foolish, sure he wasn’t perfect, but he sure helped after the disaster Carter brought on. or did we forget about him.</p>

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<p>Trickle up was basically the stimulus package…rebates to the lower and middle classes to try to get them to spend.</p>

<p>All it did was deflect the troubles from subprime mortgages to big finance. When the economy has a “bug”, the healing process will inevitably involve some sacrifice, stagnation, recession, etc. It just depends on where it strikes. There’s no easy way out of a recession, is what I’m saying.</p>