"Trickle-down economics", also referred to as "trickle-down theory", is a term associated with laissez-faire capitalism in general and more specifically supply-side economics, used to characterize economic policies as favoring the wealthy or privileged.
Supply-side economics is a macroeconomic theory that argues economic growth can be most effectively created by investing in capital and by lowering barriers on the production of goods and services.
Laissez-faire is an economic system in which transactions between private parties are free from government interference such as regulations, privileges, tariffs, and subsidies.
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In recent history, the phrase has been used by critics of supply-side economic policies, such as "Reaganomics".
Reaganomics refers to the economic policies promoted by U.S. President Ronald Reagan during the 1980s.
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David Stockman, who as Reagan's budget director championed Reagan's tax cuts at first, but then became critical of them, told journalist William Greider that the "supply-side economics" is the trickle-down idea: "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.
David Alan Stockman is a former businessman and U.S. politician who served as a Republican U.S. Representative from the state of Michigan and as the Director of the Office of Management and Budget under President Ronald Reagan.
William Harold Greider is an American journalist and author who writes primarily about economics.
' Supply-side is 'trickle-down' theory."
Political opponents of the Reagan administration soon seized on this language in an effort to brand the administration as caring only about the wealthy.