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trickle down economics
Americans Are Wising Up to the GOP’s Tired Trickle-Down Scam
Trump and other Republican politicians are trying their best to revive their nonsensical horse-and-sparrow supply-side rationale so the rest of us can pay to make the rich far richer.
Jun 13, 2024
They’re at it again. And it’s not even original: The trickle-down economics that two-dozen Republican governors and former U.S. President Donald Trump are reviving as you read these words has a long history.
“Trickle down,” of course, was the theory advanced by former President Ronald Reagan that if America only made rich people massively richer with staggering tax cuts, ending anti-trust regulation, and government subsidies for their industries, they would use all that extra free money to build new factories, hire people, and the abundance would trickle down to the average worker.
It was a lie, but it wasn’t the first time the GOP had tried that lie. Then knew exactly what they were doing, and what outcome it would produce. Instead of raising the pay of their workers, the rich people on the receiving end of Reagan’s, Bush’s, and Trump’s tax cuts simply added the cash to their money bins and investments, bought new yachts or trophy wives, and blasted themselves into outer space on penis-shaped rockets.
Thankfully, the Biden administration and this generation of Democratic politicians have rejected Reagan’s neoliberalism and low-tax ideology in favor of what centuries of history shows us works: for the wealthy to again pay their fair share of taxes to sustain the commons.
Nonetheless, Republican politicians think we haven’t noticed and they’re trying to pull it off again at both the state and federal level. A bill with 102 GOP co-sponsors (the Tax Cuts and Jobs Permanency Act) is in motion in the House of Representatives right now to double-down on Trump’s tax cuts.
How did we get here, and why are they still pushing something that’s so discredited it’s become a punch-line for late-night comedians?
The GOP was captured by the morbidly rich in the 1880s and has been dancing to their tune ever since, regularly throwing bones to bigots, religious zealots, womanhaters, and gun nuts to get enough votes to hold power.
Ever since that era, their main focus has been to increase the wealth of the morbidly rich while keeping down wages and saddling average people with as much debt as possible. As I’ve explained before, conservatives believe this crushing of the middle class is the best way to “ensure social stability” and thus “save America.”
The first Democratic president to call Republicans out for that era’s version of trickle-down economics (which back then, before income taxes, had to do with suppressing wages, fighting the early union movement, and letting industrial oligarchs wipe out small competitors) was Grover Cleveland, in his 1888 State of the Union speech:
As we view the achievements of aggregated capital, we discover the existence of trusts, combinations, and monopolies, while the citizen is struggling far in the rear or is trampled to death beneath an iron heel. Corporations, which should be the carefully restrained creatures of the law and the servants of the people, are fast becoming the people’s masters.
But the first tax on wealthy Americans went into place way before that, in 1839, shepherded through Congress by Representative Abraham Lincoln. It was a tax on luxury items and expensive land exclusively owned by rich people. As Lincoln wrote to his friend William Wait on March 2, 1839:
I believe it can be sustained, because it does not increase the tax upon the “many poor” but upon the “wealthy few”… [which] by taxing [luxuries and land], as is well known, that belong, not to the poor, but to the wealthy citizen.
On the other hand, the wealthy can not justly complain, because the change is equitable within itself, and also a sine qua non to a compliance with the Constitution. If, however, the wealthy should, regardless of the justness of the complaint, as men often are, when interest is involved in the question, complain of the change, it is still to be remembered, that they are not sufficiently numerous to carry the elections.
Lincoln followed up as president with the nation’s first income tax in 1861, put into place to fund the Civil War. It was also a progressive tax; it only hit people who made above $800 ($32,000 today).
However, taxing the rich to pay for the needs of the nation was also an idea that long predated even Lincoln. As former President Thomas Jefferson wrote to Pierre Samuel Du Pont de Nemours in 1811:
We are all the more reconciled to the tax on importations, because it falls exclusively on the rich, and, with the equal partition of intestate’s estates, constitute the best agrarian law. In fact, the poor man in this country who uses nothing but what is made within his own farm or family, or within the U.S. pays not a farthing of tax to the general government, but on his salt; and should we go into that manufacture, as we ought to do, he will pay not one cent.
Our revenues once liberated by the discharge of the public debt, and its surplus applied to canals, roads, schools, etc., and the farmer will see his government supported, his children educated, and the face of his country made a paradise by the contributions of the rich alone without his being called on to spare a cent from his earnings. The path we are now pursuing leads directly to this end which we cannot fail to attain unless our administration should fall into unwise hands.
