Trickle Them Down, But Not Out

The thing about smart people is that they should know better, but alas, intelligence is not the same as wisdom. Not only do the mistakes of experts too short on vision—when they are not corrected—have the potential to do great and far-reaching damage, but they also undermine public confidence in the very notion of expertise. This is particularly so when expertise is wielded in defence of the rich and powerful as a cudgel against those laid low. As an academic, this lack of faith in “so-called experts” is painful to see as it plays out in the spread of dis-/misinformation, conspiracy theories, and anti-intellectualism writ large. But it is also an understandable impulse given the catastrophic failure of an economic ideology pushed by certain economic experts. Supply-side economics has shaped a broken system for the last half-century and has arguably done more to undermine the fabric of the American Dream than any policy framework of the past century.

Supply-side economics—derisively referred to as trickle-down economics—is a term many people have heard. It is a deceptively simple, and ultimately inaccurate, description of how supporters of theory said it was supposed to work. The idea, boiled down to its essence, is that if a leader wished to see the economy grow, they could most effectively stimulate that growth by giving wealth to those at the top by way of tax cuts and corporate subsidies; that wealth would then trickle down to benefit everyone, even the most disadvantaged. The theory caught the eye of leaders in the 70s and 80s, who began slashing taxes, believing that economic growth would make up for the lost revenue. When they didn’t, they redoubled the tax cuts and began cutting social programs to pay for them, rather than abandoning the failed policy.

You might think to ask, did these tax cuts lead to economic growth? Yes. They led to growth like a Red Bull leads to a productive all-nighter. The boost to consumer spending was measurable, but ultimately unsustainable. As the temporary growth petered out, these economies began to feel the hangover. The cuts ultimately increased state and federal deficits that have served as a drag on growth, undermined the social safety nets, which, in turn, led to growing consumer debt and bankruptcy, breathed life into ballooning inequality, and robbed the working class of the fruits of their growing productivity.

Sure, those costs were real, but they were future costs, long-term costs that couldn’t be neatly packaged into soundbites for one’s political advantage. But the short-term hit of economic adrenaline served the goals of those whose political incentives were driven by short-term interest: “It’s the economy, dummy.” And so, more tax cuts were proffered and more again.

They never did pay for themselves.

Teeth were gnashed and fists were shaken as deficits continued to grow. Yet more cuts to taxes and social programming were made while investments in the public weal were shelved. Infrastructure can wait, education can wait, healthcare can wait, housing can wait. Look: the Dow keeps climbing. And climb it has. Millionaires became billionaires: Aren’t they just precious examples of the fruits of American initiative? But are they?

The tax cuts benefited the wealthiest individuals and corporations most dramatically. Over the last thirty years, the top 10% of families saw their share of wealth rise to 72% of all household wealth in the United States. The bottom half of families during this same period has been held down to 2% of the share of family wealth. The top-heavy distributions of wealth led those with it to seek ever-new vehicles to grow it: stocks, bonds, crypto, credit-default swaps while those in charge removed the guardrails under the mantel of deregulation. These were the vessels with which speculative bubbles rose to new heights. They left economic instability in their wake. The subsequent implosions fell hardest on those who had the least to gain from this adventurism: The rising tide raised the yachts but sank the rowboats.

The results of this instability ought to have been obvious to the experts who promoted this broken ideology. After all, it was a key driver of the Great Depression. Humourist Will Rogers chastised President Hoover’s dabbling in supply-side economics as ignorance after he lost the 1932 election:

“This election was lost four and six years ago, not this year. They [Republicans] didn’t start thinking of the old common fellow…. The money was all appropriated for the top in the hopes that it would trickle down to the needy. Mr. Hoover was an engineer. He knew that water trickles down. Put it uphill and let it go and it will reach the driest little spot. But he didn’t know that money trickled up.”

More than trickled up, the money evaporated from communities: threadbare safety nets were trimmed, and municipal goods disappeared as the reservoir of tax revenues that paid for them dried up. But incomes that no longer kept up with inflation couldn’t possibly make up the difference. Some prominent supply-side architects, Bruce Bartlett and David Stockman among them, admitted they were wrong. That was more than three decades ago. But the genie was out of the bottle. The politicians had become addicted to the drug that fueled the fever dreams these economists once peddled.

Meanwhile, people yelled, “The system doesn’t work for us.” And they were right. The economics didn’t trickle down; they evaporated up and away from the common folk and their communities. Trust in civic institutions flagged at first, then failed. Those left behind turned to conspiracy and embraced toxic populists who pointed to immigrants and wokeism as the problem while passing bigger tax cuts for the wealthiest and cutting health subsidies for those who could scarcely afford these essential goods.

On the ground, the wealthy continued their inexorable progress while exercising their political might. The rest of America fell behind; they tumbled down the mountaintop of the American Dream. Richard Wilkinson and Kate Pickett presented the clear and present danger inequality wreaks upon citizens: declines in health, well-being, educational debt, paired with increased drug addiction, intolerance, and violence, including mass violence. Social corrosion tears civilization apart at the seams. Thomas Piketty, too, laid bare in his analysis what the growth of inequality in a system would do: it had, and would again, herald the decline and eventual collapse of great world powers.

And so, heedless of these warnings, America itself trickled down too. Once a beacon of hope, the “shining city on a hill,” the United States has become a pariah—a warning to the world—of what the vicious fall from grace can look like. These experts, focused on the long view, acting not just with intelligence but with wisdom, were right. They tried to warn those with the power to change course.

They didn’t.

And so, we return to smart people who act without wisdom. With a narrow vision, the adrenaline-addled economy did in the short term what supply-side economists had hoped. Their policies were a stimulant pump into the veins of the body politic. But the long-term costs have been enormous: A country ransacked, a hand in the pocket of the working classes to fund the billionaire class, a tottering government on the precipice of dictatorship built upon the grievances it manufactured. It feels too late to right a falling giant.

But the thing I have learned about Americans is that you can never count them out when they are down. Alexis de Tocqueville noted that Americans harbour a can-do attitude, a “frenetic optimism,” that forms the very fabric of their national ethos. If anyone might be able to turn things around, late though it may be in the attempting, it is the American people. It wouldn’t be the first instance. Indeed, Winston Churchill once said, “You can always count on the Americans to do the right thing—after they’ve tried everything else.” It seems to me that the time is nigh upon them. Let us see what wise expertise they will lean on to fix a broken system: We may yet marvel at the birth of another act of American ingenuity.