Forum Post: Trickle down (supply side) economics is a failure and always has been.

To anybody that thinks trickle down might work, let's look at that.

Reagan was most famous for his wholesale implementation of the theory. Let's see how that worked out during his presidency.

The top effective tax rate in 1981 was 69.125% on income over $215,400. In 1988, it was 28% on income over $29,750, which means the rich paid much less and everyone else paid more (redistributing wealth from the people to the privledged few).

In FY 2005 dollars, the total federal receipts in 1981 was $1,251 and in 1988 it was $1,421 (in billions).

Source: Tax Policy Center http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Docid=200

You have to normalize the numbers to a single fiscal year because of things like inflation. Money isn't worth in one year what it might be worth in the next. Otherwise you're not comparing apples to apples.

So, the increase was $1,421 - $1,251 = $170 Billion.

And during that time period, in 2005 dollars, the GDP increased from $5,982 to $7,607 (in billions).

Sources: US Department of Commerce, Bureau of Economic Analysis http://www.bea.gov/national/index.htm#gdp http://www.bea.gov/national/xls/gdplev.xls

So during that period the country's income (basically) increased by $1.6 Trillion (27%), but revenues only increased by a pathetic $170 billion (13%).

In 1981 (using 2005 dollars), the deficit was $79 billion per year. In 1988, it was $155 billion per year (nearly double). Let's look at that for a minute...

Was the budget balanced during ANY of those years?

1981 $79 billion deficit 1982 $128 billion deficit 1983 $207.8 billion deficit 1984 $185.4 billion deficit 1985 $212.3 billion deficit 1986 $221.2 billion deficit 1987 $149.7 billion deficit 1988 $155.2 billion deficit

http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Docid=200

Total new debt created from deficits during Reagan - $1.338 Trillion. So during Reagan's term, he increased our debt by nearly 20% of GDP.

So we had massive increases in our national debt...

And:

We had Black Monday in 1987: http://en.wikipedia.org/wiki/Black_Monday_%281987%29

Which led to the early 1990's recession: http://en.wikipedia.org/wiki/Early_1990s_recession

Remember also during the 1980's, the agriculture speculation bubble burst which led to record numbers of farmers being evicted and foreclosed upon (sorta like the Bush housing bubble).

Read about what happened here: http://eightiesclub.tripod.com/id300.htm

Not to mention the Savings & Loan crisis, which is where the government deregulated a bunch of S&L's (very basically like banks), who then loaned a bunch of money out on bad mortgages, and then had to be bailed out by the government.

http://en.wikipedia.org/wiki/Savings_and_loan_crisis

Sound familiar?

Whoever said that the definition of insanity was doing the same thing over and over and over and expecting different results was absolutely right.

Trickle down economics doesn't work and it never has.