Posts Tagged ‘trickle down’

Trump and Reagan

January 28, 2017 1 comment

A couple of days ago I had an interesting debate hosted by France 24, on Trumponomics. Interesting because there was an overall agreement between me and Dan Mitchell from Cato Institute, even if from totally opposite points of view, on the fact that Trumponomics does not exist. The Donald is pushing forward a number of inconsistent measures, whose final effect is impossible to forecast (except that it is a safe bet to say that it will not end well).

Mitchell argued of course that the only good policies imply the downsizing of the government. As one can easily imagine I would tend to disagree. And over and over again, during the 40 or so minutes of discussion, came back the reference to the golden era of Ronald Reagan. Trump needs to cut taxes, as Reagan did, and downsize government, as Reagan did. And growth and unemployment will return, as under Reagan

When I said that the problem of the US was not the lack of jobs per se, but rather the increasingly unequal distribution of income, that started precisely under Reagan, Mitchell replied that this was false (I officially spread fake truths!), claiming that median income under Reagan increased. Well, think again. An old post by Paul Krugman had already dispelled the mith, and I had written on it myself. I copy the figure from that post (updated) here:



So, while it is true that median income increased under Reagan-Bush (Mitchell is formally right), it is hard to define it an era or decreasing inequality I My conclusion back then was that growth does not lift all boats, and trickle-down economics does not exist. And Reagan did not do that well in terms of growth either. And did I mention twin deficits?

Just a final remark. The downsizing of government under Reagan is also a myth (which is rather good news, by the way): Look at OECD data:2017_01_trump_and_reagan


I rest my case. People at Cato should pick their role models more carefully.