Trickle Down Economic Theory

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Trickle-down economics comes in many forms. Supply-side arguments, these are economic arguments that are most normally associated with tax cuts for high earners, the 1% of Americans, these arguments are used to suggest that the wealthy would be more incentivized to raise output in the marketplace and create better jobs. Demand-side arguments, these as well are associated with subsidies and tariffs, they continue on the argument that the wealthy need protections in order to keep paying their employees or to raise spending.But now to really understand trickle-down theory, you have to first understand some economic basics that set the foundation for Trickle Down. First of all, all capitalistic economies such as the United States go through a series …show more content…
Having an idea that sounds nice on paper is one thing, but taking that idea putting it into practice and having it work is something completely different. Now there are still some arguments that can make it seem like the trickle down economic theory works. The greatest example of this was during the Reagan Administration, it seemed like trickle-down economics worked. His policies at that time were known as Reaganomics, and these policies helped end the recession of 1980. He took the route of cutting taxes significantly. During this time the top tax rate fell from 70 percent all the way to 28 percent. Reagan also went and cut the corporate tax rate from 46 percent to 40 percent. But don't be confused the trickle-down economics was not at all the sole reason for the recovery. Reagan also decided to increase the government spending by 2.5 percent in a single year. This action almost tripled the federal debt, from $997 billion in to $2.85 trillion. Most of this money spent went to defense. This decision continuously supported President Reagan's efforts to end the War. So in actuality trickle-down economics, in its true form not the theory with something else attached to it, was never tested. In actuality it is most likely the large government spending ended the recession not the trickle down. As Well as Reagan, President George W. Bush used the trickle-down theory to try and counteract the 2001 recession. He cut income taxes and that ended the recession. But because of this decision unemployment rose to 6 percent. Trickle-down economics says that the tax cuts Reagan and Bush implemented should have helped people in all income levels. But instead, in reality the opposite occurred. Income inequality for all people worsened. Between 1979 and 2005,income rose 6 percent for the

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