Also called Supply vs. Demand side economics, here is a really brief outline.
Trickle Down Economics
- Basic idea is give more money to the rich and they will hire more workers, raise wages, etc.
- Corporations have some control here because they can simply raise prices. This is however limited by competition and consumer demand. The exceptions are industries with monopolies or services such as utilities.
- The GOP method is to apply corporate tax cuts, deregulation and tax loopholes such as putting money overseas.
Rising Tide Economics
- Basic idea is give more money to the working class and they will buy more stuff which enables companies to hire more people to sell more stuff.
- Workers have limited options in getting a raise, as long as someone else will take the job at a lower wage.
- Increasing effective Take Home pay is the key and this can be done through Unions, income tax cuts, raising the minimum wage, lowering medical expenses and insurance premiums and child care assistance or tax deductions. Also lowering the cost of education plays a role.
Which is better?
Both work under the right circumstances and to a limited degree.
The weakness of Trickle Down is most of the money is not spent towards growing the economy and hiring more workers is only useful if you have enough consumers wanting your goods to justify the extra expense.The weakness of Rising Tide is business expenses go up, so prices may rise as well. Enough volume can keep that from being needed.
Rising Tide is more effiecent as the same amount of money spread between more people means more people are buying things. As demand goes up companies need to hire more people to meet it which means more people have more money to spend, etc. The cycle does a better job of feeding itself.
Also some Progressive strategies actually help both economic models.
Medicare for All lowers employees and employers medical costs at the same time. So business expenses go down and their profits go up and employees have more money in their pocket. The ones who suffer here are Insurance companies and possibly drug companies, if the government allows itself to negotiate prices the way private industry does now. Most of America wins here and it works well for all the other industrial powers.
Another factor is too many people have to work two or even three part time jobs because employers prefer part time to avoid having to pay for medical benefits. This eliminates that problem.
Tuition Free College or tax credits for education. Educated people are less likely to be involved in crime and more likely to get better paying jobs and imp[rove the country with new ideas and inventions. The cost in taxes needs to be seriously considered, but hey if we can afford to repeal the Estate Tax for the rich or Pass Through loopholes or Hedge fund tax discounts we can certainly afford it and the effect will be better for the economy.
Lowering Childcare costs is another tough nut to crack. However it would lower crime rates and promote better developed kids if they are not left unsupervised. I have known many single parents who have to turn down some good jobs because it wont work with child care. Typically they have to pick the kids up early and often the higher pay is not enough to offset the higher costs.