Trickle-down economics

Trickle-down economics, also known as trickle-down theory and the horse-and-sparrow theory, is a term used to describe government economic policies that disproportionately favor the upper tier of the economic spectrum (wealthy individuals and large corporations). The term has been used broadly by critics of supply-side economics to refer to taxing and spending policies by governments that, intentionally or not, result in widening income inequality; it has also been used in critical references to neoliberalism. These critics reject the notion that spending by this elite group would "trickle down" to those who are less fortunate and lead to economic growth that will eventually benefit the economy as a whole. While criticisms have existed since at least the 19th century, the term "trickle-down economics" was popularized by Democrats in the US to derogate Reaganomics and its reduction in the top marginal tax rates. Major examples of what critics have called "trickle-down economics" in the US include the Reagan tax cuts, the Bush tax cuts, and in UK include Margaret Thatcher's economic policies in the 1980s and Liz Truss's mini-budget tax cuts of 2022.

History

In 1896, United States Democratic presidential candidate William Jennings Bryan claimed in his Cross of Gold speech that his opposition based their policies on the idea that the success of the rich would "leak through" to the lower classes, stating: "There are those who believe that, if you will only legislate to make the well-to-do prosperous, their prosperity will leak through on those below." In 1932, humorist and social commentator Will Rogers wrote a column criticizing Herbert Hoover's policies and approach to The Great Depression and stated: "The money was all appropriated for the top in the hopes that it would trickle down to the needy. Mr. Hoover was an engineer. He knew that water trickles down. Put it uphill and let it go and it will reach the driest little spot." In 2007, political commentator William J. Bennett credited Rogers for coining the term "trickle down" and observed its persistent use throughout the decades since. In 1983, H. W. Arndt wrote that Indian nationalist and statesman Jawaharlal Nehru may have been the first to use the term in an economic (rather than political context) when he stated in 1933 "the exploitation of India and other countries brought so much wealth to England that some of it trickled down to the working class and their standard of living rose." Samuel Rosenman, a Democratic presidential speechwriter under Franklin D. Roosevelt and Harry Truman, and coiner of the term "New Deal", wrote that "trickle down policies" had been prevalent in American government since 1921. In 1969, after leaving the presidency, Democrat Lyndon B. Johnson alleged "Republicans ... simply don't know how to manage the economy. They're so busy operating the trickle-down theory, giving the richest corporations the biggest break, that the whole thing goes to hell in a handbasket." Ronald Reagan launched his 1980 campaign for the presidency on a platform advocating for supply-side economics. During the 1980 Republican Party presidential primaries, George H. W. Bush had derided Reagan's economic approach as "voodoo economics". Following Reagan's election, the "trickle-down" reached wide circulation with the publication of "The Education of David Stockman", a December 1981 interview of Reagan's incoming Office of Management and Budget director David Stockman, in the magazine Atlantic Monthly. In the interview, Stockman expressed doubts about supply side economics, telling journalist William Greider that the Kemp–Roth Tax Cut was a way to rebrand a tax cut for the top income bracket to make it easier to pass into law. Stockman said that "It's kind of hard to sell 'trickle down,' so the supply-side formula was the only way to get a tax policy that was really 'trickle down.' Supply-side is 'trickle-down' theory." Reagan administration officials including Michael Deaver wanted Stockman to be fired in response to his comments, but he was ultimately kept on in exchange for a private apology. Political opponents of the Reagan administration soon seized on this language in an effort to brand the administration as caring only about the wealthy. In 1982, John Kenneth Galbraith wrote the "trickle-down economics" that Stockman was referring to was previously known under the name "horse-and-sparrow theory", the idea that feeding a horse a huge amount of oats results in some of the feed passing through for lucky sparrows to eat. In the 1992 presidential election, independent candidate Ross Perot also referred to trickle-down economics as "political voodoo". In the same election, during a presidential town hall debate, Bill Clinton, referring to the previous presidencies of Ronald Reagan and George H. W. Bush stated "...we've had 12 years of trickle-down economics. We've gone from first to twelfth in the world in wages. We've had four years where we've produced no private-sector jobs. Most people are working harder for less money than they were making 10 years ago".

… excerpt ends here. Continue reading the full article.