Wednesday, April 23, 2014
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The ‘trickle-down’ lie

By
From page A9 | January 12, 2014 | 13 Comments

New York’s new mayor, Bill de Blasio, in his inaugural speech, denounced people “on the far right” who “continue to preach the virtue of trickle-down economics.” According to Mayor de Blasio, “They believe that the way to move forward is to give more to the most fortunate, and that somehow the benefits will work their way down to everyone else.”

If there is ever a contest for the biggest lie in politics, this one should be a top contender.

While there have been all too many lies told in politics, most have some little tiny fraction of truth in them, to make them seem plausible. But the “trickle-down” lie is 100 percent lie.

It should win the contest both because of its purity – no contaminating speck of truth – and because of how many people have repeated it over the years, without any evidence being asked for or given.

Years ago, this column challenged anybody to quote any economist outside of an insane asylum who had ever advocated this “trickle-down” theory. Some readers said that somebody said that somebody else had advocated a “trickle-down” policy. But they could never name that somebody else and quote them.

Mayor de Blasio is by no means the first politician to denounce this non-existent theory. Back in 2008, presidential candidate Barack Obama attacked what he called “an economic philosophy” which “says we should give more and more to those with the most and hope that prosperity trickles down to everyone else.”

Let’s do something completely unexpected: Let’s stop and think. Why would anyone advocate that we “give” something to A in hopes that it would trickle down to B? Why in the world would any sane person not give it to B and cut out the middleman? But all this is moot, because there was no trickle-down theory about giving something to anybody in the first place.

The “trickle-down” theory cannot be found in even the most voluminous scholarly studies of economic theories – including J.A. Schumpeter’s monumental “History of Economic Analysis,” more than a thousand pages long and printed in very small type.

It is not just in politics that the non-existent “trickle-down” theory is found. It has been attacked in the New York Times, in the Washington Post and by professors at prestigious American universities – and even as far away as India. Yet none of those who denounce a “trickle-down” theory can quote anybody who actually advocated it.

The book “Winner-Take-All Politics” refers to “the ‘trickle-down’ scenario that advocates of helping the have-it-alls with tax cuts and other goodies constantly trot out.” But no one who actually trotted out any such scenario was cited, much less quoted.

One of the things that provoke the left into bringing out the “trickle-down” bogeyman is any suggestion that there are limits to how high they can push tax rates on people with high incomes, without causing repercussions that hurt the economy as a whole.

But, contrary to Mayor de Blasio, this is not a view confined to people on the “far right.” Such liberal icons as Presidents John F. Kennedy and Woodrow Wilson likewise argued that tax rates can be so high that they have an adverse effect on the economy.

In his 1919 address to Congress, Woodrow Wilson warned that, at some point, “high rates of income and profits taxes discourage energy, remove the incentive to new enterprise, encourage extravagant expenditures, and produce industrial stagnation with consequent unemployment and other attendant evils.”

In a 1962 address to Congress, John F. Kennedy said, “it is a paradoxical truth that tax rates are too high today and tax revenues are too low and the soundest way to raise the revenues in the long run is to cut the rates now.”

This was not a new idea. John Maynard Keynes said, back in 1933, that “taxation may be so high as to defeat its object,” that in the long run, a reduction of the tax rate “will run a better chance, than an increase, of balancing the budget.” And Keynes was not on “the far right” either.

The time is long overdue for people to ask themselves why it is necessary for those on the left to make up a lie if what they believe in is true.

Thomas Sowell is an author, economist and senior fellow at the Hoover Institute, Stanford University.

LEAVE A COMMENT

Discussion | 13 comments

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  • Mike KirchubelJanuary 12, 2014 - 9:41 am

    Please, somebody comment on this one. It's too good to pass up.

    Reply | Report abusive comment
  • Dave ShreeveJanuary 12, 2014 - 10:18 am

    The originator of the trickle down lie was the news media. They used it at every turn to criticize the Reagan across the board tax cuts. Years later they still had a hard time admitting that cutting taxes helps to generate economic activity. The New York Times eventually admitted that tax revenues INCREASED after the tax cuts. Tax and spend liberals, as usual, couldn't help themselves and increased spending way beyond the increased revenues. Also, as is usual with tax and spend liberals, they blamed increased defense spending for the larger deficits and not their own profligate ways. Another thing tax and spend liberals also hate to admit, even though it is documented and confirmed by the government's own figures, is that the top 1% of all individual tax payers were, and still are, paying more into the government in income taxes than before the Reagan tax cuts took effect. Dr. Sowell, by his own admission, started out as a Marxist and then realized that it didn't work and that capitalism does more to raise everybody than Marxism, communism, or socialism ever could. Dr. Charles Krauthammer, who worked for the Mondale campaign in 1984, came to the same conclusion and that is why he is now a conservative and no longer a tax and spend liberal.

