Trickle Down Economcis

Trickle Down Economics has often been referred to as giving businesses/rich people more money so they can then make their goods cheaper, which allows people to buy which increases demand which increases the need for labor which increases the buying power of the people.

But I don't think that's correct.  Must like Socialism, I believe Trickle Down Economics has been applied incorrectly.

What is the most important thing in an economy?  The one thing that, without, an economy would cease to exist?

Consumers.

I believe we should be helping consumers BEFORE we help businesses.  That way, the money trickles from the Consumer to the business to the employee, which then becomes the Consumer.

The prevailing wisdom is that if a business is capable of operating more cheaply, it will increase jobs.
This is false.

A business's goal is to get money.
So, if it decreases it's operating expenses, why would it change anything it didn't have to?  Why would it, for example, spend that extra money on making a new job or lowering the price of it's goods/services?  After all, that's extra profit and who can say no to that?

So, no new jobs are created because customers don't increase and customers don't increase because prices don't decrease.

However, if you give consumers more money, more will buy your product at it's current level, which will require you to add jobs, which will create more customers.

Trickle down, supply side, Reagonomics, or capitalsim, is the ideology that by giving people (many times especially the most wealthy) the most money without taxes or regulation, will precipitate the best results for all.  This ideology relies entirely upon classic understanding of the free market, the price mechanism, the functions of price, and  the business cycle,  Let us examine just one flaw in this understanding.  Suppose some shock to the economy-say, a sudden fall in the value of peoples houses and securities-reduces the value of personal savings and induces people to spend less so they can rebuild their savings.  The demand for goods and services will therefore fall.  Before the shock, demand and supply were both X, Now , demand is X-Y.  How will suppliers respond?  If-a critical assumption-all prices, including teh price of labor (wages) are completely flexible, suppliers, including suppliers of labor-workers-will reduce their prices in an effort to retain as many buyers as possible.  With consumers saving more because they are buying less, and at lower prices, interest rates-earnings on savings-will fall because there will be a savings glut.  The lower interest rates will induce borrowing and with more borrowing and lower prices, spending will soon find its way back to where it was before the shock.  One reason this will happen is that not all consumers are workers, and those who are not, and whose incomes therefore are unimpaired, will buy more goods and services as prices fall.

The flaw im this classicaleconomic theory of the self correcting business cycle is that not all prices are flexible; wages, especially are not.  This is not primarily because of union negotiated or other employment contracts.   Few private sector employeess in the US are unionized, and few non unionized workers have a wage garauntee by contract.  But even when wages are flexible, employers generally prefer, when demand for their product drops, laying off workers to reducing wages,  Think of all the finacnial executives who have been laid off even while bonuses-often amounting to half the executives pay-were being cut, sometimes to zero.  There are several reasons That employers prefer layoffs to cutting wages.  1-Layoffs reduce overhead expenses.  2-By picking the least productive workers to lay off, an employer can increase the productivity of the workforce. 3-workers may respond to a reduction in their wages by working less hard, or, conversely, may work harder if they think that by doing so they may reduce the likelyhood that they will be laid off.  4-Whenthe wages of all workers in a plant or office are cut, all are unhappy, with layoffs, the unhappy workers are off the premises.  This is simply one  market misconception.  Distoted by a blind faith in the promotion of trickle down/supply side/capitalist bilge.


Edit;  this post was inspired by my favorite band UB40.

most batshit retarded enconomic strategy, or most obvious attempt to misinform the public that still somhow managed to succeed?

You decide!