The Broken Promise of Trickle Down Economics Part 2

The second core principle in neoliberal economic globalization is focused on reducing public expenditure for social services by the government. This cut ultimately means the social safety net is reduced. If you think this core principle is a practice of the distant past, sadly you would be wrong. In fact, in the United States, President Trump and the Republicans have made a platform on their position to repeal the Affordable Care Act (ACA). More popularly known as Obama Care, the ACA is US healthcare reform law that expands and improves access to health care while curbing spending through regulations and taxes. Some of the important functions of the ACA include the following:

·      Offering Americans some new benefits, rights, and protections in regards to their healthcare

·      Setting up a Health Insurance Marketplace (HealthCare.Gov) where Americans can purchase federally regulated and subsidized health insurance during open enrollment.

·      Expanding Medicaid to all adults in states that embraced the program.

·      Improving Medicare for seniors and those with long-term disabilities.

·      Expanding employer coverage to millions of employees.

·      Requiring most people to have coverage, get an exemption, or pay a fee for each month.

·      Introducing new taxes and tax breaks.

If President Trump and Republicans are successful in repealing Obama Care, more than 23 million people could lose coverage in exchange for the superrich would get a $197,000 tax cut. Most Americans would only see a modest tax cut, while tens of millions will face a loss of coverage or become uninsurable. And thousands could die from lack of access to medical care.

And while cutting public expenditure can deal with hot button issues like health care as seen above or education, oftentimes it also means the maintenance of roads, bridges, even water supply are simultaneously on the chopping block.  This could have disastrous effects in a country like the United States, where, as a share of GDP, Public Spending on Transportation and Water Infrastructure has hovered at about 2.4 percent over the past three decades. The Budget Control Act (2011) puts caps in place in order to limit the growth of discretionary spending to avoid the need for massive cuts at a future date.

The third core principle in neoliberal economic globalization deals with Deregulation. The intent is to reduce government regulation of everything that could diminish profits, including protecting the environment and safety on the job. In our previous post we mentioned how neo-liberalism is about freer movement of goods, resources and enterprises in a bid to always find cheaper resources, to maximize profits and efficiency.

To help accomplish this, neo-liberalism requires the removal of various controls deemed as barriers to free trade, such as: tariffs, regulation, certain standards, laws, legislation and regulatory measures, and restrictions on capital flows and investment. Neo-liberals believe that the free market is naturally able to balance itself via the pressures of market demands and therefore deregulation is a key to success of market-based economies.

Neo-liberalism policies that support deregulation have been linked to the 2008 US financial crisis. Australian Professor Sharon Bender writes that “the global financial crisis has shown that financial markets provide opportunities for investment that provide relatively few extra jobs and that feed an ephemeral prosperity that can be wiped out in days.”

In describing what went wrong, Bender does not mince words, arguing that seeing the Market is a self-correcting mechanism meant that government intervention in the management of the economy became unnecessary and unwise. This logic not only benefited big business, because they provided a legitimacy for their pursuit of self-interest and avenues for business expansion, it also appealed to governments as free market ideology absolved them of responsibility for economic performance (Beder 2006a, 8).

In hindsight it’s very obvious how Neo-liberalism failed to deliver on the promise of trickle down economics. Simply put the outcomes oftentimes were increased inequities. As neoliberal policies were implemented around the world disparities in wealth and income increased and poverty increased, contradicting neoliberal theories erroneously espousing that by increasing the wealth at the top everyone would be better off.


Kaha Haji-Mohamed

Works Cited

Beder, S. (2009). Neoliberalism and the global financial crisis. Social Alternatives, 28(1), 17.

Chossudovsky, Michel. The Globalization of Poverty And New World Order. Shanty Bay, On: Global Outlook, 2003. Print.

Investopedia. Neoliberalism. Investopedia US: Web. 19 February 2015. This article is a definition located in the main website's "Dictionary" section

Martinez, Elizabeth & Arnoldo Garcia. What is Neoliberalism? CorpWatch 27 July 1997. Web. 21 Feb. 2015

Stiglitz, Joseph. Globalization and its discontents. New York: W.W. Norton, 2002. Print.

Picture titled, "Globalization", taken by Abadi Moustapha on December 30, 2006, obtained through Creative Commons (