Trumped up Trickle Down Economics

The 2016 United States presidential election is as important an economic event as it is a political one. The republican and democrat parties are both known for their opposing economic views. The Republican Party has more right wing views, and it believes in the principles of free market.

All Republican presidents from Ronald Reagan to George Bush are known to support the entrepreneurs. On the other hand, the Democrats are more inclined towards the workers. The person who will be elected to sit in the White House will direct the economic policy of the United States and will, therefore, have a substantial impact on the economy of the world.

Economic issues were at the forefront in all the three presidential debates. One particular term i.e. “trumped up trickle-down economics” was being consistently used by Hillary to mock her opponent i.e. Donald Trump. In this article, we will understand what Trumped Up Trickle Down economics is and why it is good or bad for the United States economy.

What is Trickle Down Economics ?

Trickle-down economics refers to a particular economic doctrine. This doctrine believes that entrepreneurs are the agents of all economic growth. Hence, if any government wants to grow the economy, they must first create a conducive environment in which entrepreneurs will be able to thrive. A particularly effective way to create a favorable environment if by giving tax breaks.

Trickle-down economics refers to giving economic incentives at the top i.e. to corporations and entrepreneurs and hoping that the incentives flow down to the common people in the form of more employment, better-paying jobs and less social security to pay!

The benefits are believed to be trickling down from top to bottom and hence the name, trickle down economics.

What is Trumped Up Trickle Down Economics ?

Trickle down economics has been vilified by the media as a hidden form of crony capitalism. It is believed that politicians shower benefits on their friends in the name of trickle down economics. These benefits never reach the common people and hence this system, some say, does not work at all.

Hillary is using this bad image of trickle down economics and combining it with the corporate image of Donald Trump to create a new term i.e. Trumped Up Trickle Down economics. This implies that the normal dangers of trickle down economics will be on steroids when someone like Donald Trump will administer these policies.

Republican nominee Donald Trump has proposed cutting the tax rate applicable to corporations from 35% to 15%. This will take the United States from being one of the most taxed countries in the world to being one of the least taxed. Donald Trump believes will make the corporations stop outsourcing their work to countries which have cheaper tax regimes.

Donald Trump’s policy is rooted in the belief that a lower tax rate will move corporations and jobs back home thereby raising the quantum of tax collected even though the rate levied will be a lower one!

Why Does it Fail ?

Hillary Clinton’s fears are not without reason. Certain reasons could cause the trickle down economics to fail. However, her arguments do not address the real issue and instead rely on fear mongering.

  • Operations Overseas: Corporations could keep their operations overseas. This would lead to job creation and wage growth overseas. They would then repatriate the profits home to enjoy the benefits of a lower tax rate. Trump says that there will be regulation to ensure that lower tax rates only apply to corporations that move their work back home. However, this would lead to an increase in regulation i.e. oppose the policy of reducing regulation that Donald Trump has been pushing all along.

  • Investments Overseas: Also, the profits earned from the operations conducted in the United States can be sent overseas in the form of investments. This could lead to benefits being enjoyed by people at the top and no benefits being trickled down to the average American. This can once again be stopped by costly regulation, to which Donald Trump himself would be opposed.

  • Automation: Lower tax rates could translate into fewer jobs as well. Companies could automate large chunk of their work, earn profits and pay less tax. However, this would not translate into more jobs or higher wages! Instead, it could be quite the opposite. A high minimum wage interferes with trickle down economics. Hence, Donald Trump must also look at minimum wage laws to make the trickle down economics work better.

What is the Alternative ?

Donald Trump’s trickle down economics may or may not work for the government. However, it will not raise the tax bills of the people of the United States. Hillary Clinton’s socialistic policies may end up raising this bill just like Barack Obama’s policies did. The state cannot pay for anything unless it has taken the money from someone first. The losers usually are the middle class as their salaries get heavily taxed.


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