Following Cleveland’s calling out of the morbidly rich of his day, late 19th-century advocates for that class came up with the “horse and sparrow” theory of taxation. This was back in the day when everybody used horses for transportation and people were used to seeing small birds pecking undigested grain from the horses’ droppings that filled America’s streets.
The sales-pitch was that if you fed horses extra oats, more than they could normally digest, they’d pass through all that undigested oat into their manure for the sparrows to pick at; rich people’s excesses, in other words, would spill over to the average “sparrow” working person. It was embraced by Republicans in Congress and not only didn’t it work; it was blamed, in part, for the Panic of 1896.
Republican Warren Harding revived Horse and Sparrow economics in 1920 (many people still owned horses) when he campaigned on dropping the then-91% top income tax bracket down to 25%. He was elected and kept his promise, the result being the “Roaring 20s” when the rich got fabulously richer while working people saw their wages actually drop (leading to an explosion of unionization efforts by pissed-off workers that were violently suppressed by employers and police).
It all came to a startling and final end in October, 1929 with the Great Crash that set off what was then called the Republican Great Depression (the “Republican” part of that label largely wore off after the election of Republican President Dwight Eisenhower in 1952).
Republicans stopped talking about horses and sparrows around that time, but the theory never really died; Reagan simply reinvented it in 1980 as “Supply-Side Economics,” aka trickle-down.
Today, Republican politicians—heavily supported by right-wing billionaires since five Republicans on the Supreme Court legalized political bribery—are trying their best to revive their nonsensical horse-and-sparrow trickle-down rationale so the rest of us can pay to make the rich far richer. Trump promises to renew his expiring tax cuts for billionaires if he’s elected, which the Congressional Budget Office (CBO) says will add another $4.6 trillion to the $7 trillion deficit he gave us during his four years in office.
In Kansas, Republican legislators keep pushing through new tax cuts for the rich (one would reportedly cut Charles Koch’s tax bill this year by almost a half-million dollars) and Democratic Gov. Laura Kelly keeps vetoing them. Republican legislatures in Wisconsin and Pennsylvania just passed tax cuts for the wealthy totaling $2 billion and $3 billion respectively, although both states have Democratic governors who will veto such legislation.
In Mississippi, however, Republican Gov. Tate Reeves and his GOP colleagues in that state’s legislature have radically and repeatedly cut taxes, threatening to eliminate the income tax (which produces a third of the state’s revenue) altogether. Rich Mississippians will be fine; the necessary cuts will fall on the poor and the state’s educational and physical infrastructure, which are not much used by the very wealthy who fund Reeves anyway; they send their kids to private schools and fly private jets.
Other Republican-controlled states are seeing similar actions to raise taxes and fees on working class people while cutting taxes on the morbidly rich. Georgia’s Republicans just cut state taxes by a billion dollars; North Carolina reduced their income tax on the richest from 5.5% to 3.99%; and Iowa is trying to transition to a flat tax so that even the poorest of workers must pay the same tax rate as that state’s most wealthy, who will see a huge tax cut.
Altogether, The Center on Budget and Policy Priorities notes, just between 2021 and 2023:
Twenty-six states cut their personal income tax rates and/or corporate income tax rates, 13 of them multiple times… Combined, the cuts will cost those 26 states an estimated $124 billion by 2028, including $13 billion that they have already lost (2022-2023) and $111 billion over the next five years (2024-2028)… This 3.6% share is equivalent to more than a third of states’ general fund spending on higher education and more than half of what goes to state correctional systems.
Thankfully, the Biden administration and this generation of Democratic politicians have rejected Reagan’s neoliberalism and low-tax ideology in favor of what centuries of history shows us works: for the wealthy to again pay their fair share of taxes to sustain the commons.
As President Joe Biden told an audience just last week:
We’ve gone from trickle-down economics to the point where we’re in a situation where we build from the middle class out and the bottom up. And that way the wealthy still do very well. No one wealthy is hurting at all. We’re in good shape. So, we have to keep it going that way.
Republicans have been hustling this scam for over 150 years, and in the states they control educational outcomes are plummeting, child and infant mortality is skyrocketing (along with homicides), and infrastructure threatens to disintegrate as funding cuts come online.
