Tag: trickle-down economics

Trickle-down economics, also known as the horse-and-sparrow theory, is a pejorative term for government economic policies that disproportionately favor the upper tier of the economic spectrum (wealthy individuals and large corporations). The term has been used broadly by critics of supply-side economics to refer to taxing and spending policies by governments that, intentionally or not, result in widening income inequality; it has also been used in critical references to neoliberalism. These critics reject the notion that spending by this elite group would "trickle down" to those who are less fortunate and lead to economic growth that will eventually benefit the economy as a whole.

It has been criticized by economists on the grounds that no mainstream economist or major political party advocates theories or policies using the term trickle-down economics. While criticisms have existed since at least the 19th century, the term "trickle-down economics" was popularized in the US in reference to supply-side economics and the economic policies of Ronald Reagan.

Major examples of what critics have called "trickle-down economics" in the US include the Reagan tax cuts, the Bush tax cuts, and the Trump tax cuts. Major UK examples include Margaret Thatcher's economic policies in the 1980s and Liz Truss's mini-budget tax cuts of 2022, which was an attempt to revive such Thatcherite policies. While economists who favor supply-side economics generally avoid applying the "trickle down" analogy to it and dispute the focus on tax cuts to the rich, the phrase "trickle down" has also been used by proponents of such policies.