Rising tide or bigger boats??? An economic thought . . .

Ronald Reagan was fond of saying that a rising tide raises all ships. It’s a wonderful metaphor, seeing the ships all floating on a tide of success and economic growth. What he seemed to have missed is that the tide is beneath the ships. If the economy is going to grow and those ships are going to rise it is the people at the bottom who need the benefit of economic policy.

Supply side economics does not work. Far too little of the rewards given to the top filters down to the people who actually make the economy work. Those rewards always get hung up in tax shelters, investments and CEO’s retirement plans. Giving a millionaire an extra $5000 a month means nothing. They won’t even notice.

What will work is trickle up economics, feeding the bottom end of the income distribution. Increasing the money flowing to the lower third of incomes will, by necessity, move a lot of cash into the upper two thirds. Give someone making $20,000/year $500 a month and it immediately re-invests itself in the local economy. These people buy clothes, food and necessities. They don’t buy stocks and watch them grow. They don’t buy and hold. They plug the money back into circulation immediately.

Shop owners see empty shelves and place orders with purchasing agents who place orders with suppliers who make deliveries to the shops. Truck drivers, assemblers, salesmen, stockers and all the way down the chain to the farmers who grow the green beans taken off the shelf at the local grocery store benefit. The stockholders of Kroger, Wall Mart and Beatrice all reap the benefits of increased sales and as Wall Street notices the increased cash flow of Megamart USA, the stock prices go up. Mom & pop boomer’s retirement portfolio grows. They become less a burden on their children and the welfare system.

On the other hand we can adopt the Bush economic policy of giving more and more to fewer and fewer. The rich get richer, the poor get poorer and the middle class shrinks.

The ships get bigger, the harbor gets shallower and soon the whole fleet runs aground.

"The ships get bigger, the harbor gets shallower and soon the whole fleet runs aground."

The problem is that the fleet sets sail for other harbors, like in China, where the bottom is 'way further down than here.

but the ground we're on has been sold to a foreign investor.