You see, “trickle-down economics” is a derogatory term for the theory of economics that is widely accepted by conservatives and widely promoted by conservative economists — supply-side economics. No economist has advocated “trickle-down” economics because that would be like adopting the liberals’ pejorative characterization of the theory. When liberals like DeBlasio speak of trickle-down economics, they mean supply-side economics.
Supply-side economics is a theory promoted by the “Chicago School” of economists such as Arthur Laffer. According to the theory, the best way to guarantee economic growth is by lowering barriers to the production of goods and services. This is accomplished by lowering income tax and capital gain tax rates and by reducing governmental regulation of businesses.
The supply-side theory was adopted by President Ronald Reagan. His plan for the federal budget, later called “Reaganomics,” was to drastically reduce taxes — mostly for wealthy people — while greatly increasing spending, primarily for the military. Reagan believed that this plan would lead to profitable businesses which would reinvest their tax savings into expanding their business, creating new jobs, and increasing profits.
David Stockman, who as Reagan’s budget director subscribed to Reaganomics, later became disenchanted and told journalist William Greider that “supply-side economics” is the trickle-down idea. Stockman said: “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.”
Liberals criticize the supply-side-trickle-down economics of conservatives as simply an effort to put more money in the pockets of the rich while letting the poor have children. A 2012 study by the Tax Justice Network indicates that wealth of the super-rich does not trickle down to improve the economy or help working people, but tends to be amassed and sheltered in tax havens with a negative effect on the tax bases of the home economy.
Proponents of Keynesian economics claim that tax breaks for those with less income would be more economically stimulating. They argue that fiscal policies directed only at the wealthy cannot improve the entire economy. President George W. Bush adopted the supply-side theory when he had the Congress enact extensive tax cuts for the rich. Bush argued that the tax breaks “fueled robust economic growth and record revenues.”
The Bush tax cuts, along with the cost of two wars, led to enormous deficits. President Obama inherited these deficits, and, unable to get Congress to impose taxes on the wealthy, and unwilling to slash domestic spending, the deficits grew. The Congressional Budget Office estimated that extending the Bush tax cuts of 2001–03 beyond their 2010 expiration would increase deficits by $1.8 trillion over the following decade.
Despite the disastrous recession that ended the Bush presidency and the gigantic deficits bequeathed by Bush, Republicans still push for supply-side economics. The resulting gridlock in Washington led to a jerry-built fix called “Sequestration.” Meanwhile, income disparity continues to grow and the rich get richer.
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