Back in the early 1980s, when Ronald Reagan was telling us that tax cuts for the wealthy would trickle down to the rest of us and promote broad prosperity, I saw a political cartoon in a left wing magazine that had a crude image of Uncle Sam pissing on a map of the United States. The cartoon was title “Trickle Down Theory.” A study by the London School of Economics that looked at 50 years of tax cuts shows the cartoon was more accurate than Reagan.
The paper looked at 18 countries and measured the impact of tax cuts. They authors found that tax cuts increase economic inequality and benefit few people other than the rich. Contrary to conservative claims, they don’t improve job growth or wages.
In other words, Republican economic arguments for the past 50 years have been wrong. Trickle-down theory is, as George H. W. Bush aptly called it, Voodoo economics. The only people who have really believed this nonsense are the free market ideologues that have dominated the GOP think tanks since the 1970s.
Republicans have been spouting magical thinking about economics almost all of my adult life. Not only have they maintained that tax cuts would create jobs, they told they would increase revenue. Instead, they’ve created the massive inequality that plagues us today and led to the deficits that only matter to Republicans when Democrats try to raise taxes to get them under control.
Unfortunately, Republicans have successfully convinced people that tax cuts are almost always good and tax increases are almost always bad. That’s the political argument. Their policy arguments are, as the study shows, harmful to working and middle class families, but Republicans claim they are letting people keep more of their money. In fact, people are paying more for everything from health insurance to housing to education and the profits are going to those who already benefit from the tax cuts.
The Reagan Revolution was really a structural change in our country that shifted wealth from the lower and middle classes to the wealthy. It rewarded people who make money from investments while offering little to those who make money from wages. While the upper middle class may have grown, the system stifled economic upward mobility for those in the working class. The economic theory put profits before people.
Let’s get real. The theory was never meant to benefit the majority of Americans, no matter what the GOP said. Instead, it was used to justify the principle that the government should not take money from people, regardless of their wealth or the source of their income. Republicans didn’t really care whether it trickled down or caused massive inequality. They just wanted to protect the earnings of the wealthy from the hands of government. That it’s caused so much unrest in our country and left so many people struggling is of no consequence to Republicans. The profits generated by trickle-down economics is how the free marketeers define “freedom” and that’s their core value.
Thomas Mills is the founder and publisher of PoliticsNC.com. Before beginning PoliticsNC, Thomas spent twenty years as a political and public affairs consultant. Learn more >