Theories Of Trickle-Down Economics

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Wooden Nickels: The Theory of Trickle-Down Economics
The theory of trickle-down economics was first coined during the Reagan administration. The theory asserts that tax breaks for large businesses and the wealthiest Americans subsequently benefit all Americans with an increase in the standard of living, job creation, increased wages and an improved economy. Trickle-down economics assumes that large corporations and the wealthiest Americans are the sole drivers of economic growth; their tax breaks and benefits should directly stimulate the economy. Unfortunately, in the post-Reagan era, we have not seen major economic growth through the theory of trickle-down economics. If tax cuts for the rich were the perfect solution to a declining economy
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In his essay, economist Ha-Joon Chang discusses global supply-side economics and its inability to grow income. Utilizing the United Kingdom as an example, Chang states: “In the UK, upward income redistribution since 1980 has seen the share of the top one percent rise from five percent of national income to over 10 percent. Yet the annual growth rate of income per person has fallen from 2.5 percent between 1960 and 1980 to 1.8 percent between 1980 and 2013” (Chang). These statistics call into question where the money is trickling to; the concentration of income at the top one percent continues to grow, while that of the ninety-nine percent …show more content…
The tax cuts of the 1980’s created an income decrease, conversely there was strong growth after the tax increase of 1993 (Etebari). The results of an analysis of the relationship between income growth and taxes after 1960 established no correlation between the the two. In fact, it takes thirteen years for people in the lower ninety percent to be compensated by the proceeds from economic growth. It takes forty years for the average American to see an increase in income through surpluses from trickle-down economics.

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