    Reply | Report abusive comment
  • Mike KirchubelJanuary 12, 2014 - 11:16 am

    Really? You've fallen for the whole rancid enchilada? Yummy.

    Reply | Report abusive comment
  • Mr. SmithJanuary 12, 2014 - 10:09 am

    Once again, Dr. Sowell knocks it out of the park. This column should be good for a few dozen posts.

    Reply | Report abusive comment
  • Mr. SmithJanuary 12, 2014 - 12:23 pm

    "Trickle-Down Economics" -- The Most Destructive Phrase Of All Time? Our language is loaded with phrases that lead people into false beliefs and harmful actions, but the one I would nominate as the worst and most destructive of all is “trickle-down economics.” It was devised by Democrats in the 1980s as a way to attack President Reagan’s economic policy combination of tax rate cuts and some relaxation of federal regulations. They needed a catchy, easy-to-remember zinger to fire at Reagan; a line that would keep their voting base angry. Sneering that Reagan’s policies amounted to cutting taxes on the rich in hopes that some small amount of that money would eventually trickle down into the pockets of workers was perfect. It painted Reagan and other advocates of tax reduction as friends of the rich who would cruelly deprive the government of the money it needed to help the poor and middle class. As a political slogan, it was a brilliant stroke. The trouble is that it has led vast numbers of people into a disastrously mistaken idea about the source of prosperity – that high taxes and a growing government is the way to increase it."--Forbes

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  • CD BrooksJanuary 12, 2014 - 12:51 pm

    Wow really Mr. Sowell? A politician lied? The fact you could write an entire column speaking to a lie having to do with a politician is purely ridiculous. What a waste of ink and you got poor Mr. Smith all in a tizzy...again. Move on folks, nothing to see here.

    Reply | Report abusive comment
  • Mike KirchubelJanuary 12, 2014 - 1:00 pm

    I think it's about time to drag out the old "horse and sparrow" theory again.

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  • Mr. SmithJanuary 12, 2014 - 4:13 pm

    A "tizzy," CD? Really? Mr. Smith's last rejoinder to MK has gone unanswered for several hours, and none of the usual suspects on this board have come forward with an answer to Sowell's question. Perhaps Mike, who fired the first shot on this thread, has been too busy gathering up the horse droppings before the sparrows get them. And RLW is obviously MIA. Pity.

    Reply | Report abusive comment
  • CD BrooksJanuary 12, 2014 - 5:15 pm

    Mr. Smith, if we all sit around and cite lies by politicians we'd never finish. The article was useless. You and yours thought it was friggin genius, it was not. That was my point.

    Reply | Report abusive comment
  • Mr. SmithJanuary 12, 2014 - 1:07 pm

    Yeah, Mike. Drag it out. You can use the extra fiber in the oats.

    Reply | Report abusive comment
  • patrickJanuary 12, 2014 - 1:56 pm

    the trickle down theory is alive. .I pay all these taxes and the government trickles the money down to the welfare, unemployed, illegal migrants. check out the ads in this paper and find out how many of these ads are run without a license--. state 0r local. they usually want to be paid in cash. many of them drive newer trucks.

    Reply | Report abusive comment
  • CD BrooksJanuary 12, 2014 - 2:28 pm

    Patrick, not just "newer trucks," EXPENSIVE trucks. Nice work if you can get it. Per the State Contractor’s License Board: “Those who are caught contracting without a license likely will have to appear before a Superior Court judge to answer to misdemeanor charges that can carry a potential sentence of up to six months in jail and/or a $5,000 fine, as well as an administrative fine of $200 to $15,000. If illegal contracting continues, the penalties become more severe. A second offense results in a mandatory 90-day jail sentence and a fine of 20 percent of the contract price or $5,000.” But oh yeah, somebody has to enforce that...

    Reply | Report abusive comment
  • patrickJanuary 12, 2014 - 4:36 pm

    did you check the ads in the daily republic? these people are also probably collecting welfare or unemployment

    Reply | Report abusive comment
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