Trickle-down economics
| Part of the behavioral sciences |
| Economics |
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Trickle-down economics, also known as the horse-and-sparrow theory,[1] describes government economic policies that disproportionately favor the upper tier of the economic spectrum (wealthy individuals and large corporations). The term has been used broadly by critics of supply-side economics to refer to taxing and spending policies by governments that, intentionally or not, result in widening income inequality; it has also been used in critical references to neoliberalism.[2] These critics reject the notion that spending by this elite group would "trickle down" to those who are less fortunate and lead to economic growth that will eventually benefit the economy as a whole.[3]
While criticisms have existed since at least the 19th century, the term "trickle-down economics" was popularized by Democrats in the US to derogate Reaganomics and its reduction in the top marginal tax rates.[4]
Major examples of what critics have called "trickle-down economics" in the US include the Reagan tax cuts,[5] the Bush tax cuts, and in UK include Margaret Thatcher's economic policies in the 1980s and Liz Truss's mini-budget tax cuts of 2022.[6][7]
- ^ Duerringer, C. M. (2019). Class Structure and the Movement of Capital: The Rhetoric of Supply Side Economics https://rwsgradexam.pbworks.com/w/file/fetch/138387093/DuerringerRhet_TrickleDown%20Econ.pdf
- ^ Springer, Simon; Birch, Kean; MacLeavy, Julie (July 7, 2016). Handbook of Neoliberalism. Routledge. ISBN 978-1-317-54966-6.
- ^ Lockwood, Benjamin; Gomes, Joao; Smetters, Kent; Inman, Robert. "Does Trickle-down Economics Add Up – or Is It a Drop in the Bucket?". Knowledge at Wharton. A business journal from the Wharton School of the University of Pennsylvania. Archived from the original on February 1, 2023. Retrieved February 1, 2023.
Kent Smetters, Wharton professor of business economics and public policy, says that trickle-down economics is a term created to disparage supply-side economics. ... Many others have pointed out the folly of using the term — that no real economic model or serious school of thought stands behind what has long been a term of art at the intersection of politics and media. Part of the problem is that "trickle down" lacks a universally understood meaning. Smetters says the idea of tax breaks for the rich eventually producing benefits to the poor has never been part of supply-side economics.
- ^ Noah, Timothy (September 21, 2011). "New Republic: How Did Trickle-Down Get Acceptable?". NPR. Retrieved January 15, 2024.
q=In 1981, when President Ronald Reagan lowered marginal tax rates, his main purpose was to drop the top rate from 70 percent to 50 percent ... But it was important not to admit as much, because that would be "trickle-down economics." That was the derisive term Democrats attached to Reaganomics.
- ^ Redenius, Charles (April 1983). "Thatcherism and Reagonomics: Supply-Side Economic Policy in Great Britain and the United States". Journal of Political Science. 10 (2, Article 4). The Athenaeum Press. ISSN 0098-4612. Archived from the original on December 2, 2022. Retrieved February 9, 2023.
- ^ Cite error: The named reference
lis truss favourswas invoked but never defined (see the help page). - ^ Schomberg, William (September 7, 2022). "UK heads for return to 'trickle-down' economics under low-tax Truss". Reuters. Retrieved January 15, 2025.