Thursday, February 22, 2024

Two sides of the same economic coin

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Trump and the Republicans are once again trying to focus on pushing through a tax bill. If they can make it happen, the stock market will be very pleased. There’s an idea inherent in his plan that if you cut taxes for corporations, it will “trickle down” to the middle and lower class. However, Trump’s plan also doubles the standard deduction, which will help the average consumer. That strategy could be called “trickle up” economics.  

At this point, it’s important to note that both “trickle-down” and “trickle-up” economics both have catchy names, which is scientific proof that they are both valid. Coincidentally, that’s the argument I want to make. Trickle-down and trickle up economics are two sides of the same economic coin. The only question is how to balance them.

Trickle-down economics: The more of its own money a business can keep, the more it can reinvest back into the business. That means more employees, more equipment, more software, and more buildings – which means more jobs at the equipment, software, and construction companies. In that way, a thriving business can drive the economy forward for everyone– not just that specific business. The easier you make life on the business world, the more an entire society can thrive. 

Trickle-down economics makes a ton of sense. However, in the specific case of today’s world, there’s a question as to whether it’s working well enough. Corporate profits are at all-time highs, but the income of the average consumer is barely growing. I don’t think anyone argues with those two facts. Perhaps the problem is globalization, or technology stealing jobs, or over-regulation. But, for whatever reason, not enough is trickling down in today’s world. 

Trickle-up economics: If you put a dollar in the hands of a rich person or a businessman, they might spend it or save it. However, if you put a dollar in the hands of the average consumer, they’ll put nearly all of it back into the economy very quickly. If you believe in capitalism, that money will go to the most deserving, best run businesses. Then those businesses can respond by hiring more workers, and buying more equipment, and software etc… It’s the exact same story as trickle-down economics. 

Businesses need a relatively easy tax and regulatory environment, but they also need strong demand from consumers. That’s why we must beg our politicians to be flexible and seek compromise. Republicans, what are your best ideas to help the business world? Democrats, what are your best ideas to help consumers? Those things don’t have to be mutually exclusive. It’s entirely possible to make life easier on the business world while also helping consumers. 

Brad Blackburn, CFP®, is the owner of Blackburn Financial, Registered Investment Advisor. Blackburn Financial is located at 121 Cottage Ave, Cashmere. He can be reached at 509-782-2600 or email him at brad@blackburnfinancial.net

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