During the 1980s, President Ronald Reagan and his core of economic advisors believed that if tax cuts were imposed on the wealthy, it would benefit every layer of society. In theory, the multiplier effect of a dollar spent would go something like this: a rich person buys a yacht, the yacht must then be built and the people building the yacht must be paid — including a profit for the owner of the yacht building company. Accordingly, after cashing their paychecks, each worker then takes their significant other to lunch and dinner. Of course the upper management team from the yacht building company enjoys high-end dining with waiters, busboys, and maître d’s while the general employees go the fast-food route. Thus, along with friendly and efficient “drive-thru” attendants and the employees who keep a very watchful eye on the grills and the deep fryers, all the restaurant workers — including those from the high-end establishments and the fast-food locations — subsequently use their pay to buy groceries, gas, cosmetics, liquor, and various thousands of other items. So, as you can see, this capitalistic system and flow of money was all generated by the purchase of a yacht, the so-called trickle-down effect.
Thousands of words, various articles, and even hotly contested debates have routinely been the norm to either defend or attack this economic hypothesis. Whether the theory is true or not, and I believe it’s quite obvious that it is correct, we’ll leave that discussion for another time.
Along with his 40-years of dedication in the financial services industry, Bill is the President and CEO of GPSforLife, has recently authored a highly successful book entitled 44th: A Presidential Conspiracy, publishes his dynamic monthly financial newsletter MacroProfit, and faithfully continues his third decade on the radio with It’s All About Money, which can be heard weekdays on Money Radio in Phoenix and in podcast form on his website (and on smartphone apps) published at billtatro.com weekdays at 5pm Eastern. Bill can be reached via email at email@example.com and on Twitter @tatroshow.