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Trickle-Down Economics vs. Trickle-Down Government


    By the time you read this article we, as a nation, have already decided our next president. But the political debates are fresh in our minds. These televised arguments remind me of a boxing match. Everything about these two candidates was conflicting. Foreign policy. Social issues. Education. Taxes. Economics. Everything.

    But what seems to be on every citizen’s mind is the economy. Is it possible one of these parties is 100 percent correct on their economic policy? Is one side completely wrong? What do they both stand for?


    You’ve probably heard the two major philosophies. Trickle-down economics is closely associated with Republicans. Trickle-up economics, or “trickle-down government”, is associated with Democrats.

Trickle-Down Economics:

“An economic theory which states that investing money in companies and giving them tax breaks is
 the best way to stimulate
 the economy.”


    Trickle-up is credited with helping the common person. This is done by tax credits, tax breaks and cash stimulus among other ways. It is criticized for “spreading the wealth.”

    Trickle-down is thought to generate growth by giving tax breaks and incentives to businesses and the affluent. This is may result in innovation and growth for the entire population. Trickle-down is lambasted for making the rich even richer.


    Is there anything good to the idea of enriching the already-wealthy? Here are a few pros and cons of the trickle-down theory:
• It does seem to loosen up business investment. This can lead to increased growth and employment.
• It can be fair. Think of across-the-board tax cuts for all brackets. Everyone gets something.
• In a weak economy, the trickle tends to evaporate. Corporations have trillions in cash now and still small, or no, new-hiring.

Trickle-Up Economics (aka Trickle-Down Government):

“…an economic theory used to describe the flow of wealth from the poor to the affluent; it is opposite to the trickle-down effect.”



    Is there anything good to the idea of spreading the wealth? Here are some pros and cons for the trickle-up theory:

• In good or bad times, re-distribution creates guaranteed spending and money flow.
• While re-distributing is not fair to the wealthy, the affluent usually have systems in place (businesses, investments, etc.) to quickly recapture these stimulus dollars.
• This wealth distribution takes away incentives to produce from both the wealthy and the recipients.


    Who wins this heated match? In my opinion, I think we need a little of both. Wait. I can hear it now, “Phillips can’t even pick a side.” Not really. I simply pick the American system. In the U.S., there really never is a “ruling party.”

    We have checks and balances in our government. The key word here is balance. Our elected officials need to wisely balance the use of these two theories. Hopefully that will benefit all of U.S. for the long-term.
*     *     *     

“Great discoveries and improvements invariably involve
the cooperation of many minds.”

Alexander Graham Bell

Ron Phillips is an Independent Financial Advisor and a Pueblo, Colorado native.  He and his wife are currently raising their two sons in Pueblo.  Order a free copy of his easy-to-read investor report Creating Your Own Pension That You Can’t Outlive by visiting or leaving a message on his prerecorded voicemail at (719) 924-5070. Simply mention Promo Code #2001 when ordering.