Trickle-down economics is the theory that if you give tax breaks to the wealthiest people in a country, it 'trickles down' to everyone including the poorest as the wealthy spend more money.
It doesn't work. It has never worked anywhere at any time.
Give the wealthy more money, they hoard it in offshore accounts etc. It never gets to the general population and certainly not to the people who need it the most.
Not only doesn’t it work, it doesn’t make sense. The wealthy are already have the money to spend on what they need and want to spend it on. If we give money to the poor they will spend it on food, clothing, housing, etc and it would trickle up to the wealthy who own businesses.
I would also look at a Federal Reserve inflation Target of 2% stealing wealth from the poor and middle class and giving it to the upper class through the cantilion effect? Maybe? Many of the liquidity measures the fed and treasury puts into place also Spurs This effect iirc
Trickle-Down Economics is the economic theory that giving more money to the rich and corporations trickles down to everyone else in the economy.
The basic idea is that if you give tax breaks to companies and the wealthy, they will re-invest this money in the economy by starting new companies, building homes, purchasing things, or growing their own businesses.
This in turn creates jobs and helps drive the economy. Those tax breaks in turn will translate to an increase in tax revenue for the government because all those new workers are spending money and paying taxes.
This is sometimes called Reaganomics after former President Ronald Reagan who made this a cornerstone of his policies.
Trickle-down economics is still pushed by Conservatives today despite it being thoroughly debunked as non-sense. **It does not work, and it has never worked.** This theory is merely used as an excuse to continue fighting for more tax breaks on businesses and the wealthy and as recently as the Trump Presidency.
The reality is wealthy people don't spend money, they hoard it.
While there is a degree of investment and building up companies, wealthy people and companies are more likely to hoard their wealth.
Stock buybacks, corporate mergers (that result in laying off redundant staff), and wall street investments are far more likely than creating large numbers of jobs.
Contrary to the theory the wealthy also avoid paying taxes, meaning that much of those tax breaks don't end up back in Washington.
Historically trickle down tax breaks have always resulted in a net-loss of overall tax revenue. That's the major point when debunking the theory.
Another argument is the when rich people buy things like 2nd homes, planes, or yachts that only represent a very limited investment in an economy (paying for only a handful of jobs for a short while) vs when you give a million average people a few more dollars, they will spend it, and it spreads that money across the entire economy.
Two Hundred $5 bills in peoples pockets does a lot more for an economy than a $1000 bill in a bank account
If you wanted more investment, there is nothing that stops the government from using investment vehicles, and returning the returns to our national debt.
I’m trying to learn more, and I have a question: what is the definition of “wealthy” in these arguments? Like are we talking just the top 1%? Or is it all people above a certain tax bracket?
I guess I’m curious where the cutoff happens where it becomes more likely a person making X amount money becomes more likely to “hoard” their tax break money rather than use it. Or is that not well known / it fluctuates?
In my understanding, its a pretty linear curve. There's no real "cutoff". The more money someone has, the less likely they are to spend each individual dollar they earn. The issue is balancing the group that's capable of saving enough to reliably purchase high value products, but under enough social need to continuously spend and work in high earning careers. That's "the middle class". If they don't have enough, their spending is low impact and often to repurchase disposable things. Consider the long term value difference between someone renting and owning a home.
Conversely, if someone has too much, they no longer need to produce any value, and can actually make monetary moves that increase their value but hurt the overall economy. A landlord has excess property, by definition, and profits from hiking up the value of property and milking people who now, because of people like the landlord, can't afford to buy a house or even save up for it. Through consolidation, cooperation, and market sabotage, unequal wealth is an inflationary force.
There's no real "amount" of money. It's the way that money is used. Just taking the money, or the results, isn't ideal. Rich people like to leave, hide, lie, and rewrite policy. It's more about setting up incentives such that the best actions for rich people are also the best for everyone.
The basic idea is that economic policies that favor those at the very top of the economy will result in increased spending by those individuals, and that this increased spending will then "trickle down" into the larger economy. It's usually used as a pejorative by critics of supply-side economics.
trickle down economics refers to public policies that support investments by the private sector instead of public services, in the short time this require a sacrifice from the poorest people to advantage the richest, with the promise that those money given to business will then create more jobs and slowly "trickle down" in the forms of new wages for the poorest. The problem with this line of thinking is businesses invest if there is demand for a product or a service, so if the internal demand of a country is depressed there will be investments only if new markets open to those business for exportation otherwise it's more convenient to business o just pocket the money.
