It was devised by Democrats in the 1980s as a way to attack President Reagan’s economic policy combination of tax rate cuts and some relaxation of federal regulations. They needed a catchy, easy-to-remember zinger to fire at Reagan; a line that would keep their voting base angry.
Sneering that Reagan’s policies amounted to cutting taxes on the rich in hopes that some small amount of that money would eventually trickle down into the pockets of workers was perfect. It painted Reagan and other advocates of tax reduction as friends of the rich who would cruelly deprive the government of the money it needed to help the poor and middle class.
As a political slogan, it was a brilliant stroke.
The trouble is that it has led vast numbers of people into a disastrously mistaken idea about the source of prosperity – that high taxes and a growing government is the way to increase it.
True to form, Barack Obama trotted out the phrase in a speech on December 4 in front of an adoring audience: “As the trickle-down ideology became more prominent, taxes were slashed for the wealthiest while investments in things that make us all richer, like schools and infrastructure, were allowed to wither.” …
… In a free society, wealth doesn’t trickle down, or up, or sideways. It is earned.
What people like Obama don’t understand or won’t admit, is that people of all economic strata, and no matter their race, religion, sex, or anything else, have far more opportunities to earn in a society with a small, efficient, frugal government than they do in a society with a huge, wasteful one.
The tax cuts during the Reagan administration somewhat increased the resources of the taxpayers, while at the same time, repeal of some regulations gave them more freedom to take advantage of opportunities for gain through exchange. The result was a large increase in production and employment. Increasing wealth did not “trickle” to anyone, but the climate of freer markets enabled many Americans to earn more. Some who had previously been poor found jobs that paid well, saved money so they’d have investment capital, and then began their own businesses. Their increased incomes were a gusher, not a trickle, and it was earned.