Liberals need to stop using the phrase “trickle down” until they understand what neo-classical economics (which most people who’ve never studied macro-economics CALL trickle-down) actually is! It starts with the very basic, common sense understanding that economics is the study of Supply AND demand, not just demand. Keynesians, Obama, and liberals think it’s all about demand, which leads them to several incorrect assumptions that were completely discredited 30 years ago (even in the eyes of Keynesian economists!
(1) It it is impossible to have simultaneously high unemployment and inflation, or to reduce each simultaneously (the Philips curve)
(2) As long as money is being spent (no matter the source) the economy will continue to thrive. Therefore, deficit spending is good for the economy.
(3) If you want to raise money, just raise tax rates. The economy will simply sit and take the increase, because they have no choice.
(4) If you want to get the economy going, simply print some money and give it to banks.
Three of the four theories above were DEFINITIVELY discredited in the 1980s when Reagan was President. unfortunately, Reagan was unable to get deficit spending down or to end it, so liberals and those who don’t study economics still believe that deficits can fuel economic growth.
Because Reagan correctly saw that the problem in the late 70s and early 80s was a supply shock (oil prices, over regulation, high marginal tax rates) he was able to recommend a solution to the malaise of the time that had completely confounded Keynesians, liberals, and those who called neo-classical economics “voodoo economics!” he called for lower regulations, lower marginal tax rates (especially at the top where they were grossly inflated), and a sound dollar through Paul Volker’s fed policies.
Because these policies were aimed at suppliers (where the problem was at the time), and many suppliers look like “rich people” because they choose to file as sole proprietorships to avoid double taxation, many casual onlookers untrained in economics ignorantly assume that the theory is simply to throw money at the rich and watch it “trickle down” to the poor. Some who weren’t paying attention at the time even STUPIDLY proclaim that Reagan’s neo-classical economic policies “did not work.” The contrary is fact the case.
After Reagan began his policies, interest rates fell dramatically, inflation fell to near zero, unemployment fell, and the economy roared on for twenty years (with only a brief hickup in 1990 when the eastern block collapsed breaking the US defense industry and putting many white-collar defense contractors and those who depended on their money out on the sidewalk).
Today many liberals have completely forgotten the lessons of Reagan’s policies and instead cling to rhetorical trickery to support policies that SIMPLY DON’T WORK!!! People like Obama, who don’t understand a thing about economic policy, insist that big deficits are good for the economy, that you can raise money by raising tax rates (especially on suppliers), that a weak dollar is a strong dollar, and that you lower unemployment without sparking inflation.
For those of us who’e studied economic history and know better, it’s frustrating because the TRUTH takes a long time to explain, but the lie is easy to understand. Everyone relates to Robin Hood, but very few know who Ludwig von Mises was and even fewer have heard of his protege Friedrich Hayek.