Trickle-Down Theory: It’s Still A Myth

Poor People

Image by PropagandaTimes via Flickr

The original peddlers of Supply Side Economics argued that tax cuts would defy expectations and actually increase tax revenues. They argued that it would stimulate the economy sufficiently to offset the loss of revenue. It was a trickle-down promise: give money to the wealthy and it will trickle down to the rest of us. Although this fantasy has been largely abandoned by serious economists, it is kept alive by politicians who want to convince you that transferring wealth from the poor to the rich is in your best interests.

We heard a lot last December from the Republicans about how we had better extend the Bush tax cuts for the rich in order to protect jobs in America. We now know that their success in forcing Obama to go along with this bad idea is adding $410 billion to our deficit in 2011 alone.

After exploding the size of the deficit, Republicans shifted strategy and are now sounding the alarm about our rising deficits in order to convince America to embrace Paul Ryan‘s budget plans. They claim it is the only serious and courageous proposal to tackle our rising deficit. The funny thing about his proposal is that it really doesn’t do that much to improve the deficit, but it does a lot to reduce taxes for the rich. According the The Center On Budget And Policy Priorities, based on analysis from the CBO, Ryan’s plan reduces the deficit by 380 billion between 2012 and 2021. In other words it would take the Republicans’ budget plan nine years to recover the damage their Bush extension caused in one year.

They are trying to sell Ryan’s plan as a way to get serious about the deficit, but in fact it is primarily a plan that seriously reduces government services to Americans for the sake of the most well-off. Ryan’s plan cuts government spending by over ten times as much as his plan saves.  How can that be? Most of the money from cuts in services is used to pay for tax cuts. Ryan cuts $4.5 trillion in government services but he adds $4.2 trillion in tax cuts.  In order to hand out this largess in tax cuts, America is supposed to swallow the fact that the money they have paid into Medicare will no longer be there to guarantee their healthcare when they retire. Most of Ryan’s cuts affect the average American, but most of his tax cuts benefit the wealthiest Americans.

The Republicans have successfully limited dissenting arguments against Ryan’s budget to the issue of whether his plan turns Medicare into a voucher system or not. Refusing to call his Medicare proposal a “voucher” is the Republican’s white lie. Their big lie is the claim that his plan is about deficit reduction; in truth, it is just another attempt to transfer more wealth to those who already have the most in this nation.

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  • kimi  On June 8, 2011 at 3:17 pm

    Excellant post!

  • ebiuro  On April 6, 2013 at 12:31 pm

    great post, very informative. I’m wondering why the other experts of this sector do not realize this. You must continue your writing. I’m sure, you’ve a huge readers’ base already!


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