According to The Independent’s economics editor Ben Chu, what would later be championed by the free-market right was actually first spun as a joke by one-time circus cowboy and humourist Will Rogers. At a time when the US was in the midst of the Great Depression he said:
Money was appropriated for the top in hopes that it would trickle down to the needy.
Trickle-down economics is the idea that reducing the tax burden on the wealthiest is good for the least wealthy, as the rich see their disposal incomes increase and therefore spend more on services that companies can reinvest and create new jobs.
It’s also completely wrong, claims a report out this week from former US Treasury secretary Larry Summers and shadow chancellor Ed Balls.
The report, from the Centre for American Progress, states:
Left to their own devices, unfettered markets and trickle-down economics will lead to increasing levels of inequality, stagnating wages, and a hollowing out of decent, middle-income jobs.
According to Summers and Balls, the only thing tax cuts for the rich create is a growing income gap, as the wealthiest members of a society do not necessarily ‘invest’ in it, they could just save their money for example.
This graphic helps explain the idea versus the reality.
Once you realise that trickle-down economics does not work, you will see the excessive tax cuts for the rich as what they are: a simple upward redistribution of income, rather than a way to make all of us richer.
Ha-Joon Chang, economics professor at Cambridge University
What’s the alternative? The Summers-Balls report’s suggestion is simple: Higher wages for ordinary workers, increased tax rates for the super-rich and corporations, and the closing of international tax loopholes, with the money instead being spend on public infrastructure.
That doesn’t sound like too much, especially in a week when it was revealed that within 12 months the richest one per cent of the planet will be richer than the remaining 99 per cent…
Original article by Ben Chu (edited by i100 staff)