Nonetheless, it finally seems Americans are catching on and increasingly rejecting horses, sparrows, and politicians who try to sell them on more trickle-down tax cuts for the rich.
More Americans need to know this history. Pass it along.
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Trickle-Down Economics, Not Immigrants, Threaten the American Dream
The ongoing attacks on the humanity of immigrants pose a threat to all of us, and we lose sight of our nation’s abundance and the promise upon which it was built.
May 12, 2024
At an age when many children are learning their ABCs, my father was a farmworker in Mexico. His job was to plant seeds with his small hands while chasing away crows that threatened to eat the freshly buried grain. I imagine him, a child, spending his days toiling behind the ox as it plowed the soil. My mother’s childhood was similar: She worked as a housekeeper and seamstress. Their meager earnings were needed for their families’ survival and as a result, neither was able to go to school.
When they were in their 20s, mom and dad immigrated to the United States, determined that my siblings and I would get an education. They believed in an American dream where prosperity was the reward for anyone who worked hard, and they did everything they could to make it come true.
Today, the belief “that anyone who works hard can get ahead” has diminished. A November 2023 poll by The Wall Street Journal/NORC found that only 36% of U.S. voters believe in the American dream, a number that has steadily declined over the past few decades.
We can reclaim the American dream and reimagine it as the freedom to thrive for all of us.
It’s not hard to understand why. The federal minimum wage of $7.25/hour has not increased since 2009, despite increases in inflation in every consumer category. Full-time workers earning minimum wage do not earn enough to pay for a two-bedroom rental anywhere in the country. Half of U.S adults struggle with healthcare costs, and 66.5% of bankruptcies are due to medical expenses. Forty-four percent of us are not prepared to pay for a $1,000 emergency. Student loan debt totals $1.74 trillion. Poverty and hunger have increased despite generations of unprecedented economic growth. By all accounts, many Americans are struggling to do impossibly more with increasingly less.
It doesn’t have to be this way. The original American dream, coined in 1931, was a vision of our collective prosperity as a society, and “a happier life” for us all. In The Epic of America, James Truslow Adams described “a dream of a social order in which each man and each woman shall be able to attain to the fullest stature of which they are innately capable, and be recognized by others for what they are, regardless of the fortuitous circumstances of birth or position.”
In other words, the freedom to thrive for all of us—no matter how much money we have, what we look like, or where we were born.
By the 1970s, my parents were both working in factories, earning minimum wage. They bought a house and raised nine children. We had health insurance, went to school, and lived in a relatively safe community. We were far from wealthy, but society’s promise of upward mobility in exchange for hard work was kept. Then came “trickle-down economics” and decades of policy decisions that transferred wealth away from working families in favor of corporations and the highest earners.
As a result, the U.S. has experienced an “uninterrupted increase in (economic) inequality since 1980.” According to a March 2024 report, the wealth of the top 1% in our country now exceeds $44 trillion, an increase of $2 trillion over the previous quarter. To conceptualize this, if you or I spent $1 million per day, it would take us 3,000 years to spend $1 trillion.
To make matters worse, opportunistic politicians distract us with divisive rhetoric and dehumanizing attacks on immigrants striving for a better life, scapegoating the very people who, like my parents, believe in the potential of our nation and work hard to make that belief a reality. People like the six men from Central America and Mexico who perished the night of the Baltimore bridge collapse as they worked filling potholes while many of us slept.
States like Texas and Georgia have moved to deputize local law enforcement to serve as federal immigration agents, resulting in racial profiling and instilling fear in local communities. Governors in Florida and Texas have played dangerous political games with human beings, shipping them like cargo to “liberal” areas in a cynical ploy that erodes our shared humanity. The governor of Texas has signaled plans to challenge the right of all children to receive an education, despite established precedent set by Plyler v. Doe. This mix of political and economic pressures robs us of the opportunity for meaningful dialogue and results in a society that is increasingly politically polarized, instead of joining together to ensure our country fulfills its promise.
These ongoing attacks on the humanity of immigrants pose a threat to all of us, and we lose sight of our nation’s abundance and the promise upon which it was built.
It’s no wonder so many Americans have lost faith in the American dream.
But there is a different perspective worth considering. It’s a perspective that motivates millions of immigrants to call this country home.
