In the 1980s, the preferred conservative economic policy went something like this: if you cut taxes and reduce regulations for the wealthy and corporations, the resulting economic growth would benefit everyone. The rising tide of a booming economy would lift all boats. Prosperity would "trickle down" from the top echelons of society to the middle and working classes below.
There was just one problem with this elegant idea - it didn't work. At all. Not only did reducing taxes on the rich not miraculously benefit everyone, it worsened economic inequality. The promised trickle-down prosperity never materialized for most Americans. Yet despite decades of evidence that trickle-down economics is a resounding failure, this zombie idea refuses to die, continuing to be resurrected by conservative politicians and pundits.
The origins of trickle-down economics can be traced back to the work of economists like Arthur Laffer in the 1970s. Laffer and others argued that high tax rates stifled economic growth by discouraging work and investment. Cut taxes, especially for the rich, and you'd unleash pent-up entrepreneurial dynamism that would grow the economy for all. This was music to the ears of business interests and wealthy political donors.
In 1981, Ronald Reagan made trickle-down economics, also known as "Reaganomics" or "supply-side economics," the centrepiece of his economic agenda. Reagan slashed tax rates, especially for the highest earners. The top marginal tax rate fell from 70% to 28%. Proponents promised it would jumpstart the economy and increase tax revenue, even at lower rates. Instead, budget deficits ballooned.
But Reagan's failures in trickle-down policies didn't deter Republicans from trying again—and again—and, inevitably, again.
Whenever they've held power in the last 40 years, from George W. Bush to Donald Trump, the GOP has reliably pushed more tax cuts skewed toward the wealthy. The names change - the Bush and the Trump tax cuts - but the essential policy remains the same. The rich get a windfall while everyone else gets empty promises and a growing national debt. Inequality gets worse, not better.
The evidence is clear that trickle-down economics doesn't deliver broad-based prosperity and, in many cases, does the opposite. Studies have repeatedly shown that tax cuts for the rich don't boost economic growth or create jobs in any meaningful way. Instead, they exacerbate income and wealth inequality.
Take the massive tax cuts engineered by Trump and Republicans in 2017. Passed on a party-line vote, the Tax Cuts and Jobs Act slashed the corporate tax rate from 35% to 21% and included other giveaways to the rich. Analyses showed that over 80% of the benefits flowed to the top 1%. Republicans insisted, as usual, that the tax cuts would pay for themselves through explosive economic growth. They didn't. Growth remained modest while deficits surged.
The fallacy at the heart of trickle-down economics is the notion that making the rich richer will somehow benefit everyone else. But in a country as unequal as the United States, where so much wealth is concentrated at the top, that simply doesn't happen. The rising tide does not, in fact, lift all boats. Instead, yachts rise while many other boats spring leaks or sink.
By 2023, wealth inequality in the United States should have been impossible to ignore, with the top 10% of households holding a staggering 66.9% of total household wealth, while in contrast, the bottom 50% of households held a mere 2.5%. CEO pay has skyrocketed in recent decades while worker pay has stagnated. Families struggle with the rising costs of housing, healthcare, and education. All the while, repeated rounds of tax cuts make the rich even richer. It's a vicious cycle of growing inequality.
In reality, trickle-down economics is just a thinly veiled rationale for the age-old practice of favouring the interests of elites. Wealthy interests fund a sprawling ecosystem of politicians, think tanks, lobbying groups, and media outlets to promote these policies. Money influences politics, which in turn further rigs the economic system to benefit those at the top. It's a self-reinforcing feedback loop.
Trickle-down economics is a bankrupt theory, a sleight of hand that has never delivered on its grand promises. For decades, America has conducted a real-world experiment testing this theory. The results are in, and they are conclusive. Making the rich richer does not create prosperity for all. Instead, it pulls the ladder up behind them.
The path to broad prosperity isn't trickle-down but what Jacob Hacker and Paul Pierson call "middle-out economics." Investments that grow and secure the middle class don't just help individual families. They create a positive feedback loop of consumer demand and economic stability that generates more sustainable and equitable growth than simply inflating the bank accounts of the rich.
The rich will always have an outsized influence on the political system despite the principle of one person, one vote. They will always advocate for policies that benefit their interests, even when they leave everyone else worse off. It's up to the rest of us to see through the propaganda and recognize that another round of tax cuts won't secure our future.
In the wake of the 2022 Ohio Senate race, Republican candidate and conservative darling JD Vance embraced rhetoric and policies reminiscent of the trickle-down mindset. A venture capitalist and author of the bestselling memoir Hillbilly Elegy, Vance positioned himself as a populist fighting for the working class. But his actual economic proposals, support from and to wealthy donors, and his subservience to Trump, the billionaire serving billionaires, told a different story.
Vance supported further tax cuts skewed toward corporations and the wealthy, arguing they would stimulate growth that would eventually reach workers. He called for dramatic deregulation to unshackle business. These ideas were straight out of the trickle-down playbook of the past 40 years. Vance may have had a compelling personal story, but his policies will inevitably further enrich elites at the expense of the working-class communities he claims to champion.
His election is evidence that the trickle-down myth still holds sway over conservative politics, even as its crusaders don a populist, profiteering veneer. But we shouldn't be fooled. Vance is simply the latest avatar of a failed economic doctrine, now cloaked in the power and platform of a U.S. Senator, peddling the same empty promises of prosperity trickling down from on high.
We've spent 40 years waiting for the benefits of trickle-down economics to materialize. It's time to admit that this experiment has failed and chart a different course that builds the economy from the middle out and creates opportunity and prosperity for as many people as possible. Trickle-down economics never really worked, and doubling down on it now won't change that. We can do better. Anyone could do better than this.
