![]() The rich can make money whether the poor are working or not. The gap between investment and employment is so wide that the former does not always translate into the latter. “ the most profitable investments are often passive financial speculations. Michael Merrill, Professor of Professional Practice and the LEARN Director for Rutgers University, explained that so-called trickle-down economic theories aren’t inherently flawed, but they are ill-suited for the United States. Rogers said that the administration of President Herbert Hoover assumed that money would “trickle down to the needy,” but that, in fact, “money trickled up.” The legacy of trickle-down economics The notion of money trickling down to the poorer classes from the rich was a concept satirized by American humorist Will Rogers during the Great Depression. (An amended note on the story from 2019, following Greider’s death, reports that Stockman was harshly rebuked by Reagan for speaking “too freely” about his doubts of the administration’s policies.) “Give the tax cuts to the top brackets, the wealthiest individuals and largest enterprises, and let the good effects ‘trickle down’ through the economy to reach everyone else.” Stockman conceded, “Supply-side is ‘trickle-down’ theory.” Stockman embraced supply-side economics after being tapped for the OMB director position, but he still acknowledged that “the whole thing is premised on faith.” It assumed that investors and businesses would see the government’s actions as a positive indicator and would increase investment.Īs Greider explained, supply-side economics was a new name for the Republican Party’s economic theory – a theory that had existed for generations. The resulting “robust” private sector would thus reduce government responsibility because private citizens would be better off. The success of the Reagan administration’s theory was reliant on the idea that the private business sector would grow so substantially, it would make up for any loss of revenue caused by reducing income tax. Soon to hold “one of the most powerful positions of government,” Stockman was the man charged with making Reagan’s seemingly contradictory campaign promises – lower taxes, higher military spending, a balanced budget – a reality. Stockman, a US Congressman at the time, was to lead what Greider called a “small but awesomely complicated power center in the federal government.” Writer William Greider conducted multiple interviews over a period of several months with Stockman, before the latter became the director of the Office of Management and Budget (OMB) in the incoming Reagan administration. It also provides insight into the mind of David Stockman, a Reagan administration official charged with making supply-side economics work in the federal government. The captain of ReaganomicsĪn article in the December 1981 issue of The Atlantic offers perhaps the best window in which to view how Reaganomics came into existence. The Millennial Source spoke with economists to put the theory into historical context. Now, nearly 40 years since those policies took effect, the growing wealth divide in the United States suggests that the legacy of trickle-down economics is one of failure. Since Reagan’s full-throated embrace of supply-side economics, the Republican Party (also known as the GOP) has continued to base their anti-tax, pro-business economic policies on the theory that greater wealth at the top of society will result in greater wealth at the bottom. Though originally a criticism of the economic policies of President Ronald Reagan, “trickle-down economics” is now the phrase most commonly associated with the supply-side economic theory that underpinned so-called “Reaganomics.” It has become so ingrained in the culture that even the current Trump administration has used the phrase positively when describing their economic policies.Īs a political weapon, “trickle-down economics” failed to curtail the Reagan administration’s economic plans.
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