Trickle-Down Economics?

The current financial crisis in the U.S. and the world has brought increasing doubts about the economic policy practiced by the Republican administration and Congress during the last eight years--Reaganomics.

Reaganomics, supply-side, or the "trickle-down" policy was made famous by former U.S. president Ronald Reagan. He popularized the controversial idea that greater tax cuts for investors and business, combined with minimal regulations, provides incentives to save and invest and produce economic benefits that trickle down into the overall economy.

Like most economic theories, supply-side economics tries both to explain economic phenomena and offer policy prescriptions for stable economic growth. In general, supply-side theory has three pillars: tax policy, regulatory policy, and monetary policy.

Increasingly, economists are using the real economic evidence of the last eight years to refute the effectiveness of Reaganomics. The pendulum has begun to swing away from generic "trickle down" policies to increased government regulation of private enterprise and increased government investment into tax subsidies that target business activities that provide greater benefits for the middle class.

The outcome of this year's election was largely due to disappointment in the economic policies of the Bush Administration--Reaganomics. Assign students to learn more about Reaganomics (trickle down or supply-side) and alternatives in terms of job creation and growth of the middle class.

Student should write a report of at least 150 words that cites at least three resources and addresses the following essential questions for critical thinking (you can create or substitute others):

• What evidence is there that Reaganomics works?
• What evidence is there that Reaganomics has not worked over the last eight years?
• What alternative economic theory can be implemented today that will bring greater benefits to and expand the middle class?
• What policies would you recommend to bring greater equity to the middle class and why?

Pathfinder 1: Basic Search > type "Reaganomics and Bush and trickle down"

Pathfinder 2: Topic Search > type "economic theory and tax cuts" > Click "Economic theory AND Tax cuts" > View documents

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