The picture pretty much says it all, folks.
The trickle down method favored by Reagan era republicans has never worked. That is, the logic that insists by granting tax cuts to the wealthiest Americans will somehow inspire them to pass those savings down to the middle and lower classes of America, create jobs, and save Santa from the Martians… has never worked. Firstly, let me ask this of you (especially those of you earning $500,000 + a year) :
You work hard for your profit. The government hands you a tax cut. With no real incentive on how to handle your bonus, what do you opt to do? Hand it down to someone else or pocket it for yourself?
Yup, that’s what I thought. And that’s why trickle-down economics don’t work, folks. Why they never have. Capitalism isn’t built upon the concept of sharing earnings. We are not a “we” culture. We are securely an “I” culture, as the recent battle over economy, jobs and health care bills have shown.
Reagan, in his infinite wisdom, offered a marginal tax cut for the wealthy. Originally, there was a great deal of support for tax reform; there was a dual problem that loopholes and tax shelters create a bureaucracy (private sector and public sector) and that relevant taxes are thus evaded. During Ronald Reagan's presidency, the Democratic controlled House, at the urging of President Reagan, cut the marginal tax rate on the highest-income tax bracket from 70% to 28%
Now, A major feature of these policies was the reduction of tax rates on capital gains, corporate income, and higher individual incomes, along with the reduction or elimination of various excise taxes. David Stockman, who as Reagan's budget director championed these cuts but then became skeptical of them, told journalist William Greider that the term "supply-side economics" was used to promote a trickle-down idea.
“It’s kind of hard to sell ‘trickle-down’, so the supply-side formula was the only way to get a tax policy that was really ‘trickle-down’. Supply-side is trickle –down.” – David Stockman, Ronald Reagan’s budget director.
Now, one of the arguments then (and, as fact, the same arguments being made now to extend the Bush-era tax cuts (more ‘trickle-down’) was that alleviating taxes on the wealthy would inspire job growth.
The job growth under the Reagan administration was an average of 2.1% per year. Comparing the recovery from the 1981-82 recession (1983–1990) with the years between 1971 (end of a recession) and 1980 shows that the rate of growth of real GDP per capita averaged 2.77 under Reagan and 2.50% under Nixon, Ford and Carter.
However, the unemployment rate averaged higher under Reagan (6.75% vs. 6.35%), while the average productivity growth was slower under Reagan (1.38% vs. 1.92%), and private investment as a percentage of GDP also averaged lower under Reagan (16.08% vs. 16.86%). Furthermore, real wages declined sharply during the Reagan Presidency.
Didn’t quite work out the way they planned after all.
As far as Bush’s tax cuts, see the additional image “Economic Performance Index” comparing Clinton and Bush.
With the debates raging back and forth in our government concerning the extension of the GOP’s desired ‘trickle-down’ economics, it is plain to see that the extension of these tax cuts are not in the best interests of this nation or the 12+ million unemployed Americans currently trying to survive in today’s economics quagmire. We should be focusing on bills and incentives directed specifically to smaller businesses, giving them options and encouragement to start hiring again as opposed to enacting tax cuts that the majority of smaller, hiring businesses swill never see.
I know we’ve barely scratched the surface here and I’d post more but I am at work and apparently my boss wants to go home early, so…. Nite!
Peace!