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“Trickle Up” Economics

Not a very creative name but we’ll go with it for now.  The “Trickle Down” economics of neoliberal/conservatives that started under Reagan has been an utter failure.  What meager economic growth that has occurred over that last 25 years has stayed at the top with majority of people not benefiting from it. 

What was “Trickle Down” economics?  The theory was if economic policies, as promoted by federal government via fiscal and regulatory policies, would benefit top income households and businesses that would translate in economic prosperity for everyone and would “lift all boats.”  Keep in mind this included unfettered “free trade”. 

Results of “Trickle Down” Economics.

“Trickle Down” didn’t lift all boats.

+  2 financial crises (remember the Saving & Loan crisis of 1980s) and several averted including Long Term Capital Management fiasco;

+  Worse job growth/creation in decades;

+  Huge Income Inequality

+  Huge gap between wage growth and productivity growth (output per worker) - meaning workers are not participating in their employers’ profitability (going to shareholders and executives)

+  The largest ecological disaster in U.S. history - BP Gulf of Mexico oil leak.

“Trickle Up” Economics

Yes, it will have to defy gravity particularly forces that support the status quo which would like to preserve the failed “Trickle Down” ideology.  Trickle Up Economics is based on ideas espoused by economic scholars such Hyman Minsky, L. Randall Wray, Bill Mitchell and Abba Lerner in his article “Functional Finance”:

The central idea is that government fiscal policy, its spending and taxing, its borrowing and repayment of loans, its issue of new money and its withdrawal of money, shall be undertaken with an eye only to the results of these actions on the economy and not to any established traditional doctrine about what is sound or unsound.

We must understand that our monetary system when properly used to address idle resources such as unemployment can go along way to addressing many of our economy’s deep seated problems.  But self-imposed constraints that stem from flawed ideology or misunderstanding of our monetary system all work to limit our ability to address these problems.  Failure to change our current economic policies will lead to further income inequality and much deeper social problems.

Trickle Down Economics focuses on investing in the lives and well-being of those who need the help the most.  Providing assistance to people that will allow them to increase their economic mobility which would benefit all of us.  This is NOT the welfare system of the past.  This is about providing resources to people so they can empower themselves to improve their own lives.

Here are just a few policies of Trickle Up Economics:

1)  Job Guarantee Program -  or “Employer of Last Resort Program”.

2)  College grants (not loans) to those who cannot afford to assist with tuition for college or trade school.

3)  Single-payer universal health care (this not socialized medicine).

4)  Restructuring of our tax system so that the objective is to regulate economic output/demand and promote economic growth starting at lower income levels.

5)  Strong regulatory regime that insures that the financial sector is an intermediary service sector and not the breeder of next economic crisis. 

Again, this is just a brief glimpse of Trickle Up Economics and more will be discussed in the future.  This quote from “What is Responsible Fiscal Policy” sums it up nicely (remember budget deficits have been the norm not the exception through out our history):

... the real question that taxpayers should be asking is, not how large the deficit is, but who benefits from the deficit and whose coffers does it fill?

Good luck.