Time to try trickle-up

By , James J. Treires is chief economist of the Fund for Peace, a private, nonprofit research organization.

It was President Reagan's budget director, David Stockman, who first spilled the beans about supply-side economics. He told a reporter that it was just a new name for the old trickle-down theory of prosperity.

Trickle-downers believe that the economy booms because the wealthiest families have a lot of money to throw around. Since these are the only people who cannot possibly spend all their income on the good things of life, they have a surplus that they can invest. It is only their abiliity to provide the financing that creates new factories, businesses, and jobs, so the best thing the government can do to stimulate the economy is to help the rich stay rich.

History has not been kind to the trickle-down theory. Now, after more than a year of implementing the updated Reagan version of trickle-down, the administration has demonstrated that it still brings the same results: bankruptcies, foreclosures, unemployment, widespread hardship.

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I suggest we try trickle-up economics. This theory is similar to the President's in that it retains his huge tax cuts, it relies on the dynamism of the private sector, and it minimizes federal spending and direct intervention in economic affairs. It is different in that it stands the supply-sider's diagnosis on its head, and prescribes an opposite cure.

We trickle-uppers believe that what booms the economy is millions of ordinary people with money to spend. Experience shows that the United States has never had a period when most people were working at good wage rates and business was bad. When most of the work force is taking home fat paychecks, everybody else does well, too - the butcher, the baker, even the banker.

The trickle-up solution is accordingly simple and direct: rescind all the Reagan tax cuts for business and upper-bracket taxpayers, eliminate all tax shelters and loopholes, and use the money saved to lower the tax rates on all families earning less than $30,000 a year. And make the biggest tax cuts in the lowest brackets.

What will happen if Congress enacts such a plan? Will businessmen be unable to expand because they have less money to invest? Or will they respond, as they always have in the past, to the demands of millions of customers with money in their pockets? It doesn't require an economics degree to understand that the lower income families spend additional income immediately; in fact, many spend it before they get it. It is this kind of spending that generates new investment , new businesses, new jobs.

Instead, business leaders left to their own instincts and in possession of unprecedented power to influence the public through television and other news media, have pushed through a shortsighted scheme to grab for themselves a much bigger slice of the income pie. What they have ignored is the inevitable effect of their actions on the pie itself. Now, as bankruptcies and mortgage foreclosures approach record levels, corporate profits plummet and unemployment nears depression rates, the self-destructive tendencies of the business community must be apparent to everyone.

What is good for the many is good for the country. Trickle-up economics could give a big boost to the millions of people who work in the nation's offices, factories and farms. And it would even be better for the people who employ them.

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