Trickle-down economics fails working-class Americans, and we have the experiences to show it. Last month, The Center for American Progress analyzed wage data from the past 50 years, pointing out that since 1981, the income growth of the top 1% has failed to stimulate wage increases for the bottom 90%. In other words–the wealth is not trickling down.
In the 1980’s, Ronald Reagan pursued an agenda of tax cuts and slashing social programs. Brendan Duke writes that since then, we have been able to watch “a natural experiment in trickle-down economics.”
The idea of trickle-down, he says, is that “tax cuts, deregulation, and the destruction of basic labor protections would unleash a wave of economic growth. A smaller share of the pie would go to most Americans, but they would be better off because these policies would grow the overall pie.”
During the ’50s, ’60s, and ’70s, income growth among the bottom 90% matched overall income growth fairly closely. Prosperity was somewhat shared. But from the ’80s onward, income growth among the bottom 90% has trailed overall income growth much more. The trickle went up, not down.
We also have state-level examples of this experiment. Last year, the Huffington Post compared California and Kansas, and their vastly different tax policies. After Kansas began implementing radical trickle-down measures in 2010, it is paying dearly. California is the opposite. In response to a budget crisis in 2012, they raised taxes, and created higher tax brackets for the wealthiest earners, leading to greater shared prosperity.
Not only do tax cuts for the wealthy leave a smaller portion of the economic pie for the remaining 90%–they shrink the whole pie! The Center for American Progress notes that “increased inequality does not appear to have delivered higher overall income growth: The pie has grown fastest and most sustainably during periods when the middle class got a sizable share.”
A strong economy is a shared resource. It does not succeed when only a few are successful. It succeeds when all participants are better off. Businesses need a strong consumer base to thrive–and for that we need policies that ensure working-class incomes are more than just a trickle.