"Trickle down" has long been a pejorative, usually applied by Democrats to Republican economic ideas. The imagery is not entirely clear, but there is no doubt about what the term is supposed to convey. As a result of some proposed government action, citizens already well off in terms of income and probably wealth will benefit the most, and some of their gains will "trickle down" to those who are less well off.
David A. Stockman, director of the Office of Management and Budget, in his now famous conversations with Washington Post editor William Greider recorded in an article in the Atlantic Monthly, agreed that a key element of Reagan administration economic policy--reducing the top personal income tax rate from 70 percent to 50 percent--was "trickle down."
In order to get Congress to go along with cutting the top rates, the same logic that lower rates would provide incentives to taxpayers whatever their income level had to be devised, Stockman indicated. "It's kind of hard to sell 'trickle down,' so the supply-side formula was the only way to get a tax policy that was really 'trickle down.' Supply-side is 'trickle-down' theory," he said.
A repentant Stockman later called the phrase "terribly unfortunate." And Tom Bethell of the American Enterprise Institute, in an editorial page piece in the Wall Street Journal, attacked it head-on. "The 'trickle down' metaphor implies that there is a better way of distributing wealth--a 'more equitable' way. That way is by conveying it directly to the poor. Don't wait for it to 'trickle' down. Hand carry it to them," Bethell wrote.
Bethell goes on to argue that true supply-siders believe that "wealth is created by workers (at all income levels), it doesn't trickle down to them."
But the personal income tax cuts proposed by the Reagan administration and passed by Congress last year indisputably provided much larger tax reductions for those at the upper end of the income scale, whether measured in dollars or in terms of tax rates. When the impact of inflation is included, the reductions in tax rates turns out to be still smaller for most taxpayers in low- and middle-income brackets.
This tax cut reversed the trend of most of the tax reductions of the 1970s which favored low-income taxpayers over those above.
William Safire, in his "Political Dictionary," traces the origins of "trickle down" to William Jennings Bryan's 1896 "Cross of Gold" speech, in which he declared, "There are those who believe that, if you will only legislate to make the well-to-do prosperous, their prosperity will leak through on those below." The explicit phrase "trickle down theory" appeared in the 1932 presidential campaign, Safire notes, when the Democrats criticized Herbert Hoover's plan to restore prosperity to business as the way to spark a recovery.
Then, as now, the issue was one of income distribution and how government policies should be used to change it. The Reagan administration has chosen to seek to make the nation's income distribution somewhat less equal to encourage entrepreneurs to take risks in the hopes that, in the process, they will lead the way to rapid, non-inflationary economic growth.
The supply-siders see that simply as a matter of allowing someone willing to take the risks to have the rewards.That term is reserved for government policy that would change the distribution of income in such a way as to make it less equal. And whether one is for or against the change, everyone knows "trickle down" is a label to be avoided at all costs. Ask David Stockman.