This week, the Prospect launches a new regular feature: Trickle Downers. Our aim is to expose the ongoing folly of the lie that that tax cuts for the rich, deregulation for the powerful, and wage suppression for everyone else are the polices that best create growth in capitalist economies.
Trickle down originally described tax policy, but as a general rationalization of policies that reward the rich, it also describes wages, deregulation, privatization, crony enrichment, and the rest of the right-wing fantasyland. Trickle down is merely the modern version of the oldest game in human affairs—elites enriching themselves and protecting existing status relationships. In the old days we had “divine right.” Today it’s trickle-down economics.
Keep in mind that it’s very hard for a small elite to sell the broad public on the proposition, “We’re rich, you’re poor, and we’d like to keep it that way.” The rich have learned through trial and error that claims like “tax cuts create growth” or “raising wages kills jobs” or “regulation will destroy industry” are infinitely more effective. Trickle down is best understood as a con job or an intimidation tactic, and the language of trickle downers always takes the same forms. What’s good for me is good for you, or conversely, what’s good for you is actually bad for you. “Tax cuts for the rich create growth!” Or, “increasing the minimum wage kills jobs.” Sound familiar?
What’s wrong with this theory? Well, it’s wrong. Empirically. Economically. Historically. Morally. Disproved by reams of data and any serious survey of economic history. The American economy has grown fastest when taxes were steeply progressive; workers, through their unions, were able to claim a decent share of the income their work produced; the power of finance was kept in its box; and there was adequate public investment. That describes America during the three decades following World War II—the “great” period to which Donald Trump would have us return.
It’s important to acknowledge why that is. It’s because that is how capitalism actually works. The fundamental dynamic in market economies is the feedback loop between consumers and businesses. When workers earn more, businesses make more and then hire more. And the investments made possible by progressive taxation fuel and enable that dynamic. A thriving middle class isn’t the consequence of growth. A thriving middle class causes growth in modern market economies.
Trump and his fellow Republicans insist, however, that the way to rebuild that greatness is through trickle-down economics: Showering the rich with massive tax cuts. Deregulating powerful corporations and industries. Repressing wages by opposing higher labor standards and the mechanisms of worker power.
Trickle down is a justification not only for redistribution—upward, of course—but also for pre-distribution. It’s a theory that justifies high profits, stratospheric executive salaries, and maximized shareholder value at the expense of wages, research, and development. It’s a theory that justifies deregulating business and finance, so that companies, in the name of maximizing profits, can avoid responsibilities to their communities, customers, the environment, and the broader economy
Despite the fact that the nation’s economy has grown more slowly under Republican presidents, who have made taxes less progressive and deregulated business, than under Democrats, who made the rich pay a fairer share and enacted regulations for the general good, trickle down is with us still. Both Trump and House Speaker Paul Ryan, for instance, support eliminating the estate tax, which places a levy on estates in excess of $10.9 million—that is, on fewer than 5,000 estates each year—at an estimated cost to federal revenues of roughly $270 billion per decade. That’s $270 billion that could go to doing things that actually create growth-building roads and airports, creating serious vocational education programs, putting money in communities where it would support local businesses. If Trump and Ryan get their way, however, it would go to the already wealthy, to invest in ventures abroad, in financial swaps, in second (and third and fourth) homes in distant lands.
It’s proposals like that that we’ll be holding up to scrutiny—and some justifiable ridicule—in Trickle Downers. This is the place where you’ll find policy dissection, economic analysis, historical context, well-deserved snark, and a loud Bronx cheer. You’ll find short takes and longer takes. You’ll find whatever it takes to drive a stake through the heart of this intellectually bankrupt doctrine that, at the behest of the greedy and their helpmates, still stalks the land. Because the most corrosive and damaging thing about trickle-down economics isn’t the assertion that if the rich get richer, that’s good for the economy. It’s that when the poor and the middle class get richer, that’s bad for the economy.
If there is one thing that we can be very sure of, it is that the elite in human societies will not stop trying to protect their interests; that’s why trickle down economics, or some future alternative, will be with us for a long time. The trickle-down advocates don’t make their claims because they are true. They make them because they are effective negotiating strategies for defending the status quo. We can’t stop that. But the Prospect can do its part to teach citizens to see trickle down for what it is. Our goal is to inoculate Americans against these pernicious ideas.
Our colleague Justin Miller will coordinate this new regular feature, and various Prospect editors and writers will contribute to it. You can find all of our Trickle Downer pieces in a clickable box on our homepage, just below the photo of the magazine.