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Articles

The “Trickle Down Economics” Myth — and How to Refute It

Published in Communicating Liberty .

(From the One-Minute Liberty Tip section in Volume 19, No. 1 of the Liberator Online. Subscribe here!)

Economist and syndicated columnist Thomas Sowell begins a recent column this way:

“New York’s new mayor, Bill de Blasio, in his inaugural speech, denounced people ‘on the far right’ who ‘continue to preach the virtue of trickle-down economics.’ According to Mayor de Blasio, ‘They believe that the way to move forward is to give more to the most fortunate, and that somehow the benefits will work their way down to everyone else.'”

President Obama, the New York Times, the Washington Post, Paul Krugman and many other prominent persons and publications have similarly attacked “trickle-down economics.”

There’s just one problem, says Sowell. No economist in history has ever advocated such a policy. The phrase is pure propaganda; the alleged theory is a straw man. “Trickle-down economics” is a pejorative term made up by opponents of free enterprise to distort what genuine free market reform is all about and to demonize those who advocate free enterprise.

Indeed, writes Sowell: “If there is ever a contest for the biggest lie in politics, this one should be a top contender. While there have been all too many lies told in politics, most have some little tiny fraction of truth in them, to make them seem plausible. But the ‘trickle-down’ lie is 100 percent lie.”

Sowell argues, in his book Basic Economics: A Citizen’s Guide to the Economy, in papers, and in several columns, that no economist in history has ever advocated a “trickle-down” economic theory, i.e., giving tax breaks, regulatory breaks, and other advantages overwhelmingly to the wealthy, in the belief that some crumbs from this will eventually fall to the poor.

“Years ago, this column challenged anybody to quote any economist outside of an insane asylum who had ever advocated this ‘trickle-down’ theory. Some readers said that somebody said that somebody else had advocated a ‘trickle-down’ policy. But they could never name that somebody else and quote them.”

Further, Sowell notes: “The ‘trickle-down’ theory cannot be found in even the most voluminous scholarly studies of economic theories — including J.A. Schumpeter’s monumental History of Economic Analysis, more than a thousand pages long and printed in very small type.”

In short, the phrase “trickle-down economics” is a slur, a weapon used to attack free market advocates by distorting what they actually believe.

If you hear the phrase “trickle down economics” used to describe what you believe or what free enterprise reform is concerned with, don’t accept it. Don’t allow it to define what we believe. Politely but firmly reject it, as we’ve done above.

Say instead that what you favor is genuine free enterprise. Libertarians believe free enterprise benefits everyone, especially the disadvantaged, and we want to bring those benefits to everyone — rich, middle class, and poor alike.

Then make a persuasive case that free market small-government reforms will immediately benefit the poor. Point out how government policies destroy jobs and keep skilled but unlicensed entrepreneurs from starting businesses. How the government education monopoly harms poor children. How minimum wage laws, high taxes, convoluted tax laws, regulations, corporate subsidies, drug laws and so many other government policies hurt poor families and deny them opportunity.

There’s not room to cover these issues in this column, of course. As we’ve noted in previous columns, these are the kinds of questions libertarians are frequently asked, and you should have soundbite answers and up-to-date facts at your fingertips.

Finally, when choosing the phrase to describe the economic system of liberty, consider alternatives to “laissez faire capitalism,” which provokes a negative response from many people. By far the most positive such phrase, according to recent Gallup polls, is “free enterprise.” You can read more about this in my column here.

Help the truth about this too-often-heard propaganda phrase “trickle down” to fellow freedom fighters. Pass the word on to other free enterprise advocates.


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