In the 1980s, the Democrats reviled President Reagan’s tax cuts as “trickle-down economics”–a phrase they themselves had invented many years before. But the Reagan tax cuts produced the greatest boom in America’s modern history. The results were so sensational that Reagan carried 49 states when he ran for re-election in 1984.
That shut the Democrats up for a while, but bad ideas never go away forever. The Democrats are now trying to revive their “trickle-down economics” smear. In today’s White House press briefing, an unidentified reporter asked Dr. Kevin Hassett, Chairman of the Council of Economic Advisers, about the tax bills now pending in Congress:
What makes you think trickle-down economics is going to work this time when it hasn’t worked before?
Dr. Hassett answered the question more politely than I would have:
So trickle-down economics is something that, I guess, people who criticize the idea that taxes affect the economy will use to characterize approaches like the one that we’re pursuing. But I don’t think the idea that’s celebrated by even the non-partisan staff of the OECD — that if you have lower marginal rates, you get economic growth — is voodoo economics or controversial at all.
And yeah, the fact is that countries around the world have cut their corporate rates and had broad-based reforms, like we’re doing on the individual side, and then seeing economic growth result.
I don’t think there’s anybody who thinks that you’ll get no growth or negative growth for this. Maybe there are a few people. But in every economic model I’ve seen, you get growth — either a lot of growth, or sometimes if it’s a closed economy model, a little growth. But you get positive growth out of this. And that growth will benefit workers, and let’s talk about that.
So, right now, the way a U.S. firm avoids U.S. tax is they locate activity, say, in a country like Ireland instead of here. And so if you build a plant in Ireland, then you can sell the stuff back into the U.S. And when you sell the stuff back into the U.S., then it increases the trade deficit and doesn’t do anything for American workers, but it does increase the demand for Irish workers and drive up their wages.
And so what the President wants to do is cut the rate to 20 percent and build guardrails around the tax code so that people can’t transfer price — everything to Ireland anymore. And if we do that, then the people who benefit will be the workers here in the U.S. who have increased demand for their jobs.
That’s economics for dummies. But there are a lot of dummies in the White House press corps and the Associated Press. Thus, the AP followed up on the question from today’s briefing in an unusually ill-informed article by Paul Wiseman headlined: “Derided by critics, trickle-down economics gets another try.”
Coincidence? I think not. The White House transcript doesn’t tell us who asked the “trickle down” question. Was it one of Wiseman’s AP colleagues? I don’t know, but Wiseman’s Twitter feed tells us that he is a Democratic Party activist. One way or another, the Democrats have decided to try to revive their “trickle down” smear. Let’s take a brief look at Wiseman’s piece.
Does money roll downhill?
In their drive to cut taxes, President Donald Trump and congressional Republicans are betting it does.
Behind their legislation 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.
It is certainly true that cutting marginal tax rates for corporations and individuals will increase investment and employment. But no significant Republican describes this as “trickling down,” a phrase invented, as Wiseman later admits, by Democrat Will Rogers.
The nonpartisan Tax Policy Center has found that the House tax plan would deliver an average tax cut of $360 for middle-income taxpayers in 2027. A far more generous bounty would go to the highest-earning 1 percent: An average tax cut of $62,000. For the top 0.1 percent, the gain would average $321,000.
This level of stupidity is enough to make you cry. Obviously, you can’t cut taxes that people aren’t paying. Currently, our tax code is so biased against upper-income taxpayers that they pay the overwhelming majority of income taxes. No developed country collects as much as we do, proportionately, from upper income taxpayers. If you cut income taxes, you will indeed benefit those who are paying them. Democrats somehow consider this to be scandalous.
It is entertaining to see the Associated Press/Democratic Party citing utterly uninformed and long-discredited sources from decades ago in their desperate attempt to stop tax reform:
Over the years, the concept — also known as supply-side economics — has frequently drawn ridicule.
“Voodoo economics” was the derisive term George H.W. Bush applied to it in his failed 1980 bid for the Republican presidential nomination against Ronald Reagan, a supply-side enthusiast.
This is painfully stupid. George Bush lost the 1980 nomination, obviously, and he was proved wrong by the subsequent success of Reagan’s economic policies. George Bush became an advocate for those policies, and he carried 40 states in 1988 when voters expected him to continue them.
The liberal economist John Kenneth Galbraith in 1982 likened the trickle-down idea to horse manure: “If you feed the horse enough oats, some will pass through to the road for the sparrows.”
John Galbraith was a flat-earth economist whose views have been proved wrong on just about every subject. It is remarkable to see the Democrats try to resurrect him in 2017!
In the view of Carl Davis, research director at the left-leaning Institute on Taxation and Economic Policy, the track record for supply-side economics “is not particularly inspiring.”
Where does the AP go for comment on the economic record of a president who won re-election by carrying 49 states? Of course, to a “left-leaning” organization, which no doubt is funded by a handful of rich liberals who stand to gain from leftist government policies.
How inspiring, to use Davis’s word, is the Reagan economic record? In 1983, US gross domestic product grew by 11.4%, and the following year by 9.3%. In 1985, by 7.4%. These days, the Democrats tell us that the 2% economic growth achieved by Barack Obama’s left-wing economic policies is the best we can do, even though Obama had the advantage of taking office just after a stock market crash and ensuing recession.
The Associated Press goes on and on, trying to discredit the Republicans’ tax reform proposals. But the facts are inescapable. The Democrats’ claim that the Obama administration’s 2% growth rate is the best we can do is ridiculous. Already since President Trump took office, the economy is growing at at 3% rate in anticipation of pro-growth policies coming out of Congress.
What will happen if pro-growth policies are actually enacted and signed into law? The sky is the limit. That is why White House press correspondents and Democratic Party news outlets like the Associated Press are desperately trying to block Republican tax proposals from being enacted into law.