Tax cuts for the wealthy tend to widen the gap between the rich and the poor, as the wealthy benefit disproportionately from tax cuts while lower-income earners may not experience any significant changes in their financial situation. Thomas Sowell disagrees with the characterization of supply-side economics as trickle-down, saying that the economic theory of reducing marginal tax rates works in precisely the opposite direction: “Workers are always paid first and then profits flow upward later – if at all. In a 2020 research paper, economists David Hope and Julian Limberg analyzed data spanning 50 years from 18 countries, and found that tax cuts for the rich increased inequality in the short and medium term, and had no significant effect on real GDP per capita or employment in the short and medium term. According to the study, this shows that the tax cuts for the upper class did not trickle down to the broader economy.1
The term “trickle down economics” was actually coined by social commentator Will Rogers several decades earlier to mock to President Hoover’s policies during the Great Depression. The term became more widely associated with the economic policies of Ronald Reagan in the 1980s, which were often referred to as “trickle-down economics” or “supply-side economics – during rise of reaganomics. One of the commonly invoked elements of trickle-down economics is tax benefits for corporations and high net worth individuals, who are expected to invest the money that they save from taxes in entrepreneurial activities, which are, in turn, expected to boost production and create jobs. The theory of “trickle down” of wealth to the poor is often invoked to support the government’s neoliberal policies. In reality, such policies as tax cuts and other financial incentives for the private sector have not been successful in bridging economic inequalities.
The Trump administration’s primary economic policy was the Tax Cuts and Jobs Act of 2017, which significantly reduced corporate and individual income taxes. Critics argue that this was a classic example of trickle-down economics, as the majority of tax cuts went to high-income earners and corporations. The 2017 Tax Cuts and Jobs Act was passed with grandiose promises that it would bring broad prosperity through trickle-down economics, but it delivered nothing of the sort. With the wealthiest 10 percent owning over 90 percent of all stocks, there is simply no credible argument that this tax cut did anything to actually help the vast majority of Americans economically. Beware – republicans are preparing to enact substantial reductions to Medicare benefits, to add restrictions on Medicaid eligibility, eliminate healthcare subsidies that help working families afford coverage, and cut food assistance programs that serve as vital lifelines for struggling Americans.2
The trickle-down economic theory was rebranded in the 1970s to an ideology – supply side economics – the doctrine that tax cuts could be had for free (incentive effects would generate new activity hence more revenue) without causing budget deficits. Its creators never believed supply side economics worked – it was an ideology that was created to unite the right. However, anyone who challenges that this thinking contributes greatly to economic inequality is declared a dangerous heretic, and a threat to freedom and prosperity of the free market system. The most dangerous impact of neoliberalism is not the economic crises it has caused, but the political crisis. As the domain of the state is reduced, our ability to change the course of our lives through voting also contracts. Apologists explain away the failure of neoliberalism by the existence of a vast left-wing conspiracy.
Thus, ‘elimination’ of poverty became ‘reduction’ of poverty and, over the last few years the concept of extreme poverty appeared, associated with hunger. These, it was declared, must gradually be eliminated, while poverty must be mitigated. The economic elite use social media to create confusion and advance a neoliberal agenda. We are indebted to Donald Trump for bursting the informational neoliberal bubble. Trump has focused us on the real issue of the day – increasing economic inequality. He is teaching us all about the power of dissemination of (mis)information. Trump and his surrogates have signaled that they intend to counter the media’s version of truth with their own alternative facts, the “truth” from their perspective. The purpose of neoliberal dogma is to protect the rich from the poor. Trump’s election unmasked that the real game – cutting taxes on businesses and the wealthy, then use the resulting deficits as a pretext to cut social programs that benefit the poor and the middle class.
