My theory on why ‘trickle down’ doesn’t work

I have nothing to base this on except for 30 years of watching the Dow Jones, and working in corporate America.

The reason that ‘Trickle Down Economics” doesn’t work is because the folks at the top don’t spend their extra money, they invest it in stocks, bonds, and any other way they can think of to avoid paying taxes on it.

Once the money goes into the investment system, it just gets moved around from stock to stock. None of it actually makes it back into the economy.

Yes, the hope is that with these investments that corporate stocks will go up.  In theory, when corporate stocks go up that the CEOs for these companies will feel more confident and will expand their businesses or give their employees raises.

The problem is that the speed at which these expansions and raises happen is slower than a glacier.

If they truly want to stimulate the economy, let the middle class have more cash. They’re more likely to go out and spend it on goods and services and keep the money in circulation. The middle class will buy more things like cars and electronic equipment and clothes. They go out to eat more often. They use more services like upgrading their cellphone plans and cable TV packages.

These actions raise company’s revenues. If a company is any good, increased revenue will leads to increased profits, and investors LOVE increased profits. With increased profits, the rich folks will be more inclined to put their money into the stocks of these companies, and THAT will raise the stock prices.

So, give the money to the middle class and things will get better all the way around.

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