Let Us Talk

October 4, 2008

Economy – Trickle Down Theory Is A Myth: Money Doesn’t Trickle Down But Pain Crawls Up

 What is the trickle-down economy theory? It’s the set of economic policies based on the concept that you provide economic incentives to the wealthy by cutting their taxes (by letting them keep their money) while at the same time deregulating industry, you’ll let loose a tsunami of economic activities that will enrich even the least advantaged among us.

Wow, this sounds great in theory but as we all know now, it doesn’t work.

Trickle-down is largely a rationale for upward redistribution that’s been kept alive by those who benefit from it by paying less tax. Reagan put this stuff on the map, GW Bush brought it back with a vengeance and McCain intends to take it even further. McCain’s policy calls for an extension of the Bush tax cuts plus he adds pork fat of about $75 billion more in corporate tax cuts on top of that!

In the 1990s when Clinton came into office he would have nothing to do with allowing the rich to pay less taxes; he instead cut taxes on lower-income households and raised taxes on the wealthiest. Obama takes a similar approach.

Because of lowering taxes on the middle-class and raising the taxes on the wealthy in hind sight we see evidence of the strong real growth in median incomes and sharp declines in poverty that occurred during the 1990s compared with the opposite movement in the 2000s with Bush’s policies.

The income for the middle-class grew by 10% or by $5,200 in the 1990s (1989-2000); these same households saw a decrease of $2,000 in 2000s under Bush when he lowered taxes for the wealthy.  If Bush had kept Bill Clinton’s policy of lowering the taxes for the middle-class, income would have continued to increase in the 2000s and middle class median income would have gone up $3,600 instead of falling $2,000.

So why do the republicans continue to push tax cuts for the rich?  It seems that it is as simple as ‘because they and their friends are rich’ and it benefits them and their friends including heirs and heiresses.  That’s straight-talk.

 Even Bruce Bartlett, an economist and Reagan adviser who supported Republican tax cutting policies believes that Bush has “bankrupted America” with his tax policies.

So in hind-sight we now know that Reagan’s legacy is a myth of a tax cutting policy that pays for itself and provides growth for the middle-class.  The fact is that Reagan’s tax cut was in large part reversed by tax increases – both in the corporate and individual income taxes and in payroll taxes, which together with significant government spending laid the foundation for the long-term deficit problem and fiscal crisis we find ourselves in today.

 So if you want to see your income go up, don’t believe McCain’s pontification that by decreasing the income of the wealthiest Americans you will do better financially – it’s simply not true and we all have the proof.  If the company you work for sees a 25% increase in profits, do you see a 25% or 15% or even 10% increase in your salary – probably not; I definitely don’t.  That’s the economic lie McCain wants you and me to believe.

We also know that lowering taxes on the middle-class helps the middle class.  President Clinton proved this during the 1990s and Barack Obama’s economic policies will as well.

Economists for Obama:





Obama/Biden 2008!


EVERY vote counts!



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