Trickle-Down Economics? Term Is Back as Biden's Big-Spending Plans Reject GOP Policies

The phrase has come up in multiple public addresses and finds its way into more off-the-cuff remarks as well.

"Folks, for too long we've seen that trickle-down economics does not work," President Joe Biden said this month after visiting with students at Tidewater Community College in Virginia.

"My fellow Americans, trickle-down economics has never worked, and it's time to grow the economy from the bottom and the middle out," Biden said during his first public address to a joint session of Congress, which was viewed by millions on television.

Under the "trickle-down" philosophy, also called supply-side economics, the benefits from tax cuts and incentives for businesses and the wealthy are expected to trickle down to stimulate the economy.

"The argument is that if you essentially provide high-income people with more income, they will turn that income into investment," Randy Albelda, a professor of economics at the University of Massachusetts Boston, told Newsweek.

Experts who spoke to Newsweek said Biden is using an old-school phrase, which has been hotly debated since the Reagan administration, to contrast the GOP's preferred small-government economic philosophy with his plans to use trillions in federal spending to stimulate the economy following a pandemic that's lasted more than a year.

"I think it's interesting that he's using this term," Charles Hankla, a political science professor at Georgia State University, said. "The term hasn't been heavily used for the last couple of decades."

Hankla noted that it began as a "pejorative term that Democrats have used to tar Republican economic policies as being 'pro-rich.'"

"Republican economic policies have remained in line with Reagan—that we should be cutting taxes," he said.

Biden has called for increased taxes on the wealthy to pay for social programs that he says will benefit low- and moderate-income families in his stimulus packages, including child care and education programs and higher wages for workers. He's promised that individuals who make less than $400,000 will see no tax increase in his proposal.

Albelda, who wrote a 1988 book called Mink Coats Don't Trickle Down: The Economic Attack on Women and People of Color in the 1980s, doesn't buy the trickle-down theory. "It doesn't turn around to increase the demand for goods and services or reduce unemployment," she said.

An Ipsos-Reuters poll conducted last month after Biden's address to Congress found 51 percent of respondents agreed with the president that trickle-down economics has "never worked in America." About 26 percent disagreed.

But Biden, who says he wants bipartisan support for his stimulus packages, faces heavy pushback from Republicans in Congress who remain committed to the small-government, tax-cut policies that favor the wealthy and corporations.

In March, Congress approved Biden's $1.9 trillion package for pandemic recovery efforts and economic relief, the American Rescue Plan. The other two proposals—a $2.3 trillion infrastructure plan and his $1.8 trillion American Families Plan—remain in negotiations with Congress. But conservatives already are pushing back as the Biden administration works to build public support around what would mean $6 trillion in federal spending if all the legislation is approved.

"It sounds like what the president is complaining about is that the government doesn't control more of people's lives," Matthew Dickerson, director of the Grover M. Hermann Center for the Federal Budget at the conservative Heritage Foundation, told Newsweek.

Dickerson argued that after the 2017 Tax Cuts and Jobs Act, worker wages went up, families had more disposable income and unemployment went down.

"[Biden] says he wants businesses to pay their 'fair share,' but of course businesses don't pay taxes, they pass that along to consumers," he said. "That would have a really negative act on people—a huge mistake."

The coronavirus pandemic, which has killed nearly 580,000 people in the United States, also devastated the U.S. economy, as businesses shut down and laid off workers. Albelda said that has created a new situation for Biden to overcome as well as an opportunity for a reversal of trends that have created economic hardships for families.

"I've watched for 40 years of the exact opposite of the treatment, which is to say rich people will save us," she said. "To see a commitment to investment in human infrastructure, human capital, is extraordinary after 40 years of disinvestment."

Hankla called the Biden proposals "mind-blowing."

"The Democrats have a bare majority in the Senate and that may go away after the midterms, so Biden's trying to do everything he can in the beginning," he said. "This is the time to do big things, and the window may not open again for a long time."

Joe Biden Blasts Trickle Down Economics
President Joe Biden leaves after an event at the White House's State Dining Room on May 5. Biden delivered remarks on his administration’s implementation of the American Rescue Plan. Alex Wong/Getty Images