A Well Deserved Death for Trickle-Down
Bob Williams
April 18, 2007
Trickle-down economics is the informal name of a misbegotten economic theory whose proponents preferred calling it supply-side economics; some called it Reaganomics. The supply-side idea is that the government should structure taxes to reward the corporations and the wealthy more than before. This should provide the wealthy more capital to invest. This should in turn stimulate the economy and produce more employment for working people; the wealth should trickle-down.
I was sitting near the space heater of a squad tent in Korea in the winter of ’53 – ’54, reading a copy of Stars and Stripes when I came across a great cartoon. It showed a two-story outhouse; the upper door labeled “Officers”, the lower door labeled “Enlisted Men”. I always remember that cartoon when I hear of the trickle-down theory.
David Stockman, Ronald Reagan’s budget director, avoided the phrase ‘trickle-down economics’. He promoted the term ‘supply-side economics’ and strongly promoted its practice during the Reagan years. Economic inequalities increased. This is the same David Stockman indicted for bank fraud, securities fraud, wire fraud and obstruction only a week ago. Promoting trickle-down was regrettably not an indictable offense, and the practice continues under the present Bush administration though Bush and his congressional allies avoid saying either trickle-down or supply-side economics.
Even though George W. Bush does not justify his tax cuts with ‘supply-side economics’ or ‘trickle-down’ the strategy is the same. The very wealthy were enjoying hefty tax cuts before 2006, at which time two major tax cuts packages, enacted in 2001 began to come into effect. Fifty-four percent of these tax cuts go to 0.2 percent of households, those with annual incomes of more than $1 million a year. Approximately 97 percent of the tax cuts go to the four percent of households with incomes that exceed $200,000 a year.
Is this largess, provided to wealthy corporations and wealthy individuals, the rising tide that raises all boats? Hardly. Well-analyzed national statistics are always one or two or more years behind times but some results have come in. The McClatchy Newspapers presented their analysis of the most recent available census data, from 2005, and found: “nearly 16 million Americans are living in deep or severe poverty. A family of four with two children and an annual income of less than $9,903 half the federal poverty line was considered severely poor in 2005. So were individuals who made less than $5,080 a year. . . . severely poor Americans grew by 26 percent from 2000 to 2005. That's 56 percent faster than the overall poverty population grew in the same period.” They also found that this was not just urban poverty, but also suburban and rural.
Last year, for the first time in several years, real income of average Americans increased slightly and child tax credits helped. But the income gap between top and bottom continued to widen. Professors Saez of UC Berkeley and Piketty of the Paris School of Economics recently presented their analysis of IRS data. They found that, “the top1 percent received 21.8 percent of all reported income in 2005, up significantly from 19.8 percent the year before and more than double their share of income in 1980. The peak was in 1928, when the top 1 percent reported 23.9 percent of all income.” And this is an underestimate of the growing disparity since, as they say, “the Internal Revenue Service estimates that it is able to accurately tax 99 percent of wage income but that it captures only about 70 percent of business and investment income, most of which flows to upper income individuals, because not everybody accurately reports such figures.”
It is clear that tax cuts for the wealthy, and the wealthy corporations, have not produced an economically healthier society. The proportion of extremely poor has grown as the very wealthy become wealthier. Those of us in the middle hang in there well enough but this is not the kind of society we think of when we think of the promise of America.
The effects of Bush’s tax cuts have widened economic gaps between people and lessened opportunities. We now have 37 million living in poverty. Those in extreme poverty are the fastest growing group in our society. There is no gold at the end of the rainbow for these people. The only gold that trickles down to them is the golden rain from a two-story outhouse.
I was sitting near the space heater of a squad tent in Korea in the winter of ’53 – ’54, reading a copy of Stars and Stripes when I came across a great cartoon. It showed a two-story outhouse; the upper door labeled “Officers”, the lower door labeled “Enlisted Men”. I always remember that cartoon when I hear of the trickle-down theory.
David Stockman, Ronald Reagan’s budget director, avoided the phrase ‘trickle-down economics’. He promoted the term ‘supply-side economics’ and strongly promoted its practice during the Reagan years. Economic inequalities increased. This is the same David Stockman indicted for bank fraud, securities fraud, wire fraud and obstruction only a week ago. Promoting trickle-down was regrettably not an indictable offense, and the practice continues under the present Bush administration though Bush and his congressional allies avoid saying either trickle-down or supply-side economics.
Even though George W. Bush does not justify his tax cuts with ‘supply-side economics’ or ‘trickle-down’ the strategy is the same. The very wealthy were enjoying hefty tax cuts before 2006, at which time two major tax cuts packages, enacted in 2001 began to come into effect. Fifty-four percent of these tax cuts go to 0.2 percent of households, those with annual incomes of more than $1 million a year. Approximately 97 percent of the tax cuts go to the four percent of households with incomes that exceed $200,000 a year.
Is this largess, provided to wealthy corporations and wealthy individuals, the rising tide that raises all boats? Hardly. Well-analyzed national statistics are always one or two or more years behind times but some results have come in. The McClatchy Newspapers presented their analysis of the most recent available census data, from 2005, and found: “nearly 16 million Americans are living in deep or severe poverty. A family of four with two children and an annual income of less than $9,903 half the federal poverty line was considered severely poor in 2005. So were individuals who made less than $5,080 a year. . . . severely poor Americans grew by 26 percent from 2000 to 2005. That's 56 percent faster than the overall poverty population grew in the same period.” They also found that this was not just urban poverty, but also suburban and rural.
Last year, for the first time in several years, real income of average Americans increased slightly and child tax credits helped. But the income gap between top and bottom continued to widen. Professors Saez of UC Berkeley and Piketty of the Paris School of Economics recently presented their analysis of IRS data. They found that, “the top1 percent received 21.8 percent of all reported income in 2005, up significantly from 19.8 percent the year before and more than double their share of income in 1980. The peak was in 1928, when the top 1 percent reported 23.9 percent of all income.” And this is an underestimate of the growing disparity since, as they say, “the Internal Revenue Service estimates that it is able to accurately tax 99 percent of wage income but that it captures only about 70 percent of business and investment income, most of which flows to upper income individuals, because not everybody accurately reports such figures.”
It is clear that tax cuts for the wealthy, and the wealthy corporations, have not produced an economically healthier society. The proportion of extremely poor has grown as the very wealthy become wealthier. Those of us in the middle hang in there well enough but this is not the kind of society we think of when we think of the promise of America.
The effects of Bush’s tax cuts have widened economic gaps between people and lessened opportunities. We now have 37 million living in poverty. Those in extreme poverty are the fastest growing group in our society. There is no gold at the end of the rainbow for these people. The only gold that trickles down to them is the golden rain from a two-story outhouse.
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