Trickle down Economics Just Don’t Work

Jul/10

Trickle down Economics Just Don’t Work

For over 30 years, we have been consumed by the theory that giving to the ultra rich in the form of tax-breaks or loopholes, will allow them to give back to us in return. And for over 30 years, while this theory has been in full force, the economy for the most part, has been on a decline, the poor got poorer, the middle class just made enough to scrape by and the rich continued getting richer.

Explaining Reaganomics

The theory is called “Reaganomics,” and is based on what I call economic slavery - making sure the rich stay rich, while everyone else work double and triple shifts just to survive.

Like the name implies, Reaganomics was introduced in the Reagan administration back in the 1980’s and had four major principles. Among these principles, two stands out;

Deregulation: According to William A. Niskanen, one of the authors of Reaganomics, “Reagan eased or eliminated price controls on oil and natural gas, cable TV, long-distance telephone service, interstate bus service, and ocean shipping. Banks were allowed to invest in a somewhat broader set of assets, and the scope of the antitrust laws was reduced.”
Tax Cuts for the Wealthy: Mr. Niskanen also wrote about this, saying “The changes to the federal tax code were much more substantial. The top marginal tax rate on individual income was reduced from 70 percent to 28 percent. The corporate income tax rate was reduced from 48 percent to 34 percent.”

Julie Wolf, a journalist at PBS wrote about these two principles and their effects, in an article called The 1982 Recession. The article claims that when Reagan presented his Economic Tax Recovery Act to Congress in February of 1981, the program was based on “supply side economics: Tax cuts, the theory went, would allow people either to spend more on goods and services, thus giving the economy a boost, or to invest in businesses, thus leading to economic growth.” Reagan signed the bill into law in August of 1981.

Mrs. Julie Wolf goes on to say that shortly after signing this bill now known as Reaganomics, “the economy took a turn for the worst.” It continued;

“The United States was experiencing its worst recession since the Depression, with conditions frighteningly reminiscent of those 50 years earlier. By November 1982, unemployment reached, nine million, the highest rate since the Depression; 17,000 businesses failed, the second highest number since 1933; farmers lost their land; and many sick, elderly, and poor became homeless.”

“The country lived through the recession for a full year before Reagan finally admitted publicly that the economy was in trouble. His budget cuts, which hurt the poor, and his tax cuts, which favored the rich, combined with the hardships of a recession, spawned the belief that Reagan was insensitive to his people's needs.”

So what caused the economy to recover?

The article stated that with a worsening economy, Reagan went against his Budget Director David Stockman’s advice to cut more taxes and “agreed to a moderate tax increase on businesses.” This tax increase contributed to the economy’s rebound in January of 1983.

The theory of Reaganomics is a flawed one. Giving money to the rich with the hopes that they will hire more, or spend more on goods and services thus leading to economic growth, is like giving candy to a child then asking them to share. It’s an almost impossible mission. It’s time to allow the Bush tax-cuts to the wealthy to expire. We’re the first to say that America is the most advanced nation on the planet. Well it’s time we all, rich and poor, contribute accordingly to keep this advantage.

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