Trickle-down economics. Supply-side economics.
Call it what you will, there are 50 years of history to prove it doesn’t work.
The administrations of Presidents Ronald Reagan and both George Bushes bear this out.
As New York Times columnist Paul Krugman so succinctly put it, “The record is actually awesomely consistent. Bill Clinton’s tax hike didn’t cause a depression, George W. Bush’s tax cuts didn’t deliver a boom, Jerry Brown’s California tax increase wasn’t ‘economic suicide,’ Sam Brownback’s Kansas tax cut ‘experiment’ (his term) was a failure.”
The administration of President Bill Clinton, with overall higher tax rates, showed just the opposite, resulting in overall economic growth as well as real wage growth for the middle class and strong job creation.
The fallback position of congressional conservatives to court votes by promising to cut taxes in 2017 brought a huge federal tax cut for the wealthy and business, with accompanying high federal deficit, but continued wage stagnation for the middle class and job growth in lower-paid employment categories.
Two of the three economists who were awarded the 2019 Nobel Prize in Economics in October – MIT economists Abhijit V. Banerjee and wife Esther Duflo – recently wrote in their book “Good Economics for Hard Times” about how good economic theory put into action can solve difficult social and political problems with compassion and respect.
Importantly, they present research-based information that directly undercuts many conservative assumptions.
One of those assumptions, that the wealthy don’t need to pay higher taxes, is even refuted by billionaire Bill Gates.
“I need to pay higher taxes,” Gates said in a 2018 interview with CNN about the “regressive” 2017 tax cut. “I’ve paid more taxes, over $10 billion, than anyone else, but the government should require people in my position to pay significantly higher taxes ... People who are wealthier tend to get dramatically more benefits than the middle class or those who are poorer.”
The conservative assumption that paying more taxes will cause the wealthy to slack up on anything they do that boosts the economy is just wrong, Duflo said in recent interviews since the publication of her book.
“Look at wealthy athletes who play under a salary cap,” she said. “You don’t see any difference in their effort versus athletes that don’t have salary caps. What matters to them is winning, and it’s the same for the rich and CEOs.”
Likewise, Duflo knocks myths about the poor and work.
“Similarly the poor also don’t stop working if there are no incentives for them to work,” Duflo said. “That’s also an illusion. When, for example, welfare became more generous, people didn’t stop working. In fact, we’ve known since the late ‘60s and ‘70s in the U.S., where there were the so-called negative income tax experiments that actually gave money to poor people and taxed it away at a rate of 50 percent, it had no discouraging effect on their work. It’s actually a little secret that we’ve kept hidden.”
Something to think about and perhaps some good holiday reading as we prepare for a heated 2020 election season, and how to evaluate what candidates have to offer.