How Mitt Romney Finally Killed Reaganomics
November 13, 2012
By Michael Tomasky
Here’s something that happened in this election that has been largely overlooked but I think is a very big deal indeed. Trickle-down economics died last Tuesday. The post-election chatter has been dominated by demographics, Latinos, women, and the culture war. But economics played a strong and even pivotal role in this election too, and Reaganomics came out a huge loser, while the Democrats have started to wrap their arms around a simple, winning alternative: the idea that government must invest in the middle class and not the rich. It’s middle-out economics instead of trickle-down, and it won last week and will keep on winning.
You know the history. Arthur Laffer sketched out his famous curve—whether on a napkin or not is apparently still debated—back in 1974, when the top marginal rate was 90 percent. There is a certain point, Laffer explained, at which rates decrease revenue. Since many of the people to whom he was doing this explaining found themselves to be in or near the top bracket, quite naturally they liked his theory a lot.
Up sprang the nonprofits devoted to getting the little people to buy in to the idea that taxes on the wealthy should be lowered, and soon enough supply-side economics was born. Along came Ronald Reagan to assure everyone that the rising tide would lift all boats. It’s never happened quite the way conservatives said it would. Even during the general prosperity of the second Reagan term, income inequality began to expand dramatically, wage stagnation became a permanent feature of American life, and the immiseration of the poor worsened.