It’s increasingly difficult for most conservatives to truly defend the concept known as ‘trickle down’ economics these days. Granted, most wealthy, orthodox capitalists don’t bother or care to quite often, short of when they can label themselves ‘job creators’ in the process. But throughout the debate over just how best to cater to an economy’s needs rages between those in the corners of concentrated wealth versus those of a more shared prosperity thinking, the phrase “supply side economics,” seems to consistently remain something thought as viable.
Now despite these two ideas being technically different, the idea that cutting taxes for the top earners and wealthiest individuals to spur private investment and keep the economy growing remains the same no matter what you call it, and proponents of the models in the midst of their ongoing continuing victory in pushing such, continue to press for more. However, recent data which analyzed economic activity under Presidents Reagan, Bush, Clinton and Bush II, is beginning to cast serious doubt as to the effectiveness of this top-down economic model.
Contrary to the market-enthusiast’s rhetoric, the strongest periods of economic growth since Ronald Reagan’s proposition of the trickle-down model, have come not when taxes on the financier and investor classes have been reduced, but to the contrary — when taxes have been increased.
A strange contradiction to the lines espoused by supply-side enthusiasts is that cutting taxes is the single, central and most crucial aspect to encouraging economic growth. However following President Clinton’s 1993 tax increases on corporate entities and wealthy individuals, the US saw substantial economic growth which came and lasted relatively until the end of the respite from supply-side policy models. Once George W. Bush assumed the office and pushed for a return to the wealth-favoring tax policies, the stagnation experienced under Reagan and Bush Sr. resumed its course.
There’s no shortage of complicated, often contrived answers in support of supply-side thinking, which are trotted out to explain away the findings of such data. Market regulation isn’t taken into account, innovation in the tech sector spurned the growth of the 90s regardless of tax models, the housing bubble resulting from a broken home lending system…the numbers of externalities in play make it impossible to truly point to a singular policy or set of policies as ultimate evidence of the theory’s potential or failure.
Yet to take something from the playbook of those who typically favor socio-economic Darwinism to managed economic models, it could be argued that the cushy tax cuts for the wealthy and corporate elite, simply failed to provide the incentive they needed to properly invest. With low marginal tax brackets and endless series’ of loopholes and shelters for those of substantial wealth and resources to enjoy, the motivation and incentive to put their money back into the economy by way of investment simply wasn’t there.
Their wealth, which was protected from taxation, could accumulate and amass without the additional need for investing such as venture capital, hence causing markets to struggle, placing additional incentives on them to augment their stalled investment revenue by streamlining everything from labor costs to the end value of their products or services. In effect, the entirety of the market economy suffered because those at the top became ‘lazy’ with their money.
While much of the right wing, which itself is heavily dominated by corporate interests in one form or another these days, continues to bang on the drum of low taxes driving strong economies. Whereas once taxes were said to result in economic stagnation (now proven to be wrong on its own), they are now quite commonly referred to as a form of totalitarian slavery, perhaps in an attempt to distract from the demonstrated failure of their policies in practice.
So could it be that as these old models and their inherent failures become more obvious, those who support such are simply getting desperate? Its possible, though with a congress comprised of so many corporate spokespeople and privately wealthy individuals, it’s unlikely that the U.S. is going to see any real reversal of this failed theory any time soon.
(Images courtesy of Center for American Progress)