Ah, yes, the Presidential election year is on like a light
and I’ve been thinking about economics lately.
Decades in the past, the Republicans hoisted “trickle down”
economics on us, and, instead, brought untold wealth to the already wealthy.
Not a solution. The poorest of us became poorer, and the middle class is now in
tatters.
Bernie Sanders has an alternate economic theory. I earned a graduate degree in finance and
economics at NYU’s prestigious Stern Business School, so I have a bit of academic
credibility here. So, consider this approach as a new economic theory,
replacing “trickle down.” With that in mind, here is my review of his approach:
UPWARD BLOOM THEORY:
Like a tree that needs food and water at its roots before it
can bloom, the economy has to have people who are wealthy enough to buy the
products manufacturers produce. Otherwise, businesses shrink and fail. Those
with enough wealth must also believe the economy will at least offer them their
current level of wealth, or better yet, more wealth, for their state of mind to
be optimistic enough to spend what they earn. Poor attitudes shrink the
economy.
If those at the low
end of the economy have more spent by government on education, this would spur
their hopes for a better future. I believe there is enough statistical data to
prove that better educated people spend more money, especially since they tend
to grow higher incomes over time.
The most wealthy people add no additional economic boost
when they are given even more money. They tend not to even spend the additional
funds on their businesses. Delivering more wealth to them is simple misguided
waste.
So, my policy change would be quite simple. Tax the richest
Americans at a much higher level and make education past high school much
cheaper at state run schools. Also use the additional tax revenue to artificially
lower the interest rates charged for student loans to half the prime rate or
lower. Finally, use some of the additional tax revenue to pay teachers in
public schools (K through 12) 33% more in average salaries.
I’ve run these numbers through my own economic models and
the result is a vibrant, growing economy.
If you have comments, please post them. If you think this is
important, share it with others
Hey could you show us your economic models
ReplyDeleteNouriel Rubini's writings offer most of the ideas I have come to believe and use in my own econometric models. My own models are run in an Excel spreadsheet with pages for each of the past years. Pages are arranged with sectors as rows (where each sector is an economic entity, such as "education" or "high tech B2B") and each column as sequential month of the year.
ReplyDeleteThe formulas are designed to follow a single economic unit across time and form the forecast perameters with the objective of minimizing the mean absolute percentage of errors. For a detailed set of formulas and examples, refer to David Spiselman article "Chapter 12, nternational Cash Management and Positioning of Funds (pages 291 - 313) in the book 'International Corporate Finance' edited by Harvey Ponichek, published by Hyman Unwin in 1989.