In 2023, my colleagues traveled the country and met with hundreds of immigrants to hear their stories and explore the lens through which immigrants view the country. We heard optimism about the abundance of our nation. A vision of belonging, and a desire to live with self-determination. A place where true prosperity includes a sense of community, joy, love, safety, dignity, inclusion, and purpose.
We are a nation that has yet to live up to its potential. But if we dare to collectively view our country through this lens, we can reclaim the American dream and reimagine it as the freedom to thrive for all of us.
The freedom to thrive will be possible when every one of us can see a doctor without facing financial ruin. When all workers are paid fairly, have safe working conditions, and can comfortably afford a place to live. When all children have access to an education and no one goes hungry. When our full humanity is recognized, embraced, and our interconnectedness celebrated. When we are free to love and to worship in ways that align with our experiences and beliefs, and when we each have the power to live our lives meaningfully. For immigrants, this also means the safety, inclusion, and dignity that comes with citizenship, and the recognition that we are a stronger nation because of the contributions of immigrants.
This will require policy choices that once again leverage our country’s wealth in favor of the many, instead of consolidating it among the few, and policies that are inclusive and rooted in our shared humanity. It will require us to envision a society that is radically different from our current reality. And it will require all of us—including the millions of immigrants who call our country home—working together to bring it to fruition.
My father, mother, and siblings were in attendance when I graduated with my master’s degree. It was a moment of immense joy and pride for my family, and the fruition of my parents’ humble dreams. For me it was a moment of profound gratitude for their vision and belief in what was possible, and a powerful reminder that the freedom to thrive is indeed worth fighting for.
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All I Want for Tax Day Is a Reversal of Trump’s Regressive Tax Cuts
Like the Bush tax cuts before it, the Trump tax cut was a trickle-down failure.
Apr 15, 2024
Happy Tax Day. As Supreme Court Justice Oliver Wendell Holmes said, “Taxes are the price we pay for a civilized society.”
But who should pay the most for this civilized society? As Adam Smith, the father of modern economics, instructed in his The Wealth of Nations, a tax system should be based on the principle of equal sacrifice. This means the richer should pay a larger share of their incomes in taxes than the poorer.
But today’s wealthy Americans are paying a much smaller share of their incomes in taxes than most Americans.
Which is why the debate that’s already begun over the 2025 expiration of the Trump tax cuts is so illuminating and important.
Whenever you hear Republicans complain about the federal budget deficit, bear this in mind: The Bush and Trump tax cuts are the major culprits.
The major reason some very wealthy people are backing former President Donald Trump is they want the Trump tax cuts to become permanent and not expire as scheduled in 2025.
As this debate unfolds, you should know four basic facts. The Trump tax cut that went into effect in January 2018 is:
- Skewed to the rich. Households with incomes in the top 1% will receive an average tax cut of more than $60,000 in 2025, compared to an average tax cut of less than $500 for households in the bottom 60%, according to the Tax Policy Center. As a share of after-tax income, tax cuts at the top—for both households in the top 1% and the top 5%—are more than triple the total value of the tax cuts received for people with incomes in the bottom 60%.
- Expensive. The Congressional Budget Office estimated in 2018 that the Trump tax cut would cost $1.9 trillion over 10 years. Recent estimates show that making the law’s individual income and estate tax cuts permanent would cost another $350 billion a year beginning in 2027.Together with the 2001 and 2003 tax cuts enacted under George W. Bush (most of which were made permanent in 2012), these laws have severely eroded America’s revenue base.
- Budget-busting. Federal tax revenue as a share has fallen from about 19.5% of the total economy in the years preceding the Bush tax cuts to just 16.3% of the economy in the years following the Trump tax cuts. Whenever you hear Republicans complain about the federal budget deficit, bear this in mind: The Bush and Trump tax cuts are the major culprits. Moreover, the relatively smaller share of the economy financing the federal government is not enough to pay for the nation’s investment needs and our commitments to Social Security and health coverage.
- Based on a “trickle-down” lie. Trump claimed that the corporate tax cut would “very conservatively” lead to a $4,000 boost in household income.Research shows that workers who earned less than about $114,000 on average in 2016 saw no change in earnings from Trump’s corporate tax rate cut, while top executive salaries increased sharply. Similarly, research has shown that the law’s 20% pass-through deduction, which was skewed in favor of wealthy business owners, has failed to trickle down to workers in those companies who aren’t owners. Like the Bush tax cuts before it,the Trump tax cut was a trickle-down failure.