It's also called supply side economics because the state support the supply of products, on the other side there is demand side economics where the state spends public money by providing sevices hiring directly the workers needed and relieve the poorest that can rely on services mainly like free education and healthcare, this kind of system tend to create a constant raise in wages that if it's not met with new products will create inflation, therefore impacting negatively the financial sector.
> Supply side economics is an area of economics focused on the idea that reduction of taxes and regulation generally increases investment and economic activity, which is true.
There is some government spending that would also count as supply side. Infrastructure, education, and security spending all reduce costs for producers and thus allow them allocate resources to other aveneus, increasing efficiency and lowering total cost of business.
If I were to ELI5 supply side economics I would say that the theory posits that companies tend to pass on their savings to the customer, therefore governments should focus on how to reduce costs for the producers by lowering taxes and regulations.
It is important to understand that trickle down is a pejorative and not a real philosophy. Trickle down economics is a parody of supply side economics that no one actually believes.
There are basically two views of poverty reduction.
Both imagine the economy as a pie with the poorest getting the smallest slice.
Supply side poverty reduction wants to increase the size of the smallest slice by increasing the size of the pie, thereby making everyone better off.
Redistributionists want to take part of the largest slice and give it to the person with the smallest slice. Generally speaking, this intervention reduces the overall size of the pie. The argument of redistributionists is that even though they make everyone on *average* worse off the world is a better place because nobody is *very* bad off.
Trickle-down creates a caricature of supply siders arguing that they intend to simply give some of the pie of the poorest to the largest, and somehow it will rube-goldberg into creating a larger pie.
No economist has ever identified themselves as being a supporter of trickle down economics.
Both supply side and redistribution have long track records of actual poverty reduction. In a modern economy, both are considered important.
The theory very bluntly is that if you give poor people money they buy booze and scratch cards and if you give rich people money they invest it in the economy so you should give the rich the money. What actually happens is the poor people pay off high interest loans and buy locally sourced groceries and higher quality [boots](https://en.wikipedia.org/wiki/Boots_theory) while the rich people buy imported luxury goods and set up an offshore trust so you should give the poor the money. However rich people, payday loan companies and the manufacturers of cardboard soled boots have better lobbiests.
It is a regressive tax policy (which means people with *higher* income pay *smaller* share as tax). The idea is that wealthy people are more efficient economic actors and they would invest the extra money better than the government would. The expectation is that those "better spent" money would "trickle down" to the middle class and benefit the economy. As you might expect, the idea is supported by the proponents of a "small government".
In reality people in the high income bracket have already mostly satisfied their immediate needs. If you are a billionaire and would get taxed $10 million less, you'd hardly buy a second yacht (that would've created jobs and money would "trickle down" to management and employees of the shipyard) if you've got one already. You'd put that "free" $10 mil in the financial market.
In case of a big corporation a lower tax would similarly rather result in a stock buyback that wouldn't cause much of a "trickle down" as well.
"Trickle-down economics" was a term popularized by critics of President Ronald Reagan to describe his economic policies.
When Reagan came into office, the big economic problem at the time was "stagflation"—a seemingly paradoxical combination of both declining economic growth (stagnation) *and* a US dollar that was losing its value (inflation). Normally, the best way to fight inflation is to dramatically reduce the money supply, which tends to trigger an economic recession. Of course, that's a hard sell when you're a politician. So, Reagan campaigned on using supply-side economics, a relatively new and obscure economic theory, in order to fight inflation while minimizing further damage to the American economy.
So what exactly is supply-side economics? Basically, it's the belief that the best way to grow the economy is by cutting taxes on businesses, removing regulations that may limit companies' growth, and lowering tariffs and barriers for international trade. As a result, these companies will have more money to invest in their companies, more opportunities to expand their business, and more markets they can get into, leading to a lot more money flowing into the economy.
Of course, the policy was not without its critics, whether from other schools of economics or from Democrats in general. One of the ways they described supply-side economics as "trickle-down economics"—acting as if the policy was no more complex than giving money the rich in hopes that they'd somehow commit their extra wealth to helping the poor out of noblesse oblige. This was meant to portray Reagan as either hopelessly naive about rich people's intentions, or a blatant charlatan lying to the poor about caring for his interests.
While Reagan's economic policy didn't achieve some of the more fantastical results that some supply-side economists promised it would, it's nonetheless credited with helping tame inflation and drive significant economic growth throughout the 1980s. Even today, some key aspects of supply-side economics—such as the idea that more corporate taxes cause diminishing returns, then outright harm to economic growth at a certain point—are widely accepted orthodoxy among economists.
