Why did President Ronald Reagan give the 1% so many tax cuts?

Also called “trickle down economics,” you may have heard the term “Reaganomics” tossed around in political content online or debates. To economic conservatives, it was the genius policy that saved America. To economic progressives, it was the start of our biggest economic problems and injustices. But the term signifies a simple and powerful idea: what if the taxes for the richest people and for big corporations were cut and everyone else would supposedly benefit?

That was the promise of the economic policies backed by President Ronald Reagan in the 1980s. Officially called “supply-side economics,” the guiding idea is that if you let the wealthiest individuals and companies keep more of their money, they would use it to invest in their workers, build factories and create jobs. These benefits would eventually “trickle down” to the workers in the middle and lower classes in the form of higher wages and more opportunities.

With the legislation in action, the government did two main things. First, it slashed the top income tax rate from 70% down to 28%. Second, it cut back on regulations for businesses and reduced funding for many social programs. The idea, a commonplace conservative ideology,  was to get the government out of the way of the top 1% and corporations’ money and let the free market do its work.

Ethan Raney ‘27 said, “Reaganomics basically just cut taxes for the wealthy and promoted deregulation and thought that the wealth would ‘trickle down’ to the lower class which is proven to be untrue. Reaganomics cemented neoliberalism in the US after being piloted in Chile in the 70s with Milton Freedman and is what both the democratic and republican party rely on to stay in power.”

One major question still stands: did it work? For the rich, absolutely. The stock market soared and the wealth of the richest Americans exploded.  However, for the working class, the numbers tell a different story. In a 1984 New York Times opinion piece, representative Berkeley Bedell pointed out that “according to the Bureau of Labor Statistics, 10 million jobs were created under Jimmy Carter; only 5.1 million under Ronald Reagan.” While the rich got much richer as the stock market prospered, wages for average workers stayed largely the same. Over time, the government started spending much more on the military and because the huge tax cuts meant less money coming into the federal government, the national debt tripled. The promise that everyone would rise together was becoming the truth that a canyon was growing even wider between the ultra-rich and the working class.

The residue of Reaganomics is found everywhere today. It made big tax cuts for the wealthy, a standard republican policy. It accelerated a shift in economic power from workers to shareholders, ultimately planting the idea that what’s good for Wall Street is automatically good for every street. An idea that, for millions of Americans whose jobs moved overseas or whose paychecks stopped growing, never added up. When asked his thoughts on Reaganomics, Henry Oesterle ‘27 said, “My biggest issue with Reaganomics is that it empowers the elite at the expense of regular people, since the middle and lower class is forced to rely on the goodwill of the rich to gain economic prosperity. Instead of directly assisting all Americans by instituting government social programs and economic reforms via the democratic process, Reaganomics takes money from the government in the form of tax cuts for the rich, in the hope that the wealthy cut prices and increase wages, which rarely happens in practice.”

So, what is Reaganomics? According to George H.W. Bush in the 1980 Republican primary debate, “It is voodoo economic policy.” But really, it’s the blueprint for an economy where financial gains are concentrated at the top, justified by a theory that the benefits would shower down on the rest of the nation. Almost 50 years later, that shower has not started to trickle.