Trickle-down economics

Trickle-down economics, also known as the horse and sparrow theory^[1]^[2], is a pejorative term for 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.^[3] 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.^[4]

It has been criticized by economists on the grounds that no mainstream economist or major political party advocates theories or policies using the term trickle-down economics.^[5] While criticisms have existed since at least the 19th century, the term "trickle-down economics" was popularized in the US in reference to supply-side economics and the economic policies of Ronald Reagan.^[6]

Major examples of what critics have called "trickle-down economics" in the US include the Reagan tax cuts,^[7] the Bush tax cuts,^[8] and the Trump tax cuts.^[9] Major UK examples include Margaret Thatcher's economic policies in the 1980s and Liz Truss's mini-budget tax cuts of 2022,^[10] which was an attempt to revive such Thatcherite policies.^[11] While economists who favor supply-side economics generally avoid applying the "trickle down" analogy to it and dispute the focus on tax cuts to the rich, the phrase "trickle down" has also been used by proponents of such policies.^[4]^[12]

^ 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
^ Lavrynenko, A. How Trickle-Down Economics Works https://essuir.sumdu.edu.ua/bitstream-download/123456789/26035/1/Lavrynenko.pdf
^ Springer, Simon; Birch, Kean; MacLeavy, Julie (July 7, 2016). Handbook of Neoliberalism. Routledge. ISBN 978-1-317-54966-6.
^ ^a ^b 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.
^ Arndt, H. W. (1983). "The "Trickle-down" Myth". Economic Development and Cultural Change. 32 (1): 1–10. doi:10.1086/451369. ISSN 0013-0079. JSTOR 1153421. S2CID 153842242.
^ Noah, Timothy (September 21, 2011). "New Republic: How Did Trickle-Down Get Acceptable?". NPR. Retrieved January 15, 2024.
^ 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.
^ "The Bush Tax Cuts Disproportionately Benefitted the Wealthy". Economic Policy Institute. Archived from the original on February 1, 2023. Retrieved February 1, 2023. The Bush-era tax cuts were designed to reduce taxes for the wealthy, and the benefits of faster growth were then supposed to trickle down to the middle class.
^ "Trickle-down economics gets new life as Republicans push tax-cut plan". USA Today. Archived from the original on May 9, 2021. Retrieved May 7, 2021. Behind [Republican tax legislation of 2017] is a theory long popular among conservatives: Slash taxes for corporations and rich people, who will then hire, invest and profit — and cause money to trickle into the pockets of ordinary Americans.
^ Cite error: The named reference lis truss favours was 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.
^ Harwood, John (November 9, 2017). "Gary Cohn: Trickle-down is good for the economy". CNBC. Retrieved January 1, 2024.

[1] 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

[2] Lavrynenko, A. How Trickle-Down Economics Works https://essuir.sumdu.edu.ua/bitstream-download/123456789/26035/1/Lavrynenko.pdf

[3] Springer, Simon; Birch, Kean; MacLeavy, Julie (July 7, 2016). Handbook of Neoliberalism. Routledge. ISBN 978-1-317-54966-6.

[Lockwood-4] 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.

[5] Arndt, H. W. (1983). "The "Trickle-down" Myth". Economic Development and Cultural Change. 32 (1): 1–10. doi:10.1086/451369. ISSN 0013-0079. JSTOR 1153421. S2CID 153842242.

[Noah2011-6] Noah, Timothy (September 21, 2011). "New Republic: How Did Trickle-Down Get Acceptable?". NPR. Retrieved January 15, 2024.

[7] 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.

[8] "The Bush Tax Cuts Disproportionately Benefitted the Wealthy". Economic Policy Institute. Archived from the original on February 1, 2023. Retrieved February 1, 2023. The Bush-era tax cuts were designed to reduce taxes for the wealthy, and the benefits of faster growth were then supposed to trickle down to the middle class.

[9] "Trickle-down economics gets new life as Republicans push tax-cut plan". USA Today. Archived from the original on May 9, 2021. Retrieved May 7, 2021. Behind [Republican tax legislation of 2017] is a theory long popular among conservatives: Slash taxes for corporations and rich people, who will then hire, invest and profit — and cause money to trickle into the pockets of ordinary Americans.

[lis_truss_favours-10] Cite error: The named reference lis truss favours was invoked but never defined (see the help page).

[11] Schomberg, William (September 7, 2022). "UK heads for return to 'trickle-down' economics under low-tax Truss". Reuters. Retrieved January 15, 2025.

[12] Harwood, John (November 9, 2017). "Gary Cohn: Trickle-down is good for the economy". CNBC. Retrieved January 1, 2024.

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