A rising tide lifts all boats

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The aphorism "a rising tide lifts all boats" is associated with the idea that improvements in the general economy will benefit all participants in that economy, and that economic policy, particularly government economic policy, should therefore focus on the general macroeconomic environment first and foremost. The phrase is said to have been coined by Seán Lemass, the Irish Taoiseach (Prime Minister) in 1959–1966.[1] [2] It is also associated with John F. Kennedy, who employed the expression to combat criticisms that his tax cuts would benefit mostly wealthy individuals.[3][4][5]

The expression also applies to free-market policies, in that comparative-advantage production and subsequent trade would theoretically increase incomes for all participating entities. It is a favorite proverb of former U.S. Treasury Secretary Robert Rubin.

The substantive aspect of the statement is that economic growth which raises the GDP of the entire economy will also raise the incomes of all of the individuals within the economy. However, not all industries track the overall economy. For the aphorism to be strictly true, one would never expect to see a 'going out of business' sign during a rising economy. There many examples in economic history in which an increase in GDP per capita did not raise the incomes of large groups of individuals in the society. According to the US Census, the real per-capita GDP in the United States increased by 71% between 1980 and 2006, but median household income increased by less than 20%[citation needed].

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[edit] References

  1. ^ Speech by Martin Cullen TD, Minister for Transport at the South East 2020 Conference. Department of Transport, Ireland (24 June 2005).
  2. ^ Speech by Mr. Callanan. Seanad Debates, Vol. 182, No. 4. Office of the Houses of the Oireachtas (7 December 2005).
  3. ^ John F. Kennedy (October 3, 1963). Remarks in Heber Springs, Arkansas, at the Dedication of Greers Ferry Dam.. The American Presidency Project. Retrieved on 2007-04-07.
  4. ^ Gene Sperling. "How to Refloat These Boats", Washington Post, December 18, 2005, p. Page B03. Retrieved on 2007-04-07. 
  5. ^ Thomas E. Nugent (July 28, 2006). A Rising Tide...In More Ways than One:The wisdom of the JFK-Reagan-Bush tax-cut model. National Review Online. Retrieved on 2007-04-07.

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