Trickle-Down Economics is Officially a Hoax!

Trickle-down economics is officially a hoax. You might also know it as Voo-Doo Economics. The idea that you can just give massive tax breaks to the wealthy and because they create all value and job opportunities, it “trickle” down to the rest of the economy. Sounds like a law of nature or something, doesn’t it? This concept was first mentioned by Reagan as he completely dismantled the tax code that led to the most prosperous time in American history. It wasn’t only Reagan who was all in on helping the ultra-wealthy, the Democrats helped him pass it. We saw this same logic tested in the Bush Administration with tax cuts for the wealthy and with the lowering of the capital gains tax. One can picture these Republican ‘Noah’s’ parting the seas of hard work and adversity for these trustafarians. Get daddy’s money tax-free, throw it in the market, and watch it grow! If only there were literally zero taxes these rich people could own the majority of the wealth indefinitely in the exact manner of royalty in the old world. Oh wait, many of them, like Bezos, don’t pay any taxes already! Turns out a 50-year study of tax cuts for the wealthy revealed a shocking discovery, they never trickle-down. 

Ok, let’s not act like this was the most obvious thing ever, we still have politicians pushing it on the American public today with the Trump tax cuts. There is some logic to the argument that the wealthy are employers or owners. So in theory you could take a leap without looking closely that if you gave those employers more money, they will hire more workers and spend more money. This is why it is just a theory and not a factual idea, rich people do not spend the extra money like a normal person. For a working-class person struggling to make ends meet, they can think of countless ways to spend the money immediately. To the non-wealthy group of Americans, the trickle-down logic kind of makes sense because we know we would spend the money, boosting the economy, so it makes sense a rich person could do that at a more impactful rate. However the ultra-wealthy live life utterly alien to ours. They aren’t worried about making ends meet, they are just trying to save and grow their fortune. Plus if your house is paid for, you have every material thing you could want with no debt, getting $1,000,000 more won’t spur a spending spree. It’s pennies in the pile. Let’s take the $1,200 stimulus check, picture someone who makes $500,000/year as a software engineer(not even a billionaire), and then someone making $40,000/year as a server who lost their job during COVID, who do you think spent their money quicker? This is where theory butts into reality or something called the velocity of money, you check it out in-depth here. It doesn’t take a scientist to understand that the more impoverished you are the faster you would spend a stimulus check, this is the classic hierarchy of needs. 

So at its core we know the wealthy will not blow the money they are given on local businesses, what about business owners? Won’t they have more money to employ people? This again seems logical, we all seem to know a small/local business owner that we hear talking about how tough the system is on them. However, the people lobbying for these tax cuts aren’t small business owners that you know. These are large corporations, like Comcast, Amazon, Goldman Sachs, the list could go on all night. So if these large companies provide so many benefits to American society how many people did they hire after the Trump tax cuts? Well AT&T laid off a record number of employees after the tax cut to secure enough cash to purchase Time Warner, making a move away from technician services to streaming. Yet this is not AT&T’s fault, these companies do not have brains of their own sickened by greed. AT&T is forced by shareholder expectations and competition to always make more money the next quarter than you did the last. If you are the CEO and your sole purpose is to be more profitable every quarter, naturally you are going to hire the absolute minimum amount of employees to get the job done. Then imagine that Comcast comes up with some new logistical product that allows them to do installs with half the human technicians as AT&T allowing them to drop their prices. AT&T will have to cut the same amount of workers or go out of business. Pair this with automation and we have drag race to the bottom, who can be the first company with no employees, all profit. We are already seeing this today with the business model of the future, Gig-workers. They aren’t employees, you just get to absorb the majority of their production value with zero risks, a capitalist wet dream. 

So if you are some kind of billionaire that actually wants the system to flourish and see your businesses explode, what would work better than tax cuts and keep the workers satisfied? Direct all of these government programs currently going to the ultra-wealthy(Elon Musk), to your customers. See this is their big mistake, workers are the primary consumers. The healthiest economies see a wide array of people with spending power. Perhaps we should propose trick-up economics? 

This is why programs like Medicare for All would be an immediate boon to the economy. Millions of Americans would spend an additional $300-$1600/month in the economy instead of it sitting stagnant in the accounts of billionaires. Perhaps it is time to rethink our priorities.

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