On “trickle-down economics”

“Trickle-down economics” is not a real theory. It is a slur of sorts used by those who dislike the theory of supply-side economics. In fact, the phrase “voo-doo economics” was employed first by George Bush, Sr. (and immortalized in Ferris Bueller’s Day Off by Ben Stein) when campaigning against Ronald Reagan in 1980.

The reality is that supply-side economics has nothing to do with the trickle down effect of tax cuts. In fact, if anything supply side would be best thought of as trickle up, and not about taxation, but about ideas. The more you encourage entrepreneurship and innovation, the more new products, services and knowledge will be created and passed into the economy.

Simply put, supply side economics believes that without supply there is no demand. It is a modern manifestation of Say’s Law – Supply creates demand. Even Karl Marx understood this. Note that he wanted to control the “means of production” not the “means of demand.” Keynesianism, and all it modern manifestations, especially those that emanate from “The Krugtron” (Paul Krugman, PS – He called himself the Krugtron) is based on the exact opposite idea – demand creates supply. It is nonsense, unless you believe in fairies that deliver presents (aka Santa Claus) and big government.

Oh wait, those are the same thing.

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