Trickle-Down Theory

The phrase trickle-down started out in our lexicon as a joke ridiculing President Hoover’s efforts to combat the Great Recession.  Will Rogers, the early humorist of the twentieth century, wrote about the 1932 Government’s efforts, “The money was all appropriated for the top in the hopes that it would trickle down to the needy.“  This phrase is now conjoined to alleged mainstream economic theory and fiscal policy.  In fact, there is no such thing as trickle-down economics.  No reasonable individual would argue that higher taxes for greater redistribution stimulates growth.

Despite that, there are those who resent wealth and criticize lower taxes on  wealth creators using the phrase “trickle-down economics” as a pejorative term to evoke discontent for such lower taxation and fiscal policies.  To jar the electorate into action, trickle-down economics slogans are used to create fear of reduction of government power and entitlements.  With seemingly higher tax collection and spending, they feel that Government is better at trickling-down prosperity than the electorate deploying and allocating their own pre-tax resources.

This whole debate is actually about who has the control and power to initiate economic change—the private sector or government bureaucrats and incumbent politicians.   Which is better:  Opportunity or Allocation?  Government is a parasitic middleman being both an enforcer and benefactor of the populous.  The issue will always be whether we prefer a larger or smaller regulatory middleman.

For an additional well-reasoned discussion of so-called Trickle-Down Theory by Steven Horwitz, please consider the following fact-based monograph:  Read More.