How to build the economy? Not through trickle-down economics. Tax cuts to the rich and big corporations don’t lead to more investment and jobs.
The only real way to build the economy is through “rise-up” economics: Investments in our people—their education and skills, their health, and the roads and bridges and public transportation that connects them.
Trickle-down doesn’t work because money is global. Corporations and the rich whose taxes are cut invest the extra money wherever around the world they can get the highest return.
Rise-up economics works because American workers are the only resources uniquely American. Their productivity is the key to our future standard of living. And that productivity depends on their education, health, and infrastructure.
Just look at the evidence.
Research shows that public investments grow the economy.
A recent study by the Washington Center for Equitable Growth found, for example, that every dollar invested in universal pre-kindergarten delivers $8.90 in benefits to society in the form of more productive adults.
Similarly, healthier children become more productive adults. Children who became eligible for Medicaid due to expansions in the 1980s and 1990s were more likely to attend college than similar children who did not become eligible.
Investments in infrastructure—highways, bridges, and public transportation—also grow the economy. It’s been estimated that every $1 invested in infrastructure generates at least $1.60 in benefits to society. Some research puts the return much higher.
In the three decades following World War II, we made huge investments in education, health, and infrastructure. The result was rising median incomes.
Since then, public investments have lagged, and median incomes have stagnated.
Meanwhile, Ronald Reagan and George W. Bush’s tax cuts on the top didn’t raise incomes, and neither will Donald Trump’s.
Trickle-down economics is a hoax. But it’s a convenient hoax designed to enrich the moneyed interests. Rise-up economics is the real deal. But we must fight for it.
This post originally appeared at RobertReich.org.
Robert B. Reich is the chancellor’s professor of public policy at the University of California, Berkeley and former secretary of labor under the Clinton administration. Time Magazine named him one of the 10 most effective Cabinet secretaries of the 20th century. He is also a founding editor of The American Prospect magazine and chairman of Common Cause. His film, Inequality for All, was released in 2013. Follow him on Twitter: @RBReich.