Trickle-down economics has become a popular phrase in conservative media since their king, President Ronald Reagan, in the 1980s. The term, according to Alex Andreou at The Guardian, was actually a witty catchphrase created by the Democrats of the 1980 Presidential Race to be thrown at Reagan. Despite Reagan winning the election, the Democrats were correct in their criticism of “Reaganomics” in that the trickle-down effect does not work.
Trickle-down economics is often hotly defended by fiscal conservatives as a way to encourage free markets, increase profit margins and build an economy around supply side economics. Supply side economics essentially means that if I allow a businessman and his business more money, he will be able to create more jobs or, in economic terms, afford more “capital.” This economic jargon is typically described in the much simpler phrase, “A rising tide lifts all boats.” However, it is quite obvious that the business cycles and circular flows of this economic theory are not rising tides, despite the ironic likeness a graph of our recessions and ascensions attempt to depict.
The first measurement that reveals the unfortunate failures of trickle-down economics is a measure of the homelessness rates since the 1980s. Poverty Living’s Jason Cox reveals quite a few numbers that prove trickle-down economics to be nothing more than a trickle-down in logic. First, the number of homeless people in 1980 to 1990 more than doubled from 200,000 homeless to 500,000. By the time of post-recession in 2008 the homeless population grew to be between 2.4 million and 3.6 million, after the not so free market caused the recession of 2007. The figure of 2.4 million to 3.6 million is, after all, only a relative 1 percent of the U.S. population, and the 200,000 homeless in the beginning were less than even half a percent in 1980, according to the population listed by the U.S. Census. So, perhaps despite homelessness increasing, workers’ wages drastically increased to defend the other half of the theory?
It actually, once again, resulted in the exact opposite of what was intended. According to Drew Desilver at the PEW Research Center, while most average Americans’ purchasing power and wages have remained stagnant or even fallen, the top earners’ wages have actually increased by almost 10 percent. The report depicts this trend starting in 1964, the year President Johnson started his official “War on Poverty,” going through the Reaganomics period of the 1980s and all the way to 2014.
Trickle-down economics is a trickle-down of logic resulting from the misguided belief that if you give more money to the top earners of society they will buy more capital, create more jobs and increase the American workers’ wages. Instead, this very logic is what has kept real wages of the average earning American stagnant.