it's not trickling down, chad
what is this amorphous Economy and what does "good" mean
For a while, we’ve seen much media coverage attempting to reconcile “good” economic indicators with feelings that things aren’t going well for everyday Americans' bank accounts. I’m no economics expert, but just because The Big Economy thrives doesn’t mean those benefits accrue to everyone. These days, The Economy’s gains go mainly to those already well off, and everyone else gets the scraps. In short, all that income and wealth creation isn’t trickling down, Chad.
how should we define a “good” economy?
Trickle-down economics does not work for the majority of Americans. Maybe it leads to “growth” and “a good economy” when growth is accumulated disproportionately by the wealthy and good is defined by limited metrics like stock market capitalization and gross domestic product (GDP).
GDP? What the heck is GDP in real life??! I know what it means in a literal sense, and here’s the definition. But how does that matter to our day-to-day lives?
Just because this amorphous Economy grows and we sell more crap doesn’t mean it’s crap that is good for people, the planet, or our budgets. Are more fast fashion duds, ultra-processed snacks, or pollution particles from automobiles good for us even if they increase our GDP? 🙄
If economics defined “good” by metrics tied to prosperity and quality of life, things are not so good by most measures (health, happiness, peace, democracy, unity, etc…). Many of the things we value most, like love from family and the well-being of our children, have no monetary value, making them worthless in our current economic models.
income inequality means a “good economy” doesn’t feel great for most people
Income inequality is a huge part of why people feel the economy is terrible, even though the metrics say it's good. The advantages of our amorphous “good economy” disproportionately benefit wealthy individuals.
For example, many people use stock market performance as evidence of a “good economy,” but a strong stock market offers wildly disproportionate benefits to wealthy families. According to the Federal Reserve and as reported by USA Facts, nearly all the investments in stocks and mutual funds are owned by the top 20% of Americans.
Only investors reap the rewards of share price increases and rising market capitalizations. One might argue that a strong stock market offers ancillary gains for non-investors, but the benefits accrue to the shareholders far more than anyone else. No non-investor thinks they’re winning as much or more than an Apple shareholder when the Apple share price jumps.
In some cases, non-investors are harmed while shareholders gain. Corporate profits have soared in recent years while consumer prices have risen. Sounds like greedflation, no? While stock market investors have seen monumental gains in share value, customers are squeezed at the register.
The Pew Research Center, a non-partisan and respected research organization, did a deep dive into income inequality in the United States. No matter how you slice and dice it (and there are many ways), income inequality has risen significantly since 1980 and is higher than in peer countries around the globe.
Risen since 1980, huh? That’s right when neoliberalism’s trickle-down economics became popular as part of Reagonomics. Surely that’s not a coincidence… 🧐
Maybe The Economy is flowing like water from a fire hose. But over the last few decades, the wealthiest Americans have been gulping down the water from that fire hose while the rest of Americans squabble over any remaining trickle.
what is trickle-down economics?
As Investopedia further explains, “trickle-down economics and its policies employ the theory that tax breaks and benefits for corporations and the wealthy will eventually benefit everyone. Tools like reduced income tax and capital gains tax breaks are offered to large businesses, investors, and entrepreneurs to stimulate economic growth.” In other words, give government handouts at the top, and they will eventually make their way through the economy to help everyone.
common sense debunks trickle-down economics?
Economists are criticized for building models in some non-existent world where humans act perfectly rationally. It’s such a valid critique that a new field of behavioral economics emerged to study more realistic models considering how humans actually behave following their biases, emotions, and instincts.
Regarding trickle-down economics, let’s theoretically suppose some additional value spurred by favorable governmental treatment is generated at the top and flows from corporations and high-income individuals down through society to those in lower socioeconomic spaces.
Realistically, this will always increase income inequality; it’s common sense. Those at the top always take at least a little extra for themselves, meaning those at the bottom get short-changed. I mean… what would you do if you controlled the allocation of wealth and capital?!
The only possible way trickle-down economics doesn’t increase income inequality is if humans at every step of value transfer altruistically choose to hold on to only their fair share (or less) of the value created and pass along everything else. Who thinks that’s going to happen?!
Who is creating economic models where the wealthiest people aren’t taking at least a little extra for themselves and their families? And do those models still hold any water when we’ve watched those at the top consistently hold on to way more than their fair share for the last several decades? When are we going to stop believing this fantasy?
