Economics is confusing. I get it. There is such a flood of arguments, evidence, counterevidence, theories, and talking heads that understand it poorly that it’s a wonder anyone can wrap his head around it. Given all the variables out there, it becomes kind of like predicting the weather.
I’m not going to explain any complicated economic theories here. Instead, I’m just going to explain what I find to be the biggest hypocrisy of the Bush Administration’s fiscal policy.
President Bush has professed to believe that the best way to get our economy going is to spend our way out of trouble. This was the stated reason for the rebate checks we got this year. It is a common belief that spending and circulating money stimulates the economy; that point is hard to argue. It is possible to argue the relative damage to our treasury by dolling out money, but I won’t take a stance against that here.
Bush is also a big proponent of so-called “trickle-down” economics. The basis for this idea is that if we give more money to the rich, they will have more money to hire and will thus increase wages to the lower class and/or create jobs.
The problem is that these two ideas, while argued fervently by Bush and his cabinet, are fundamentally incompatible. The reason is that the poor spend a higher percentage of their total income, either through necessity or lack of discipline. Thus, if you want to stimulate the economy through total spending, then it makes sense to give more money to the lower class. The rich are more likely to put their excess money into banks or, because they tend to be older, more conservative investments.
My full thoughts on trickle-down economics can be summed up by a month-old political commercial.
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