On trickle-down economics

Anyone who isn’t an acolyte of Reagan, Rand, Hayek or Friedman knows that getting money into circulation is the key: money is the lifeblood of an economy and it needs to be moving around.

My example is to imagine putting $1000 in the pocket of a guy who makes $20k vs one who makes $100k. The former will spend it, or most of it, probably on things he has put off buying or to pay down credit cards, etc. But that money will certainly pass through a lot of hands in a short time. Things will be made or repaired. Food service/restaurants will see some of that. The hardware store or home center will benefit. And the ultimate beneficiaries will be the people working at those places. And they in turn will spend that money…

The other guy will put it in the bank, invest it, or maybe buy a big ticket item, something nonessential. It likely won’t be groceries or home repair or something from Main Street. Maybe a new bauble, most likely of non-US manufacture as so many things are. But not much of it will go into local hands, through dining and tips and the incidental friction of the marketplace.

If there is a simpler, more direct argument for raising wages for the lowest earners, I haven’t heard it.

Underlying opposition to this is the deep and abiding disapproval of someone having an unearned good time. “If we give a bunch of mechanics and shop clerks a bump, they’ll only spend on themselves,” goes the predictable response. See above on money as the lifeblood of an economy.

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