Here are those words: “My fellow Americans, trickle-down, trickle-down economics has never worked.”
With that simple sentence, Biden sought to officially close the book on the dominant economic theory of the last 40ish years: That success by affluent people at the top of the economy would, eventually, trickle down to the average American. It’s been the theory behind every major tax cut pushed by Republican presidents since Ronald Reagan — including Donald Trump’s 2017 cut — and is so closely associated with our 40th president that the economic idea is known colloquially as “Reaganomics.”
The idea was made popular by Reagan who, in the teeth of a recession, delivered a speech to the country in February 1981 in which he made the argument that the way to revive the economy was by shrinking government and returning more money to individuals — especially wealthy ones — who would, in turn, drive a top-down economic comeback.
“Since 1960, our government has spent $5.1 trillion. Our debt has grown by $648 billion. Prices have exploded by 178%. How much better off are we for all that? Well, we all know we’re very much worse off. When we measure how harshly these years of inflation, lower productivity, and uncontrolled government growth have affected our lives, we know we must act and act now …
” … We can create the incentives which take advantage of the genius of our economic system — a system, as Walter Lippmann observed more than 40 years ago, which for the first time in history gave men “a way of producing wealth in which the good fortune of others multiplied their own.”
“Our aim is to increase our national wealth so all will have more, not just redistribute what we already have, which is just a sharing of scarcity. We can begin to reward hard work and risk-taking, by forcing this government to live within its means.”
So pervasive was the belief that a small federal government — and tax cuts for the wealthy — was the recipe for economic success that Democratic President Bill Clinton declared that “the era of big government is over” in the mid-1990s as a way to signal to independents and Republicans that he understood that government was, if not the enemy, than an enemy.
Which is what makes what Biden said on Wednesday night matter so much. In the biggest speech of his (admittedly young) presidency, he stated, without hesitation, that Reaganomics never worked. That incentivizing the wealthy with tax cuts never trickled down. And that the way that you build a healthy economy is not top-down but bottom-up — and with a major assist from the federal government.
“It’s time to grow the economy from the bottom and the middle out,” Biden said directly after declaring trickle-down’s death.
Biden’s belief is that the combination of Donald Trump’s presidency and the Covid-19 pandemic have reminded people that government isn’t a bad thing — and can be a very good thing. That, confronted with the fragility of our well-being — economic, physical, mental — the idea of the government helping to build a social safety net will be appealing once again.
“We have to prove democracy still works,” Biden said in Wednesday’s speech. “That our government still works — and can deliver for the people.”
He has bet his presidency on just that idea.