Trickle Down Economics Has Never Worked – or Has It?

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Do you know what trickle means? Do you know what trickle down economics are?

Trickle down economics was the cornerstone of the Reagan (and Thatcher) agenda back in the 1980s. It all started with Dick Cheney and a man named Arthur Laffer. Laughably enough, it began as an idea to maximize revenue for the government. Ha ha ha! It sure didn’t turn out that way.

Trickle down economics was/is a philosophy that tax cuts and benefits for the wealthy would, um, eventually benefit everyone. Especially if you reduce benefits for the poor. It will be so great because it will make the economy explode with um explosive growth. It was an idea, a theory, a thing based on hope, not real life.

But if you know anything about what the word ‘trickle’ means, you know it’s not much of an economic philosophy. Unless you’re rich. Then it’s a great economic philosophy. Because it means you get to hog up all the hot water and everyone else can either wait around for the water to warm up again or go unwashed. Ha ha ha!

That was metaphor by the way. Although given the state of the world these days, there are probably plenty of people who are literally going involuntarily unwashed.

The bottom line is that an economic trickle is the opposite of what you want. Trickle down economics results in less economic activity than ditching the whole idea. You don’t have to be a socialist to figure that out. Trickle down economics (aka voodoo economics as one Republican president put it) is the opposite of what you want.

Unless you’re already wealthy when the trickling starts.

The era of trickle down economics: it’s been pretty much a disaster.

So – since there are waaaaaay more not wealthy people in America and around the world than wealthy people – why in the holy fucking hell did an economic philosophy that literally says it’s for rich people only hold so much sway in the US for upwards of 40 years.

If you guessed that it’s because people are stupid – good guess! People are stupid. So that’s always a percentage bet.

Did you guess because people are racist and trickle down economics appealed to people’s implicit racism? Good guess! People are racist. But that doesn’t explain it all.

Did you guess that it’s because people are greedy? Good guess! People are greedy. Wealthy people are especially greedy.

But it’s not just because wealthy people are especially greedy. Lots of people who are not wealthy are greedy too. And in America, there is a very particular economic myth. The myth, held extraordinarily widely – is that I personally, no matter how unwealthy I am, am going to become extraordinarily wealthy here in this country, sooner or later, so policies that benefit the wealthy are gonna benefit me when I become super rich.

Yup.

People vote for trickle down economics because they think it will benefit them in their future richness.

Not their current poorness. Their future richness.

True believers, the sincere ones, also thought that if ordinary Americans had the opportunity to get into the stock market (e.g., via their 401Ks), they could get rich too! And that rich people are smarter than the government (true, if the government is staffed by Republicans). This little myth worked its magic on the great American populace until the Great Recession of 2008.

And then people started thinking – oh wait a goddamn fucking minute – I’m not going to get rich am I?

And then they started getting pissed. And mean. And ugly.

By that time, by a strange alchemy named Hillary Clinton, the Democrats became the party of the wealthy.

Not the rich. The wealthy. A demographic that accidentally comprised around 49% of the population. Those people voted for Clinton in 2016. The other half, more or less, a bit less, voted for a pissed, mean, and ugly person named Trump.

Trickle down economics have benefited the wealthy.

Republicans like George W. Bush have benefited as well, accidentally, for a long long time. Because the trickling not working benefits Republicans, currently the party of stupidity, greed, and unrealistic delusions about human nature. And the trickling benefits Republicans when it helps the very very wealthy, and it benefits them when it screws over the not wealthy at all.

So trickle down economics works great!

For CEOs and certain politicians. For everyone else (even Republican voters) – nah. Trickle down economics doesn’t reduce unemployment or increase economic growth.

So it’s only good for people like Bob Iger, current CEO of The Walt Disney Company, make waaaaaay too much fucking money. He earns 1,000 times more than the average Disney employee.

Do you know what useful things people like Bob Iger, Mark Zuckerberg, and Jeff Bezos do with all that way too much money?

Nothing. Nada. Nil. Zippo. Zero.

Now Bob Iger might buy himself some nice clothes.

Tailored suits. Oooooh. Doesn’t that stimulate the economy and benefit everyone else?

No, not really. What it does is encourage a modest investment in luxury suits that only a few people can buy and only a few people provide, physically produced by people who make pennies an hour. An excess of tailored suits and people who make pennies an hour is not useful. Money circulates among people who already have it and don’t need it, but it’s not good for you. It’s not good for me. It’s not really that good for Bob Iger. As for the people who make pennies an hour, not good at all.

The bald truth of trickle down economics is that corporations that have benefited from tax cuts and government benefits have not paid their workers an equivalent amount or created an equivalent amount of new jobs.

Corporations don’t have to do that. There’s no good reason why they should do that. In fact, they’re not even allowed to do that. They’re supposed to benefit the wealthy people who hold shares in (have ownership of) their companies.

