Could someone please explain to me how top-down economics works?
I thought I understood it and agreed with it years ago, but every year it makes less sense to me. Basically, giving tax cuts to rich people make them richer. This is good, because they can't spend it all and must invest it. When they invest their money, they create jobs for us poor people - or does it?
I think the theory is that rich people have nothing to do with their time, so they create new businesses with their money for fun, but I don't think that's actually the case. I picture an overworked CEO when I picture one of these "rich people" who get huge tax breaks. If I were that CEO, I would put most of my money in an S&P 500 index or, if I feel like risky, give it to some hedge fund manager.
Either way, this CEO is just buying stock. At best, this raises some stock prices a little bit. How does a stock price raising in value translate to poor people getting more jobs?
Thanks!
I thought I understood it and agreed with it years ago, but every year it makes less sense to me. Basically, giving tax cuts to rich people make them richer. This is good, because they can't spend it all and must invest it. When they invest their money, they create jobs for us poor people - or does it?
I think the theory is that rich people have nothing to do with their time, so they create new businesses with their money for fun, but I don't think that's actually the case. I picture an overworked CEO when I picture one of these "rich people" who get huge tax breaks. If I were that CEO, I would put most of my money in an S&P 500 index or, if I feel like risky, give it to some hedge fund manager.
Either way, this CEO is just buying stock. At best, this raises some stock prices a little bit. How does a stock price raising in value translate to poor people getting more jobs?
Thanks!
Top-Down Economics
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