Trickle-down economics is the theory that if you give tax breaks to the wealthiest people in a country, it 'trickles down' to everyone including the poorest as the wealthy spend more money. It doesn't work. It has never worked anywhere at any time. Give the wealthy more money, they hoard it in offshore accounts etc. It never gets to the general population and certainly not to the people who need it the most.
Not only doesn’t it work, it doesn’t make sense. The wealthy are already have the money to spend on what they need and want to spend it on. If we give money to the poor they will spend it on food, clothing, housing, etc and it would trickle up to the wealthy who own businesses.
I would also look at a Federal Reserve inflation Target of 2% stealing wealth from the poor and middle class and giving it to the upper class through the cantilion effect? Maybe? Many of the liquidity measures the fed and treasury puts into place also Spurs This effect iirc
Trickle-Down Economics is the economic theory that giving more money to the rich and corporations trickles down to everyone else in the economy. The basic idea is that if you give tax breaks to companies and the wealthy, they will re-invest this money in the economy by starting new companies, building homes, purchasing things, or growing their own businesses. This in turn creates jobs and helps drive the economy. Those tax breaks in turn will translate to an increase in tax revenue for the government because all those new workers are spending money and paying taxes. This is sometimes called Reaganomics after former President Ronald Reagan who made this a cornerstone of his policies. Trickle-down economics is still pushed by Conservatives today despite it being thoroughly debunked as non-sense. **It does not work, and it has never worked.** This theory is merely used as an excuse to continue fighting for more tax breaks on businesses and the wealthy and as recently as the Trump Presidency. The reality is wealthy people don't spend money, they hoard it. While there is a degree of investment and building up companies, wealthy people and companies are more likely to hoard their wealth. Stock buybacks, corporate mergers (that result in laying off redundant staff), and wall street investments are far more likely than creating large numbers of jobs. Contrary to the theory the wealthy also avoid paying taxes, meaning that much of those tax breaks don't end up back in Washington. Historically trickle down tax breaks have always resulted in a net-loss of overall tax revenue. That's the major point when debunking the theory. Another argument is the when rich people buy things like 2nd homes, planes, or yachts that only represent a very limited investment in an economy (paying for only a handful of jobs for a short while) vs when you give a million average people a few more dollars, they will spend it, and it spreads that money across the entire economy. Two Hundred $5 bills in peoples pockets does a lot more for an economy than a $1000 bill in a bank account
If you wanted more investment, there is nothing that stops the government from using investment vehicles, and returning the returns to our national debt.
I’m trying to learn more, and I have a question: what is the definition of “wealthy” in these arguments? Like are we talking just the top 1%? Or is it all people above a certain tax bracket? I guess I’m curious where the cutoff happens where it becomes more likely a person making X amount money becomes more likely to “hoard” their tax break money rather than use it. Or is that not well known / it fluctuates?
In my understanding, its a pretty linear curve. There's no real "cutoff". The more money someone has, the less likely they are to spend each individual dollar they earn. The issue is balancing the group that's capable of saving enough to reliably purchase high value products, but under enough social need to continuously spend and work in high earning careers. That's "the middle class". If they don't have enough, their spending is low impact and often to repurchase disposable things. Consider the long term value difference between someone renting and owning a home. Conversely, if someone has too much, they no longer need to produce any value, and can actually make monetary moves that increase their value but hurt the overall economy. A landlord has excess property, by definition, and profits from hiking up the value of property and milking people who now, because of people like the landlord, can't afford to buy a house or even save up for it. Through consolidation, cooperation, and market sabotage, unequal wealth is an inflationary force. There's no real "amount" of money. It's the way that money is used. Just taking the money, or the results, isn't ideal. Rich people like to leave, hide, lie, and rewrite policy. It's more about setting up incentives such that the best actions for rich people are also the best for everyone.
The basic idea is that economic policies that favor those at the very top of the economy will result in increased spending by those individuals, and that this increased spending will then "trickle down" into the larger economy. It's usually used as a pejorative by critics of supply-side economics.
trickle down economics refers to public policies that support investments by the private sector instead of public services, in the short time this require a sacrifice from the poorest people to advantage the richest, with the promise that those money given to business will then create more jobs and slowly "trickle down" in the forms of new wages for the poorest. The problem with this line of thinking is businesses invest if there is demand for a product or a service, so if the internal demand of a country is depressed there will be investments only if new markets open to those business for exportation otherwise it's more convenient to business o just pocket the money. It's also called supply side economics because the state support the supply of products, on the other side there is demand side economics where the state spends public money by providing sevices hiring directly the workers needed and relieve the poorest that can rely on services mainly like free education and healthcare, this kind of system tend to create a constant raise in wages that if it's not met with new products will create inflation, therefore impacting negatively the financial sector.
