Q:  Does Trickle-Down Economics Work?  Are the rich job creators?

A:  No!  As Nick Hanauer says in his now famous TED talk video, it is an article of faith for Republicans that if taxes on the rich go up, job creation will go down.  This is the essence of trickle down-economics first promoted by David Stockman, President Reagan’s Director of the Office of Management and Budget.  At the time it was called supply-side economics, but years later Stockman had a change of heart and started referring to the policy as voodoo economics and admitted it had no rational other than an excuse to lower taxes on the rich. 

But the question remains, do lower taxes on the rich spur economic growth and create jobs?  Nick Hanauer, one of Amazon’s first investors, would say, “No”!  In the video, Nick says he makes approximately 3000 times what the average worker makes. He owns three cars and only buys a few pairs of pants a year, not 3000, and that he can’t possibly buy enough stuff to make up for those who can’t afford to buy any new cars or pants.  In Nick’s view, jobs are created by consumer demand, and it is middle class consumers who are the true job creators as they spend a far greater portion of their income buying stuff, and that is what drives jobs and our economy.

More recently the non-partisan Congressional Research Service concluded a study of the last 65 years of our economy and found absolutely NO correlation between the top tax rates and economic growth.  Their conclusion was that lower tax rates on the rich do NOT create economic expansion or jobs!  They did however find a correlation between lower tax rates on the rich and growing income inequality, a point that Nick Hanauer also makes. 

There is also no doubt that tax cuts have also led to greater budget deficits and national debt.  That is why Reagan and George W. Bush are credited with the policies most responsible for our currently growing national debt as seen in the graphic below.

National Debt

So whether you listen to the very logical arguments in Nick Hanauer’s TED talk, or read the very careful analysis by the non-partisan Congressional Research Service, there seems to be little doubt that trickle-down economics does not work and is a cynical self-serving way for the rich to get even richer while putting the nation in more and more debt.  We should purge the idea of supply-side or trickle-down economics from our political dialog.  It simply does not work.