TRICKLE-DOWN … DOESN’T!

Historic evidence confirms what Progressives have always believed: Trickle-Down economic theory does not work. Yet, the GOP continues to base their plan for economic recovery on this discredited idea. We’ve addressed this issue multiple times in our blog, and in reviewing these articles we chose Broken Compact for a link to this post for readers who might like more on the subject. There are others, such as Voo Doo Economics, that you can find by using our search box to the right and looking under the term Trickle-Down.

It all began when the Reagan administration instituted trickle-down economic theory by drastically cutting taxes on the wealthy, in the mistaken belief that the elite upper-class would create jobs (and therefore boost the economy) in exchange for having their taxes cut. And since that time our nation has been mired in a failed economic experiment.

These drastic Reagan tax cuts (from a top marginal tax rate of 50% down to 28%) began the country’s slide into a banana-republic style of income disparity and dangerous levels of national debt. Our tax payers gave our nation’s money to the already wealthy, and the elites shipped our jobs out of the country. The rich got richer, causing our country to be starved of the funds we needed to invest in a bright future. We paid dearly for this trickle-down fiasco: we paid with our jobs, our infrastructure, our educational system, our future.

The nation’s richest 1% now takes for themselves 24% — one-quarter —of the nation’s income, way up from where it was in the 1970s when they took around 9%. Then, our infrastructure, educational system, national employment, and our future all looked bright.

The GOP clings tightly to this discredited economic theory, in spite of the historical evidence to the contrary. The main tenet of their plan to save the economy continues to be the same as it was in 1980: “lower the top marginal income tax rate” along with “eliminate capital gains tax” for the investor class (i.e. the already wealthy). Cutting taxes for the rich has been, for decades now, the GOP’s main response to any economic challenge … it’s the same old tired idea.

It’s clearly an exercise in “Magical Thinking” to believe that cutting taxes to benefit the wealthy class will create abundance for the rest of us! The main problem the GOP has with the tired repetition of this same old saw is that history does prove them wrong. Just because the GOP asserts that trickle-down works does not make it so.

Over the past sixty years the top marginal tax rate has been as high as 92% and as low as 28%. Checking the historical data should show us whether the economy and jobs grow during low marginal tax rates and if higher marginal tax rates produce a weak economy — as the GOP claims.

The facts demonstrate that economic growth was fastest in the 1950s when the top marginal tax rate was above 90% — an annual growth rate more than 4%. AND over the past 8 years, with the top tax rate at only 35%, the economic growth was anemic — less than 2%.

Over the decades the growth in the economy averaged 3.7% in the years that tax rates were at or above 50%. Conversely, growth in the years with a tax rate less than 50% averaged only 2.7% annually.

These figures absolutely discredit the trickle-down economic theory.

The President has challenged the media to ask the Republican leaders, “If you don’t like the President’s plan for a jobs-recovery, then what is YOUR plan?” If the GOP will only submit their plan in writing to address the immediate jobs crisis, as the President has done, then the same independent economists that scored the President’s jobs-recovery plan can score the GOP plan and we can have some real data to compare. Do you think there must be a reason that they don’t reveal their plan?

TRICKLE-DOWN … SIMPLY DOESN’T!