Trickle down economics... It's not a real thing

[Anonymous]

(These are not my original thoughts but I believe them to be absolutely true. I realize most people here aren't interested in this, but I think here they will gain more visibility to the normal folks) Can anyone tell me the root of trickle down economics theory? Who thought it up? Who has put it into practice? Is cutting taxes on the rich all that it is? The answer is, there is none. You will not find it in any economics book, or in any papers written by economists at any time in history

The truth is no one has ever implemented trickle down theory because it doesn't exist and never has. Not Bush, not Reagan. It's a classic straw man that's often trotted out when someone proposes tax cuts Not just to the rich, but any tax cuts that include high income earners.

When people say "they told us it would trickle down, but it hasn't" I have to wonder, who told you that? It's often attributed to Reagan, but you will never find any record of him saying so. THat wasn't his intention with the tax cuts he implemented.

The problem is that the intended goal of the tax cuts often attributed to trickle down has nothing to with trickling down at all, The goal of cutting taxes is to increase tax revenue for the government. If there's any trickling going on, it's trickling from the general population into the government

now hold on... How can cutting taxes INCREASE tax revenue? Well it has to do with the behavior of people when their tax rates are too high. In 1933 John Keyes, the economist responsible for Keynesian economics, a model that is the basis for a lot of what our current president bases his policies on, said this. "taxation may be so high as to defeat its object,” that in the long run, a reduction of the tax rate “will run a better chance, than an increase, of balancing the budget.”

This idea has proved itself correct four distinct times in American history. The Mellon tax cuts in the 1920s under the Coolidge admin, revenue tax act of 1964 under JFK, Reagan tax cuts, Bush tax cuts. These cuts were not just tax cuts on the rich, but across the board tax cut policies and in every single instance, raised the tax revenue that the American government took in. The theory is that when taxes are too high, people, rich and poor, do their best not to pay them, and spend less. It has nothing to do with trickling of any kind from top to bottom.

The republicans believe that the rich are disproportionately taxed. Whether you agree with that or not is irrelevant. The point is that none of them believe that money trickles down because of lower tax rates on the rich. They believe that tax rates are at the point where revenenue could be increased by cutting them. Whether you believe that is true or not is again not the point. I'm just trying to get you to understand the intended outcome of tax cuts is not trickle down.

So Next time you hear someone fighting a battle against a non existent theory or policy (you will undoubtedly in the next 2 years) Realize that what they are fighting something that has never existed.

[NotDrunkNow]

It's true that "trickle-down economics" is a media-created straw man, never adopted by any prominent politicians or economists. However, there is a grain of truth in it. Much wealth does flow from rich people down to not-so-rich people. When Bill Gates buys a new yacht, the money goes to a lot of folks who build, sell, and service yachts. When I buy a beer, not much results (except that I'll soon need another beer). But "trickle-up economics," if it existed, would be equally valid. People who own McDonald's outlets get reasonably wealthy by extracting small amounts of money from many, many people. But the reality is that without rich people, there would be no skyscrapers, symphony orchestras, shopping malls, jet planes, or much of anything else. We would still be subsistence farmers. Eliminating rich people will make us all poorer. If we want some of their money, it's up to us to offer them something they really want to buy. And the great thing is that it doesn't need to be remotely worth what we charge for it, because they don't necessarily care.

[myTake Owner]

yes i think it does happen, but its not a total economic theory and it would be foolish to base policy on that idea, thats just much too simplistic. Anybody who has any basic grasp of markets knows that. If only economics were that simple.

[juststrollin]

So what is trickle down economics? I've hear of the trickle down theory in marketing but not in place of taxes? Nice to make about about!

[myTake Owner]

its a political term, no more no less

[Riverock]

So what you're saying it that trickle down economics is a political term used to justify reduced taxes? Why would they need it to justify reduced taxes that bring higher revenue?

Unless you're saying that modern politicians wrongly attribute this saying to Reagan in an attempt to discredit him.

[Consultant]

There are so many logic and grammar flaws in this.

Trickle-down-economics has been disproven to be effective a long time ago. Of course it has been implemented--why are you delusional to think it hasn't? Reagan, Bush Sr. and Bush Jr. have pushed for it practically their entire presidencies.

[myTake Owner]

Bush senior is out of the question. There's no way you can relate his policies to "trickle down"

Bush sr "don't like trickle down government. Clinton says grow government. Government doesn't create jobs. If they do, they're make-work jobs. It's the private sector that creates jobs."

Reagan and bush jr cut taxes across the board. How does that line up with the idea of trickle down?

[myTake Owner]

Bush sr "I don't like trickle down government. Clinton says grow government. Government doesn't create jobs. If they do, they're make-work jobs. It's the private sector that creates jobs." *

[Despondency]

Supply-Side Economics exists. It's what you know as "Trickle-down economics".

( www.econlib.org/.../SupplySideEconomics.html )

[myTake Owner]

I know what supply side is, that exists. What I'm saying is that trickle down is a misnomer for supply side because trickling down is not a part of what supply side is all about. It's about cutting taxes based on the laufffer curve to raise tax revenue, and to increase production.

Also supply side is mostly dead, there are very few politicians and even fewer economists who would call themselves supply side supporters today.

[NiallM]

Actually by definition if you alter taxes it would be fiscal policy

[front2back]

All of these problems and more could be solved with a flat tax rate. Everyone gives the same proportion. It's simple, it's equal.

Oh, and before you say it disadvantages the poor, stop putting a sales tax on necessities like basic food, toiletries, and cheap clothing. Then they will no longer be disadvantaged. Only allow an excise tax on goods that aren't necessary for survival. Boom. Done.

[TadCurious]

George W. Bush inherited a federal budget in surplus, signed into law 2 tax cuts, and the deficit exploded.

[myTake Owner]

Economics is a complicated thing with a lot of variables, we can say that certain policies work, but there will always be situations where it won't. You can't blame the tax cuts as an idea, maybe applied at the wrong time in that situation. The economy was bound to bust, we had several big giant bubbles ready to pop during that period biggest being the housing bubble and the dot com bubble.

And again, you can't call what bush did, trickle down, it's dishonest. Less than 1/4 of his cuts benefitted the rich. They were cuts across the board

[NiallM]

There is a different between "trickle down theory" and the "multiplier effect"

[NiallM]

Also trickle down is not linked with Keynesian economics, its linked with monterism/neo-classical economics. Keynesian economics is based on the principles of the redistribution of income and wealth therefore lowering taxes would go aganist this. Monterists would like a world without government intervention markets (like the republicans) were the rich stay rich and the poor stay poor.

[myTake Owner]

I never said that trickle down is linked to Keynesian at all just to be clear. I was just showing that it's generally accepted by many different forms of economist that when taxes are too high, making cuts increases tax revenue. Laufffer curve

[Zerrok]

Wow wee

No seriously.

[tenofthepeaks]

it's never been proven to work..

[myTake Owner]

cutting taxes when taxes are high has been proven to increase tax revenue as i mentioned earlier.

it hasn't been proven to "trickle down" because thats not even the point, trickle down is a political term, used perjoratively, its not a real economic theory, but it misses the point. Its like trying to prove that liposuction improves brain function. Did you read what i wrote at all?

[tenofthepeaks]

not really, i didn't see the point,..

[myTake Owner]

The point is in the title, trickle down economics, its not real thing. When Obama says things like "they told us it would trickle down" he's making stuff up, no one has ever said it would trickle down, thats not the point of tax cuts