Trickle-down economics, first popularized by the Reagan Administration but around for decades before then, seems to be making a comeback with the Trump Administration’s new tax plan. The logic behind the plan is simple- tax less, but deliver the majority of the benefits to the members of the upper tax brackets. The nonpartisan Tax Policy Center predicts that with the new tax plan, the average member of the middle class will save merely $360 while the top 1% of earners will save over sixty thousand dollars. Despite this, however, proponents of the new system believe that even though those earning lower incomes won’t get as much of a flat-out tax break, the benefits will “trickle down” from the top levels of the economy. Thus, by cutting the taxes at the top, everyone will benefit. Some of the main provisions seem like they benefit the ultra-rich and no one else. The bill calls to end the inheritance tax for the wealthiest people, to cut the corporate tax rate from 35% to 20%, and to cut business partnership taxes.
In the same vein as Reagan’s economic philosophy, Trump’s tax plan system directs the tax deductions towards higher income brackets, and assumes the benefits of said tax cuts will trickle down to the rest of society. If people and businesses pay less in taxes, they will invest more, consume more, and hire more as well. As such, this process will lead to benefits for all economic classes. Detractors of the policy say that the plan will only make the rich richer and add to the government deficit. Arguments both for and against are grounded in sound economic logic. Therefore, only time will tell if the Trump Administration will be successful in employing this controversial policy.
Bitcoin - among other popular cryptocurrencies, such as Ethereum and Litecoin - has been in the headlines as the currency surpassed $230 Billion last week. Public figures, from Bill Gates to Jamie Dimon, have weighed in on the impact of cryptocurrencies and on their use in society. Although the future of Bitcoin itself is still under question, the underlying technology makes for a compelling case for a future disruptive force in global economies.
Created by an unknown inventor named Satoshi Nakamoto in 2009, Bitcoin is a digital currency based on a decentralized network. Although the price of both cryptocurrencies and fiat money is determined via supply and demand, the former is not backed by any central authority. Rather, digital money cryptocurrencies work through a distributed ledger that keeps track of all transactions made with that cryptocurrency.
Ultimately, cryptocurrencies have the potential to be used all over the world, unifying global trade under one currency. The time-stamping and ledgering of each individual transaction, layer by layer, means that fraud is almost impossible and middle-men are not needed to facilitate exchanges. However, as multiple cryptocurrencies emerge the universality of such currencies disappears. The learning curve doesn’t help, either. The difficulty of access to even the most popular digital currency, Bitcoin, requires some understanding of how to operate crypto-wallets and execute transactions.
So too, digital money can have a profound impact on economic market inefficiencies. Bitcoin transactions are more efficient by cutting out middle men, usually found in the form of banks and other large financial institutions. In theory, society is able to achieve more economic activity and interaction with less resources. At the moment, however, digital money is not used on a wide enough basis to be adopted universally, while the lack of regulation, safety and steep learning curve prevent it from achieving mass adoption quickly.
While the astronomical market capitalization of Bitcoin attracted much of the initial attention, the underlying technology of the cryptocurrency is what truly warrants another look. Blockchain technology, has the potential to disrupt retail, payments, the financial services, and many other industries. UBS, Barclays, IBM, and Samsung, amongst many other corporations, are already experimenting with the technology. The next question is not whether Bitcoin will become popular, but whether it will render all other currencies irrelevant?