Trickle Down Economics

President Reagan, then George Bush I, and now George Bush II, have responded to endless critics for the "flaws" of trickle down economics. In case you missed all of the hullabaloo, "trickle down" refers to the concept that as wealthy people (relative term) earn and spend their money, the results of that trickle down to the rest of society.

In political terms, the concept is mostly about taxes. If the "rich" pay less in taxes, they have more money to spend (creates jobs because goods and services are desired) and more to invest in their own businesses (also creates jobs and money is payed in the form of wages).

Opponents of trickle down say that its just a way for rich Republicans to make sure their rich Republican, business-owner friends skirt the big tax bills they should be paying, because they are rich. Proponents argue that if you tax the rich too highly, they won't have as much money left to trickle into society as described above.

Well, I'm far from being among the nations elite households. According to the IRS, my wages were so low in 2005 that I didn't have to pay much of anything for taxes. That's right, nearly every dollar that I paid in taxes during the year are being refunded to me. So, even though I'm "poor," here's a demonstration ofn how trickle down works.

• $600 of my tax refund is being spent on a new bed mattress that is manufactured right here in Marion, Iowa at Lebeda Mattress. My low tax rate is keeping some citizen in my hometown employed for another day because I bought a mattress.
• $50 is being spent on bed sheets, because the new bed is a queen size, and the old is a full. Bed, Bath and Beyond's balance sheet looks a little better now than it did yesterday.
• $500 of my refund is being sent to my friend and brother Matt Payne, who is in the midst of planting a church in Bethany, Oregon. This will help pay Matt's salary, which in turn generates more revenue in the form of taxes. You might say I'm helping to create a job. You also might say I'm helping create more Christ-followers, which is even better.
• At least $2000 is going into a ROTH IRA account for retirement. The government has recently reported the savings rate among Americans is 0 percent. I don't want to contribute to THAT statistic.
• Between $500-1,000 will be spent on paint and accessories for our new house. Menards' bottom line will likely be the benefactor.
• Don't forget that every local purchase described here is contributing to Iowa sales taxes (to build roads and schools). My expenditures of $2,650 have resulted in the state of Iowa receiving $132.
• There's just a little left over. It will get spent some day, in some way. Local restaurants, gasoline, golf, vacation, sweet corn stands this summer (yum!)

So there you have it. If my little pittance can accomplish this, imagine what could be done with someone who makes more money than I. Trickle down does work (repeat after me three times).

Sorry for the long post. You didn't expect a full Economics 101 course in one paragraph, did you?