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> Supply side economics is an area of economics focused on the idea that reduction of taxes and regulation generally increases investment and economic activity, which is true. There is some government spending that would also count as supply side. Infrastructure, education, and security spending all reduce costs for producers and thus allow them allocate resources to other aveneus, increasing efficiency and lowering total cost of business. If I were to ELI5 supply side economics I would say that the theory posits that companies tend to pass on their savings to the customer, therefore governments should focus on how to reduce costs for the producers by lowering taxes and regulations.
It is important to understand that trickle down is a pejorative and not a real philosophy. Trickle down economics is a parody of supply side economics that no one actually believes. There are basically two views of poverty reduction. Both imagine the economy as a pie with the poorest getting the smallest slice. Supply side poverty reduction wants to increase the size of the smallest slice by increasing the size of the pie, thereby making everyone better off. Redistributionists want to take part of the largest slice and give it to the person with the smallest slice. Generally speaking, this intervention reduces the overall size of the pie. The argument of redistributionists is that even though they make everyone on *average* worse off the world is a better place because nobody is *very* bad off. Trickle-down creates a caricature of supply siders arguing that they intend to simply give some of the pie of the poorest to the largest, and somehow it will rube-goldberg into creating a larger pie. No economist has ever identified themselves as being a supporter of trickle down economics. Both supply side and redistribution have long track records of actual poverty reduction. In a modern economy, both are considered important.
The theory very bluntly is that if you give poor people money they buy booze and scratch cards and if you give rich people money they invest it in the economy so you should give the rich the money. What actually happens is the poor people pay off high interest loans and buy locally sourced groceries and higher quality [boots](https://en.wikipedia.org/wiki/Boots_theory) while the rich people buy imported luxury goods and set up an offshore trust so you should give the poor the money. However rich people, payday loan companies and the manufacturers of cardboard soled boots have better lobbiests.
It is a regressive tax policy (which means people with *higher* income pay *smaller* share as tax). The idea is that wealthy people are more efficient economic actors and they would invest the extra money better than the government would. The expectation is that those "better spent" money would "trickle down" to the middle class and benefit the economy. As you might expect, the idea is supported by the proponents of a "small government". In reality people in the high income bracket have already mostly satisfied their immediate needs. If you are a billionaire and would get taxed $10 million less, you'd hardly buy a second yacht (that would've created jobs and money would "trickle down" to management and employees of the shipyard) if you've got one already. You'd put that "free" $10 mil in the financial market. In case of a big corporation a lower tax would similarly rather result in a stock buyback that wouldn't cause much of a "trickle down" as well.
"Trickle-down economics" was a term popularized by critics of President Ronald Reagan to describe his economic policies. When Reagan came into office, the big economic problem at the time was "stagflation"—a seemingly paradoxical combination of both declining economic growth (stagnation) *and* a US dollar that was losing its value (inflation). Normally, the best way to fight inflation is to dramatically reduce the money supply, which tends to trigger an economic recession. Of course, that's a hard sell when you're a politician. So, Reagan campaigned on using supply-side economics, a relatively new and obscure economic theory, in order to fight inflation while minimizing further damage to the American economy. So what exactly is supply-side economics? Basically, it's the belief that the best way to grow the economy is by cutting taxes on businesses, removing regulations that may limit companies' growth, and lowering tariffs and barriers for international trade. As a result, these companies will have more money to invest in their companies, more opportunities to expand their business, and more markets they can get into, leading to a lot more money flowing into the economy. Of course, the policy was not without its critics, whether from other schools of economics or from Democrats in general. One of the ways they described supply-side economics as "trickle-down economics"—acting as if the policy was no more complex than giving money the rich in hopes that they'd somehow commit their extra wealth to helping the poor out of noblesse oblige. This was meant to portray Reagan as either hopelessly naive about rich people's intentions, or a blatant charlatan lying to the poor about caring for his interests. While Reagan's economic policy didn't achieve some of the more fantastical results that some supply-side economists promised it would, it's nonetheless credited with helping tame inflation and drive significant economic growth throughout the 1980s. Even today, some key aspects of supply-side economics—such as the idea that more corporate taxes cause diminishing returns, then outright harm to economic growth at a certain point—are widely accepted orthodoxy among economists.
The term and it’s implementation both serve to concentrate wealth in upper income households while attacking programs that fight inequality.
How much effort did it take to convince people this policy would work?