More generally, trickle-down economics—the abiding faith on the political right that tax cuts as well as deregulation are good for an economy—continues to live on, notwithstanding its repeated failures. Ever since former U.S. President Ronald Reagan and former British Prime Minister Margaret Thatcher first tried them, trickle-down policies have exploded budget deficits and widened inequality.
Reagan’s tax cuts and deregulation at the start of the 1980s were not responsible for America’s rapid growth through the late 1980s. His exorbitant spending (mostly on national defense) fueled a temporary boom that ended in a fierce recession.
Yet the U.S. never restored the highest marginal tax rates before Reagan. And deregulation—especially of financial markets—is a continuing harmful legacy.
The result? From 1989 to 2021, typical working families in the United States saw negligible increases in their real (inflation-adjusted) incomes and wealth.
Over the same period, the wealthiest 1% of Americans became $29 trillionricher. The national debt exploded. And Wall Street’s takeover of the economy continued.
Meanwhile, and largely as a result, Americans have become more bitterly divided along the fissures of class and education.
So why is trickle-down economics still with us? What explains the fatal attraction of this repeatedly failed economic theory?
The easiest answer is that it satisfies politically powerful moneyed interests who want to rake in even more. Armies of lobbyists continuously demand tax cuts and “regulatory relief” for their wealthy patrons.
But why has the public been repeatedly willing to go along with trickle-down economics when nothing ever trickles down? What accounts for the collective amnesia?
The answer is that the moneyed interests have also invested a portion of their gains in an intellectual infrastructure of economists and pundits who continue to promote this failed doctrine—along with institutions that house them, such as The Heritage Foundation, Cato Institute, and Club for Growth.
Consider Stephen Moore, the founder and past president of the Club for Growth and a leading economist at The Heritage Foundation, whose columns appear regularly in The Wall Street Journal and who is a frequent guest on Fox News.
Moore helped draft and promote Trump’s trickle-down tax. He is now advising Trump on making that tax cut permanent, if Trump returns to the White House next year.
Moore and others like him are happy to disregard the evidence and history of trickle-down’s abject failures. They simply repeat the same set of promises made decades ago when Reagan and Thatcher set out to convince the public that trickle-down would work splendidly.
The public has so much else on its mind and is so confused by the cacophony that it doesn’t remember—until immediately after the next trickle-down failure.
If Democrats take over both houses of Congress in 2024, and President Joe Biden gets a second term, they must reverse the regressive tilt of the Trump tax law—raising more revenue while advancing the interests of low- and moderate-income families across the country rather than those of the wealthy. To achieve this:
- Tax cuts for people making over $400,000 should end on schedule in 2025. The Trump tax law’s provisions primarily benefiting high-income households are costly and do not trickle down.
- The tax system must raise more revenue from wealthy people and profitable corporations to offset tax cuts extended or expanded for those with incomes below $400,000, to finance high-value investments in people and communities, and to improve the federal budget outlook.
- New progressive tax policies should be enacted to reduce the ability of the wealthy to avoid taxes on their large unrealized capital gains and roll back the special breaks they receive when they do pay tax. Policymakers can also generate progressive revenues by extending and making permanent the mandatory IRS funding enacted in the Inflation Reduction Act, which supports revenues by increasing tax collections primarily from high-income households.
- Top priorities for extending and expanding tax provisions in 2025 should be the Child Tax Credit, the Earned Income Tax Credit for adults not raising children, and the enhanced premium tax credits for Affordable Care Act marketplace coverage. These credits have a long history of success—in stark contrast to the record of failure of the corporate tax rate cut and regressive tax cuts on wealthy individuals. This includes a marked drop in the child poverty rate in 2021 under the American Rescue Plan’s expansion of the Child Tax Credit—a policy that should be made permanent in 2025.
- Additionally, some 16 million people who work for low wages and who are not raising children in their homes received help through the Rescue Plan’s EITC expansion in 2021, and there were historic gains in the number of people receiving health coverage in the ACA marketplaces during the 2024 open enrollment season, with most enrollees able to find coverage for less than $10 per month. These should continue.
- Revenues also can be used for additional services Americans need. The costs of childcare, home-based care for older adults and people with disabilities, and housing remain unacceptably high for millions of families, and federal investment in these areas falls far short of need. Higher taxes on the wealthy will help offset these costs.
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