Companies do not exist for the benefit of their workers. Or society. Companies are not your sugar daddy. Or any other kind of daddy. They are not enthusiastic job-creators. They are grudging job-creators at times. But creating jobs is not why companies exist. They exist to make their owners money.

If a company is able to get its hands on extra moola, it is not under any obligation to invest that money in the business. And often they don’t. What they do is buy back their own stock so that the wealthy people who own their stock will get wealthier. And they do that because the same geniuses that thought trickle down economics was a good idea thought that getting rid of restrictions on stock buybacks was a good idea too.

So that whole ‘job killing’ rhetoric the Republicans kept trotting out every time someone even slightly proposed something to rein in corporations – that rhetoric – is and always has been bull-fucking-shit.

Companies, as they should under capitalism, work the system to get the best deal for themselves. Not to give anyone a fucking job.

Rich people are rich people. Millionaires. Billionaires. Not job creators. They do not owe anybody a fucking job. It’s not their role to create jobs. Rich people don’t give a flying fuck about you and they don’t have to. If Americans had the sense the propaganda they grew up tried to give them, they’d do absolutely the same thing for rich people that rich people do for them: nothing. Nada. Zip. Zilch.

You, me, and the rest of the population don’t owe rich people a goddamn fucking thing any more than they owe the rest of us anything.

So…the only people stupider than the people who bought into the rhetoric job-creator rhetoric are the Democrats who didn’t counter it by calling out the bull-fucking-shit.

The profit that corporations generate is not evenly divided. Most people don’t get any of it. Some people get a little tiny bit of it. A very few people get almost all of it.

What has actually happened is that wages for most people have stagnated.

The bottom line is that with trickle down economics a small number of people get insanely rich and everyone else loses ground.

And those people don’t spend that money at anything near the rate that they rake it in. They don’t go out and buy stuff they need the way poor people do. Because they don’t fucking need anything.

Neither do companies. So there’s an immense amount of money under the control of rich people that is not stimulating the economy or benefiting anyone else. Not even the rich people who are getting wealthier but no less anxious or any happier.

What the Reagan economic revolution actually did was transfer a great deal of money from the US to other countries via offshoring and globalization. You might think that’s a good thing. It may be a good thing. But it’s not what most people want if they’re not already wealthy. Cutting the top tax rate (a key component of trickle down economics) does not grow the economy. The economy is cyclical and the top tax rate just does not correlate with economic growth.

The other thing the Reagan economic revolution did was increase the amount of debt non-wealthy households carry. Because…if your economy actually depends on people spending money and you give all the money to people who have no good reason to spend it and take it away from the people who need to spend it then…. you have to encourage the people who don’t have money to borrow money in order to spend the money that they don’t have.

Make sense?

No. No part of it makes sense. You do everything you can to prevent ordinary people from saving which would build up their financial security and instead encourage them to incur debt to decrease their financial security and thereby impoverish wide swathes of the American populace…..ooooooh wait. Maybe that’s what trickle down economics was supposed to accomplish.

Oh well done trickle down economics!

You see, the incomes of ordinary Americans have grown just fine under periods of high taxation (70% as the top tax rate). The Republican theory behind trickle down economics is just objectively wrong.

But but but…if you give lots of money to places like banks (a la the bank bailouts when they all crashed and burned during the Great Recession) don’t they just loan it out again to businesses that provide income for the business’s employees and suppliers and all kinds of other deserving non-wealthy people?

No, banks put the money you give them wherever they think it will make the most money for them. Like, um, you know, the kind of risky derivatives that lead to the Great Recession in the first place. Trickle down economics has spent half a century (almost) disincentivizing investment in things that are important in the long run (like infrastructure, public schools, higher education, healthcare, childcare, pollution reduction) and incentivizing shit that is never important (like superyachts). Hey – welcome to the student debt that will follow you to the grave peons!

That’s what you get when you think a ‘trickle’ of anything is going to be good for the people being trickled on. Infrastructure benefits everyone. Superyachts do not.

Of course, you don’t have to call it trickle down economics. You could also call it supply side economics. You don’t worry about the demand side of the economic equation, i.e., providing what people need and ensuring they enough money to secure it.

And that’s the problem. There are two sides to the economic equation – supply and demand. Economies do need people and companies willing and able to invest in productive activities. But they also need people and companies able to spend money on the fruits of those productive activities. Over-emphasis on investment distorts the economy just as surely as over-emphasis on demand via Keynesian economics does. Indeed, when Reagan took office, interest rates, inflation, and unemployment were high, and the economy was in a period of stagnation that called for action that could reduce interest rates.

A certain amount of investment and yes, speculation, and risk-taking, and innovation and stupidity and irrational exuberance and all the rest is good.

