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The trickle down effect: Is it a viable economic strategy?
Are you tired of seeing the rich get richer while the rest of us struggle to make ends meet? The trickle-down effect is not the solution - read on to learn why.
In today's email:
The trickle-down effect demystified!
Trickle-down effect in action
Why does this effect fail to deliver?
The Trickle-Down Effect Demystified!
The Trickle-Down Effect is the idea that policies that benefit the wealthy will ultimately help the middle class and the poor.
According to this hypothesis, offering tax benefits and incentives to the rich, high-income earners, company owners, and organisations leads to overall economic growth. It will eventually benefit all classes of society.
The perks offered to the wealthiest 20% of the population cause them to spend their additional income on:
New investments
New recruitments
Establishing new factories/organizations
Overall working towards the economic growth of the nation
Furthermore, wealthy individuals purchase luxury commodities. This increases employment and production opportunities. As a result, the global economy grows.
To understand this effect more clearly, let's look at an example:
Government passes a tax cut for the wealthy
Wealthy people use this extra income to buy luxury cars(for example)
Employment opportunities become available in the automobile industry
Middle and lower-class people benefit economically because of the wealthy people.
Why does this effect fail to deliver?
Trickle-Down Economics is a fraud. Giving tax breaks to the rich and large corporations does not create jobs. It simply makes the rich richer, enlarges the deficit and increases income and wealth inequality. We need economic policies which benefit working families, not the billionaire class.
Bernie Sanders
When examined, this idea appears to be highly promising, yet it fails miserably when implemented in real-life.
The Trickle-Down Theory assumes that rich people would use their excess income to boost economic activity and growth.
In real life, this theory can be misleading because:
Wealthy prefer saving the money obtained from tax cuts and incentives.
They do not utilize tax incentives to stimulate economic activity or improve the purchasing power of the average citizen.
As a result, no demand is created, which has a negative influence on the economy.
This leads to a net-zero effect on the global economy.
Because of the different tax benefits available to wealthy individuals and large corporations, this impact can frequently result in greater government debt and reduced government spending on social programmes.
Just learned about the trickle-down effect and it's basically the idea that if we help the rich, eventually it will benefit everyone else too. IDK about you, but I'm not feeling too hopeful about that! #trickledown#economics#inequality
— Parth Thanki (@moneyy_matterz)
12:00 AM • Dec 10, 2022
The graph above illustrates how the top 10% of the population has had a huge income increase in the past few decades. This is a prime example of how this theory is misleading and does not benefit society's middle and lower groups.
In conclusion, this effect is a controversial economic theory. The trickle-down effect may bring a few drops of hope to the middle class and the poor, but it's no substitute for real policy solutions that address inequality and promote economic growth for all.
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