Lincoln * Institute

Ralph R. Reiland

Ralph R. Reiland

The B. Kenneth Simon Professor of Free Enterprise at Robert Morris University

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of Public Opinion Research, Inc.

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Reflections

Trickle Down Denial

by Ralph R. Reiland
 

"Why’d you write the column in the newspaper about the success of trickle-down economics during the Kennedy administration?,” a business acquaintance of mine, a hardworking owner of a small printing business, recently asked me. "It didn’t work,” he said, authoritatively. “Everyone says supply side economics doesn't work.”

“I don’t know why they say that, but they’re wrong,” I replied. “Tax cuts worked during both the Kennedy and Reagan administrations in turning around slow economies and delivering increased economic growth, higher employment and widespread prosperity.”

Maybe the skeptics are ideologically reluctant for some reason to acknowledge that financial incentives and tax cuts matter, or opposed to admitting that businesses are the key creators of jobs and income, that private enterprises are the essential engines of social and economic betterment in the U.S. economy, or perhaps, more broadly, the cynics are disinclined to concede that the capitalist system and private markets have created the highest standards of living in the world for the largest numbers of people.

In the Kennedy years of pro-growth tax cuts, an inherited stagnant economy was energized by way of business tax cuts in 1962 and across-the-board income tax cuts in 1964 that together more than doubled the rate of GDP growth in the United States while widely boosting job creation and reducing poverty.

With a GDP expansion rate in the U.S. of 2.1 percent from 1944 through 1960, U.S. economic growth following Kennedy’s tax-cutting stimulus program exceeded 5 percent per year for nearly a decade, producing millions more jobs than in the pre-Kennedy periods of lower GDP growth and slow job creation.

The number of people in the U.S. living below the line poverty line, as reported by the U.S. Bureau of the Census, declined by millions following Kennedy’s economic revitalization program, dropping from 39.8 million in 1960 to 36.0 million in 1964 to 26.0 million in 1979. Correspondingly, the national rate of unemployment was decreased.

Similar results followed Reagan’s tax-cutting initiatives, with economic growth expanding and the national jobless rate dropping in half, from 10.8 percent in 1983 to 5.5 percent when Reagan left office in 1989.

Nevertheless, my business acquaintance was correct in saying there’s no shortage of people, from politicians to boxers to popes, who maintain that supply-side economics and pro-growth tax cuts don’t work, in spite of the evidence.

Stated Muhammad Ali, “Tolerance and understanding won’t ‘trickle down’ in our society any more than wealth does.”

From Hubert Horatio Humphrey, Democratic Party Senator, Vice President of the U.S. and presidential nominee, discrediting trickle-down economics: “If you give the horses some hay, somehow the sparrows will

have something to pick at later.”

And from Democratic presidential candidate John F. Kerry, continuing Humphrey's attempt to reduce the success of more jobs, less poverty and higher levels of prosperity to a bodily function: “I believe every worker in America is tired of being trickled on by George W. Bush.”

Democratic presidential candidate Hillary Clinton: “Throughout the 1980s, we ... found that while prosperity does not trickle down from the most powerful to the rest of us, all too often indifference and even intolerance do.”

And Pope Francis, kindly but clearly not infallible when it comes to economic analysis: “Some people continue to defend trickle-down theories which assume that economic growth, encouraged by a free market, will inevitably succeed in bringing about greater justice and inclusiveness in the world. This opinion has never been confirmed by the facts.”

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Ralph R. Reiland is Associate Professor Emeritus of Economics at Robert Morris University in Pittsburgh.

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Ralph R. Reiland

Pittsburgh, Pa. 15236

Email: rrreiland@aol.com

Phone: 412-527-2199