But by and large the people who have gotten insanely rich under trickle down economics ain’t the ones doing that stuff.

So what has also happened is the loss of good jobs in the American economy.

This may be efficient. But it’s not been good for the communities (often rural) that have been hollowed out. Unless you think that turning people pissed, mean, and ugly is good.

Oh wait – maybe that was the point of trickle down economics.

Cuz, you know, if what you wanted was to spur economic activity, you might develop policies to help small businesses (like Kamala Harris did) instead of policies to help people and corporations that already have too much money. And if you wanted to be fiscally responsible, you’d raise taxes on wealth. On billionaires. And then you’d get stuff that benefits everybody (public goods). Uh-oh!

Of course, the other problem is that when you allow small numbers of individuals (the mythical and real 1%) to control almost all the money in a nation, you allow those people to buy the governmental and educational and judicial institutions of that nation.

Not that that would ever happen. Except that it already did. And it has throughout history. Wealth inequality is power inequality is political inequality.

Extreme wealth concentration typically eventually reaches a tipping point where the people who have too much money end up accidentally bringing down the whole shaky edifice. The most notorious example comes via the French Revolution. We have a ways to go before our own French Revolution but the World Bank did declare 2023 ‘the year of inequality.’ The US has somehow managed to make itself more extreme than the norm, but inequality is rampant everywhere – thanks to the bad set of ideas that trickle down economics came to embody.

This happens in history. People, as is their wont, take things too far, fuck things up for themselves, destroy what they wanted to preserve, and set a new cycle in motion. At its most extreme, wealth concentration encourages the wealthy to prevent any trickling whatsoever. That’s where we are now in the United States.

There is no known law of nature that requires the rich to desire to trickle anything down and if there is nothing to compel them to do so, some or many of them will do whatever possible to stop all trickling whatsoever (think Elon Musk). Elon Musk is not making people other than Elon Musk wealthier. Elon Musk is trying, in fact, to make sure that people who are not wealthy get no money whatsoever. This is not because Elon Musk is the strangest rich person ever. He is, but that’s not why. It’s because that level of wealth actually makes people feel like hoarding it.

Many insanely rich people cheat the system every way they can. That is, perhaps, one reason why they are insanely wealthy. And that creates eventual backlash. Around the world, societies will work to become more equal not less equal. I’m not saying the US will automatically be one of those countries.

What I’m saying is – if you actually care about the economy (not saying you do), then what you want is a bunch of poorer people running around buying random stuff thereby stimulating economic activity and — creating jobs. Demand creates jobs.

POORER PEOPLE ARE THE JOB CREATORS!

And…if sensible regulation reined in the corporate abuses of the day, then they might actually get a chance to create the jobs that make a society worth living in. And favoring actual useful innovations.

Instead of traveling back in time like we’re doing now – back in time to an era before the Great Depression taught us the lessons that the Reagan revolution put so much effort into having us all forget.

The thing is, there is some psychology behind all this. Rich people want to win. That’s what they want. If 7 billion dollars is winning, they want 7 billion dollars. If 21 billion dollars is winning, they want 21 billion dollars. If winning is $700K, they want $700K.

They don’t actually care how much money it is, as long as it’s more than some other guy. The insane amount of money trickle down economics is allowing some people to accumulate means nothing to them. You could redo the system to redistribute the wealth in a much more equitable and useful way and let rich people win to their hearts content and make the entire world better.

If you just give up trickle down economics. And endless tax cuts for the insanely rich. And the idea that those insanely rich people are actually better human beings than anyone else. (Hint: they’re not.) You could tax their wealth and their estates and their incomes at much higher rates than they are taxed at today and things would be okay. How we do know this?

Because they used to be taxed at much higher rates before Reagan and things were okay. There was a time when the highest tax rate was 91% – and there were plenty of jobs created. There is a point at which higher tax rates would actually decrease the amount of money the government takes in. But we aren’t nearly at that point. We are at the point where tax cuts create huge deficits.

But with higher taxes people could get more of the things they want but cannot buy for themselves (like clean air). You don’t have to nationalize industries to improve the economics of the tax structure. What you need is simple attention to reality rather than theory.

Look, I’m not saying that people don’t have more stuff now than they did when Reagan took office.

They do. What they don’t have is the luxury of being able to retire at 65, for example.

What you can do about it is speak out. Especially if you’re in that age range, your sixties, that carries an excess of political clout. Let people, especially Republicans, know exactly how much less the rich pay than they used to and how things actually worked when the rich paid more taxes.

What’s happened over the last 40 years is not right. It’s destructive. It makes a phrase like ‘equality’ a pathetic understatement. Theft would be closer to the mark. Stealing from the poor to feed the rich.

Time to get pretty fed up.