I’m not even suggesting all those who hoard wealth are bad people. It makes evolutionary sense to hoard resources. But it seems pretty clear that trickle-down economics will never work. Advocates of trickle-down economics selfishly use the dated economic model to protect and concentrate wealth. But do good-faith economists still believe this model is a long-term solution for collective prosperity? Am I missing something??! 🧐
the data doesn’t lie
Unlike some of our politicians and their lackeys who create alternative realities of madness and mayhem, this data doesn’t lie. The chart below from the Pew Research Center shows how incomes have diverged over the last few decades. Incomes are rising for the upper-income group while declining and remaining flat for middle- and lower-income groups.
If income isn’t telling enough, the disparity gets more egregious when we look at wealth (accumulated income and assets). While wealth is falling for lower- and middle-income families, in some cases by a lot, it’s growing rapidly for upper-income families. Upper-income families do not need more tax cuts. They’re doing just fine, Don.
Trump is not your ‘good economy’ president. Ask 16 Nobel-prize-winning economists. Though he touts his policies as good for our wallets, they’re only good for a few people’s wallets and not most Americans.
Trump advocates for tax cuts for corporations and the wealthy. He specifically mentions corporations in his messaging and intentionally evades details about who benefits from individual tax cut plans… because campaigning on the truth that they benefit wealthy individuals more than others falls flat on most Americans!! Duh, right?
Furthermore, if more tax cuts at the top “helped” The Economy (and that’s a big ‘if’), they only serve to exacerbate the sh*tty gaslighting that one should feel good about an economy that prospers overall at the expense of quality of life for working- and middle-class people. Maybe Trump will make the economy “better” (although those Nobel-prize-winning economists disagree), but does it matter if it’s not better for most Americans?
Sigh…
income inequality isolates communities and increases division
Income inequality further isolates people within their social classes. Certain groups of people can’t afford to live, work, or socialize in communities out of their financial reach. Neighborhoods and schools become more homogenous along socioeconomic lines.
We lose sight of the humanity in people we don’t see and interact with regularly. Physical separation makes it easier to advocate for policy that protects our interests, even if it harms those of others we don’t engage with. For those with the privilege and resources to thrive, the despair is out of sight and out of mind.
All the chatter about “lower taxes” and “good economic policy” doesn’t always translate to better quality of life. We need to be critical thinkers and consider how policies impact The Economy, who benefits, what “good” means to the politician touting said policies, and whether that means the same thing to us.
Politicians can chatter about ‘lowering taxes,’ but we need specifics. Will lowering corporate taxes and reducing marginal tax rates for the highest tax brackets improve the lives of most Americans? Will it make our country and communities more resilient, prosperous places to thrive? Probably not. Maybe the last forty years of history have some insight to offer.
deplete and heat the planet for The Economy
As if the trickle-down storyline wasn’t bad enough, a hyper-focus on growth to make The Economy “good” only worsens our climate crisis and living conditions. Work more hours. Make more things. Spend more money. Consume more. Use more resources. Deplete and heat the planet, and the bank accounts will balloon (or so the model says).
Cash is king, and to an extent, money buys happiness. But strong communities, resilient relationships, thriving ecosystems, agency, and a livable planet offer far more paths to prosperity than a growing GDP, whose benefits mostly get stuck at the top of the funnel.
let’s be critical thinkers and learners
Just because ‘prices were lower during Trump’s presidency’ doesn’t mean he fostered better economic and quality of life outcomes for most people. A snapshot of prices at any given time without any contextual information is useless. We need to consider things like:
why are prices high or low? maybe inflation was a result of rapid and extreme spending during 2020 following the COVID outbreak and it took time for that spending to spur inflation (not exactly unfathomable); or maybe corporations exploited COVID to earn excess profits at the expense of consumers
who implemented policies to cause high or low prices? COVID governmental spending had strong bi-partisan support and was sent out during Trump’s term
how much control does the president have over the causes? not nearly as much as people want to believe
if corporations are earning crazy profits and consumers are experiencing high prices, why would we give more tax breaks to corporations? maybe direct assistance to those struggling the most will have the best outcome
what other metrics of prosperity are equally as important as prices of consumer goods? surely there are other things we care about as much or more than the price of consumer goods (freedom of religion, freedom of speech, bodily autonomy, health of our families, upholding democracy, to name a few)
Trump is not the ‘good for the economy’ president. He’s the neoliberal, more of the same, tax cuts for Trump, income inequality president. If he’s elected again, he’s ready to double down on his trickle-down economic policies that flow rapidly at the top and barely trickle by the time they get to the bottom.
Americans are right to believe that the economy isn’t working well for most. But we need to be more thoughtful about why that is the case. Let’s start asking good questions and having tough conversations that lead to better outcomes.