Obamanomics-The Trickle-Up Theory: Robert Reich

Monday, March 30, 2009

As much as conservatives insist President Barack Obama’s economic policies (dubbed “Obamanomics”) threaten a return to big government, Robert Reich argues that the new administration offers a plan that is “remarkably conservative.” The former Secretary of Labor under President Bill Clinton says Obama’s 10-year budget plan is expected to bring taxes down to approximately 19% of GDP, which the country hasn’t experienced since the 1990s. Also, government spending is expected to drop to around 22.5% of GDP, “about where it was under Ronald Reagan—including nondefense discretionary spending at about 3.6% of GDP, its lowest since data on this were first collected in 1962.” Reich admits these numbers could prove “wildly optimistic” if the economy doesn’t rebound by early 2010.

 
Reich also writes that it’s important to note the distinction between Obamanomics from Reaganomics. Reagan believed that helping those at the very top would benefit the economy as a whole, a theory that came to be known as “trickle-down economics.” George W. Bush took the same position. As Reich points out, “In 1980, before Reagan took office, the highest-paid 1% took home 9% of total national income. By 2007, before the economy melted down, the richest 1% was taking home 22%.” Obamanomics, on the other hand is premised on the belief that an economy grows best from the bottom up, using increased taxes on the wealthiest 2% of Americans to fund education and improved health care for lower-income children. Reich and others calls this “trickle-up” economics.
-David Wallechinsky, Noel Brinkerhoff
 
Obamanomics Isn't About Big Government (by Robert Reich, Wall Street Journal)

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