Ronald Reagan is Closely Associated With Trickle-down Economics but Actually, His Reaganomics is Badly Misrepresented
By Ed Lathrop, Tea Party Views Contributor
The phrase trickle-down economics has been bandied about freely in the media over the last 30 years or so. To people who like to use the phrase trickle-down economics, the term carries with it a dire tone. This is because people who usually use the term trickle-down economics are liberals and know little about any kind of economics. They like to tie trickle-down economics to periods of slow economic growth, which they will always call a near depression, and they love to blame it all on Ronald Reagan because of their hatred for him.
The trickle-down detractors will always shout at the top of their lungs “we tried it and it doesn’t work!” They also shout, “it’s trickle-down – Republicans giving tax breaks to the rich.” Liberals always say tax breaks are for the rich. However, even when corporate tax rate reductions and capital gains tax rate reductions are introduced it is not trickle-down economics because they benefit everybody. Regardless, to liberals all tax breaks only go to rich people.
The word “go” in the term “tax breaks go to the rich,” is a misnomer because taxes come from people to the government. If the government starts taxing these people less, less money may flow from the people to the government but nothing actually goes to rich people from the government. It is only low-wage earners who actually receive tax refunds on money they didn’t pay to the government in the first place. Still, in the perverted world of liberalism, money always goes from the government to “the rich.”
The term “trickle-down” is actually only accurate when used to describe government programs. With government programs, money flows from the government down to lower income people. This is the entire goal of government programs. When government spends money, it must recoup this money at some point, with interest, or it is just more debt which ultimately hurts the economy.
Instead, when the economy is stimulated by taxing corporations less, liberals call it trickle-down economics. Actually, it is financial stimulus because it leaves more money to cycle through the private sector, but it is not an influx of money that flows downward only and it is not government spent funds. When money cycles through the private sector, it flows down from wealth but it also flows up from lower wage earners. If it did not, businesses would make no money and they would be unable to employ anyone.
The truth is, when corporations are taxed less, more working capital is freed up for them. Because of this they may expand their businesses and when they do they will have to employ more people. When they do employ more people these people will be paying income tax and money given up by the government in favor of corporate tax rate reduction will come back in the way of more working people paying more taxes. Also, after corporations expand they will, hopefully, be making greater sums of money and therefore they will be paying more money to the government than they were when their tax rate was higher. So you can see, money left in the private sector works it’s way though to all levels of society from all angles.
Are far as taxes are concerned, there is a limit to how much return the government can get on its money by lowering taxes to any entity or group of people. I will not argue this point. However, tax breaks to any tax bracket has a cumulative affect on the economy. The problem is there isn’t a great deal of funds the private sector gains when low wage earners only receive the reduced rates. This why across-the-board tax cuts, capital gains tax cuts and corporate rate tax cuts are most beneficial.
The way trickle-down economics has been defined in the media is entirely inaccurate because what they call trickle-down is actually typical capitalism.. The thought capitalism does not work can only cross the mind of a person who is very economically challenged. Of course, capitalism does work. In fact, there is no other economic system that truly even approaches the wonders of capitalism. Under capitalism, everyone has a chance to succeed. Millionaires and billionaires can grow out of people who have come from absolutely no wealth. There is no other system where this is true.
Finally, to try to demean the economy of the Ronald Reagan years is completely anathema to any real economist. The Reagan administration took over an economy that was in very poor shape and by the time the eight-year term of their administration had expired, mortgage rates had fallen drastically, average household income soared and quarterly GDP measurements had typically reached beyond the 4 and sometimes 5% level. Of course, to capitalist-hating liberals, all these things are terrible.
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