Today younger people will have poorer health as adults, which will affect their economic status as they will earn lower wages as an adult, and this in turn, will affect the next generation of children who will thus be born into a poorer family. The link from family household income and poorer social and health outcomes is well documented – the growing income inequality in Canada and the US associated with globalization poses a significant threat to the health of many. The economic and social conditions under which people live, rather than the biomedical risk conditions and lifestyles choices are the factors determining whether one develops chronic conditions like cardiovascular disease, which develop primarily from material deprivation (of poverty), excessive psychological stress and the adoption of unhealthy coping behaviors. The top-down system of trickle-down economics ensures the next generation in the workplace can not only expect to earn less than their parents, but are on track to enjoy poorer health.3
Together with the 2001 and 2003 tax cuts enacted under President Bush (most of which were made permanent in 2012), the 2017 Trump tax law has severely eroded the US revenue base. Revenue as a share of GDP has fallen from about 19.5% in the years immediately preceding the Bush tax cuts to just 16.3% in the years immediately following the Trump tax cuts, with revenues expected to rise to an annual average of 16.9 percent of GDP in 2018-2026 (excluding pandemic years), according to CBO. This is simply not enough revenue given the nation’s investment needs and existing commitments to Social Security and health coverage. Administration officials claimed their centerpiece corporate tax rate cut would “very conservatively” lead to a $4,000 boost in household income. New research shows that workers who earned less than about $114,000 on average in 2016 saw “no change in earnings” from the corporate tax rate cut, while top executive salaries increased sharply.4
Trump was re-elected in 2024 with the promises to cut your taxes, end inflation, slash your prices, raise your wages, and bring thousands of factories back to America. In first 100 days he has turned to Project 2025, a product of the Heritage Foundation, one of Washington’s most prominent right-wing think tanks. The 900 page document sets out four main policy aims: restore the family as the centrepiece of American life; dismantle the administrative state; defend the nation’s sovereignty and borders; and secure God-given individual rights to live freely. The dismantling of government agencies can be traced back to the document. In the back ground MAGA folks need significant cuts to social programs in order to extend the 2017 tax cuts to the oligarchs. These plans raise red flags that the government efficiency cuts are a ruse to secure funds to support tax cuts for the wealthy.
As Trump surpassed 100 days in office, a period filled with slashing and burning of the federal government and democratic norms, many are becoming angry. The 90% now have a good reason to be angry. However, recognize anger is power. It’s red. It’s heat. Anger is movement and sound. Anger is a force for change, a force of strength. Since Reagan years, the social contract has always been broken. Governments have largely failed to uphold their end of the social contract: to guarantee safety, offer protection, uphold rights, fight inequality and act in the best interest of all people. There is a need to channel this anger for positive change. Instead of being a destructive state, anger can be a potent force of nature that can move us forward and fuel optimism, problem-solving, and creative brainstorming. In other words, if we want to make a change, we can tap the powerful motivational push that anger can provide.
As a consequence of globalization, the business class is no longer under pressure to accommodate citizens (workers). The government default position is that international competition is at stake – increasingly lower taxes, less support for labour and deregulation – creating socio-economic status related inequalities at the same time as budget cuts erode social assets and population capacities that might have buffered the effects of the health inequalities. We need to adopt policies that have science behind them. The trickle-down economic ideology is political rhetoric of white-washing the “socialism for the rich.” An ideology is a set of ideas proposed by the dominant class of a society to all members of this society (that is normative or based on what is considered the normal or correct way of doing something). Trickle-down economics in the 21st century is a fraud – the majority of people are not benefiting – in fact, the gap between the rich and the rest of society is increasing.
Power is best seen as an invisible force linking individuals and actors, in a state of constant flux and renegotiation. There is a small group who have been made very wealthy by the existing system. Change is a threat to them. It is this group that loves its status quo so much that it sees its own change as an underhanded attack on its way of life. The debate is no longer how fast the ocean is rising, rather how fast will we rise to the occasion to introduce change. This is about introducing equality, justice and fairness so that it not just a perception, but a reality, that the system is no longer gamed for those at the top. To create change we must seek out ideas that make a difference. It is urgent to save globalization from the authoritarian neoliberal mindset because globalization is reversible. Our outlook must have a sense of urgency as things never stop moving, and we must be optimistic as there is always opportunity.
The increasing socioeconomic inequality, drives the need for change. Often, we have to acknowledge that change is sometimes difficult or close to impossible. Empowerment happens when individuals and organized groups are able to imagine their world differently and to realize that vision by changing the relations of power that have kept them in poverty, and restricted their voice and deprived them of their autonomy. While none of us can actually “see” the future, we can practice looking into the future and seeing what might be. The path forward is urgent optimism – a mindset that includes mental flexibility, realistic hope, and future power. Hope-reward feedback loop creates a vision of the future we can become. As we practice seeing many different crazy futures, we become more comfortable with the reality of continuous change, and we start to find hope in the possibilities that exist alongside the difficulties.6
2 https://thehill.com/opinion/finance/5220282-trump-tax-cuts-trickle-down/
5 https://questioningandskepticism.com/angry-people-on-the-road-to-anarchy/
6 https://questioningandskepticism.com/act-immediately-to-tackle-an-obstacle/