Adding another nail to the coffin of Reaganomics, a recent study
published by the International Monetary Fund (IMF) has concluded that,
contrary to the principles of “trickle-down” economics, an increase in
the income share of the wealthiest people actually leads to a decrease
in GDP growth.“The benefits do not trickle down,” the authors of the study write,
directly contradicting the theory that US pretender Ronald Reagan
popularized in the 1980s. Reagan argued that decreasing the tax burden
for the rich–investors, executives, corporations and the like–would not
only increase their own income but stimulate broad economic growth as
they create opportunities for others’ increased prosperity. This belief
has been at the center of conservative economic thought in the United
States and abroad since Reagan’s presidency, during which he cut tax
rates for the rich.
But the IMF study’s five authors say we should instead focus on
raising the income of the poor and the middle class. “Widening income
inequality is the defining challenge of our time,” they write. “In
advanced economies, the gap between the rich and poor is at its highest
level in decades."
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