Trickle economics—Up or down?

“Suppose you were an idiot, and suppose you were a member of Congress; but I repeat myself.”—MT

Trickle-down economics is closely identified with the economic policies known as “Reaganomics.” Reagan’s budget director David Stockman, championed tax cuts at first but then became skeptical, and told journalist William Greider that, “supply-side economics is the trickle-down idea: 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.’”

The idea seemed to make sense, in theory, due to the fundamental economic relationship between supply and demand. The greater the demand (assuming industrial response) there would be job creation to provide rising supply. However, this principle ceases to function when demand is suppressed when consumers have decreasing disposable income (as during an economic downturn). The only way to correct the situation is with a stimulus program OR if those with wealth incur front-loaded risk and hire (or don’t fire) more people, who then have more disposable income, leading to increased demand. Of course risk aversion is also a sound economic principle and there are very few wealthy people who get excited about incurring more risk. 

But then we must consider the most wealthy of all: the U.S. Government, that is unfortunately controlled by a bunch of congressional idiots beholden to wealthy donors. The Uncommon Sense here is that somebody must take a risk and prime the pump of economic activity to jump-start job creation, putting money in the hands of the people who create demand in the first place. Neither the current elite nor ruling members of The House of Representatives are willing to take that risk, but instead have chosen to slash and burn the very people who could start the economic engine moving. The consequence is that the poor get poorer, the rich get richer and the middle class is joining those at the bottom. There is no “trickle.” There is just fattening the wealthy lambs at their own peril. 

Republican’s have attributed the slogan to Democrats in the 1980s as a way to attack Reagan’s economic policies. But students of history know the term first appeared long before during the Great Depression in 1932 when Will Rogers said of the Republican President, “The money was all appropriated for the top in the hopes that it would trickle down to the needy. Mr. Hoover didn’t know that money trickled up. Give it to the people at the bottom and the people at the top will have it before night, anyhow. But it will at least have passed through the poor fellow’s hands.” It took Hoover’s successor Franklin Delano Roosevelt to have the vision, fortitude and courage to turn this theory upside down and start the long road out of the worst depression we have ever experienced. Unfortunately the trickle-down nonsense has reemerged, packaged in the disguise of the “makers and the takers,” and once more the policies that created and sustained our economic woes have taken root all over again. To suggest that those who enable wealth are inferior to those who acquire it, is like saying a house is built by itself for the occupants who live in it.