*SHOCKED* Study reveals that trickle-down economics doesn't work.

[Benjamin Frank]

They needed another a study to tell you that?

The only economic policy that works is supporting middle class people and small/medium sized businesses and leveling the playingfield for the poor to gain access to the middle class. Anything else is voodoo economics.

If you only have small/medium sized businesses, who is going to do the research and development for major advances?  To the degree that the lone inventor in the garage was ever true, it is pretty much a total myth/legend today.

There are startups that usual startup up in universities of course, but I think you want as many avenues as possible.

[Benjamin Frank]

A matching estimator that uses a binary dependent variable for major tax cuts to generate cross-country comparisons for a whole *five years after the policy intervention?  l o f{inks}ing l

If you fall for this, you're probably similarly *SHOCKED* that most working poors/LMC folx didn't have iPhones, televisions or access to post-secondary education fifty years ago (thanks neoliberalism!)

The fundamental problem with this type of #analysis is an improperly constructed counterfactual.  Cross-country comparisons don't really tell us whether "Reaganomics" has worked when there's been a steady, long-term global trend toward more liberal economies; the appropriate (and more difficult) question to answer is if we would've been better off sticking with the production/consumption economies of the 1930s-60s instead of transitioning to the investment economies of the 1980s-present?  If your outcomes of interest are the quality of consumer goods, national output (GDP) and just general quality-of-life, then the latter comes out as the obvious winner  

You're wrong based on GDP

Annualized U.S real GDP per capita
1946-1980: 2.12%
1981-2019: 1.74%

source: measuringworth.com calculator

I chose 1946 because it's post Great Depression and Post World War II.  The recovery from the Great Depression and the spending during World War II would obviously skew the numbers considerably.

Annualized U.S real GDP per capita
1930-1945 4.80%

After Roosevelt became President
1933-1945: 8.15%
This obviously includes the deep recession from 1937-1938.


If you feel that 1946 is too soon post war to be an accurate measurement, it actually lowers the percentage.  (There was a lot of inflation and slow growth for a time following World War II in the United States)

Annualized U.S real GDP per capita
1950-1980: 2.28%

I appreciate that you're wedded to your favorable feelings towards trickle down tax cuts, but as the saying goes: facts don't care about your feelings.

[Benjamin Frank]

"Trickle-down economics" is a silly term because that's not what supply-side economics even argues. The right needed a way to justify those tax cuts and used the argument that the wealth would be passed down to the poor, and the left mocked it by giving it that name.

Supply-side economics were meant to revitalize western economies after the stagflation of the 70s, when government spending was failing to stimulate the economy and only causing inflation, and the private sector was held back by government action. Supply-side economics were meant to revitalize the private sector, which it did, and it wasn't meant to reduce economic inequality, which it didn't. It does what it's meant to do, it doesn't do what it isn't meant to do.

This isn't me supporting or opposing these economics. Generally I lean more left and don't support ideas like this because it comes at the expense of social services, but in the context of stagflation, it was good policy. What isn't good policy is implementing the exact same things in every context because of an ideological predisposition. The Trump-Ryan tax cuts for example were really stupid--the American private sector was already doing very well, the tax cuts hardly led to any stimulus while skyrocketing the deficit. Frustratingly, good policy rarely makes for good politics. So here we are.

That's only referring to supply side theory in the monetary policy context.  There is also a broader macro economics definition.