Last night’s Republican debate brought the idea of “trickle-down economics” to the forefront again. The theory — essentially that a lot of money at the top will eventually mean a lot of money for the poor, too — is popular with people like Marco Rubio. Note that when we say “people like Rubio,” we don’t necessarily mean “Republicans.” We mean “people who don’t know sh*t about economic theory.” That’s because while trickle-down economics, occasionally, provides cool anecdotes for presidential candidates, it doesn’t work on a large scale.
The top of the pile is good at absorbing the influx of money — that bit is a smash. But then, a strange and TOTALLY PREDICTABLE thing happens: It sticks. Or as financial economist Thad Beversdorf put it to Uproxx: “Any policy that narrows income distribution, even if total income increases, will necessarily hurt economic growth and, thus, standard of living for most of us.”
We asked Evan Kirkpatrick, Forbes contributor and founder of Wendell Charles Financial, to share his truth about trickle-down economics. Kirkpatrick’s focus is more on tax theory than monetary policy, but his conclusion is the same: Watering only the top leaves will create a misshapen tree.
