Will Trump’s ‘trickle-down’ work? Don’t bet on it.
Have you heard the old saying that goes “Fool me once, shame on you – fool me twice, shame on me?”
Well, it seems like we Americans like to be fooled over and over again without feeling ashamed at all. An example of this is how many of us have embraced the massive tax cuts that President Trump pushed through Congress in 2017.
The rationale for the Trump cuts is based on what many call “trickle-down” economics. The idea is that the cuts will inject more money into the economy and that this boon will trickle down to corporations and then to workers in form of higher profits, more jobs, higher wages and more buying power. In turn, the government would supposedly collect enough tax revenue from the expanded economy to make up for revenue it lost. Trouble is, trickle-down has been a spectacular failure throughout U.S. history.
For example, in the 1920s, Republican Presidents Warren G. Harding, Calvin Coolidge and Herbert Hoover significantly cut corporate and individual income tax rates. The nation was enjoying a technology and manufacturing boom after World War I that launched the Roaring Twenties, an era of soaring optimism that the boom would continue indefinitely. The use of credit exploded and people began a buying frenzy with money they didn’t have. Unregulated banks and brokers made risky loans to Americans clamoring to speculate in land and stocks and who often invested only a small fraction of their own money and borrowed the rest. The stock market hit record highs as demand for shares skyrocketed, causing share prices to far surpass the value of many companies.
But, as business cycles inevitably do, the economy cooled and fragile consumer confidence plummeted, stock values tanked, borrowers couldn’t repay their loans, banks failed, companies went out of business and the stock market crashed in 1929. It ushered in the Great Depression, a disastrous decade of crushingly high unemployment and economic misery. Clearly, the tax-cutting, anything-for-business stimulation policies of Harding, Coolidge and Hoover, while producing a short term illusion of prosperity and the loyalty of voters, failed miserably.
Ronald Reagan was the next president to try trickle-down. Bruce Bartlett, a key designer of Reagan’s 1981 tax cuts, wrote in a September 2019 article for the Washington Post that trickle-down, in hindsight, doesn’t work. He said “There’s no evidence that a tax cut now would spur growth” and that the 1981 tax cuts “brought [only] about half of that [revenue] back.”
President George W. Bush tried his hand at trickle-down, implemented in 2001. In an April 2017 article in the New York Times, N. Gregory Mankiw, who was chairman of Bush’s President’s Council of Economic Advisors, acknowledged, again in hindsight, that “A reasonable rule of thumb … is that [only] about one-third of the cost of tax cuts is recouped via faster economic growth.”
Far right Republican Sam Brownback was elected governor of Kansas by a wide margin in 2010 after promising voters that deep tax cuts would spur robust economic growth and raise government revenues. His trickle-down experiment was a fiasco. Kansas took in hundreds of millions of dollars less in revenue every year. By 2014, the shortfall was $700 million more than the previous year. Brownback’s once-loyal Republican legislature rebelled and overrode his veto of a bill that reversed many of his tax cuts.
So here we are again with Trump and his minions boasting how their tax cuts have created a trickle-down nirvana. It brings to mind a line from a venerable old folk song that goes “When will we ever learn?”
Larry Alan Brown, Alpine
United Utah Party