Trickle down fallacy: debts, deficits and wealth distribution

From Heather Cox Richardson’s Blog

One story jumped out at me today. The Hill reported that as soon as a Democrat is back in the White House, Republicans intend to retrench and be careful about how the country spends money, although during Trump’s term, even before the pandemic, they spent huge sums without worrying about it.

This is a pattern. Since President Ronald Reagan’s presidency in the 1980s, Republicans have insisted that tax cuts will pay for themselves by stimulating economic growth, thus increasing tax revenues as everyone gets richer. At the same time, they have dramatically increased military spending without ever suggesting a way to pay for it. Then they complain about the debt, and insist that the only way to get our finances back into whack is to cut domestic spending.

There are two important metrics involved in figuring out our national expenses. One is the deficit, which is the difference between the money the government spends every year and the money it takes in. The other is the debt, which is the total amount the government owes.

Until the late twentieth century, the government took on large debt during the Civil War, WWI, WWII and during the Great Depression, when Democrat Franklin Delano Roosevelt initiated a new kind of government that regulated business, provided a basic social safety net, and promoted infrastructure. But leaders of both parties believed that deficits should reflect emergencies and that debt should be held at a low percentage of the nation’s Gross Domestic Product, used to estimate the growth of the economy. It was to pay down the national debt that the Republican Party created national taxation, including the income tax, during the Civil War, and that Republican Dwight Eisenhower kept the top income tax bracket at 91% during his administration. Eisenhower was the last Republican president to balance a budget.