Reaganomics with a red hat and cake

At its core, OBBBA draws heavily on supply-side economic theory introduced in the 1920s and current-era popularized during the Reagan administration in the 1980s. Reagan’s team argued that cutting taxes for corporations and high-income earners would stimulate investment, create jobs and eventually raise wages for all. Paired with deregulation, reduced government spending, and a rhetorical commitment to shrinking the role of the state, this approach reshaped the American economy with mixed results.

The outcomes of that era are well documented. The economy grew, but income inequality skyrocketed and middle and working-class wages stagnated. Safety nets were scaled back or eliminated entirely, the national debt ballooned, and yes, there was even the largest single-day stock market crash in 1987 as a perhaps more coincidental cherry on top. The prosperity born from 80s era Reaganomics simply did not “trickle down.”

Trump’s newly signed bill resurrects many of these same ideas. There are tax cuts where the highest earners see the largest gains, and increases in funding for immigration enforcement and military. Qualifying for medicaid and food assistance gets harder, while billions in federal funding are cut. According to the Congressional Budget Office, OBBBA will add between $2.8 and $3.3 trillion to the national debt over the next decade, with as many as 11 million Americans expected to lose health coverage or access to basic services.

Of course, we tend to return to what worked — especially when it worked for us personally. For 45, the Reagan years were not just politically important. They were the foundation of his own financial rise. The deregulation, tax shelters and real estate incentives of the 1980’s helped him build his business empire, largely through debt-leveraged expansion and favorable capital gains treatment. It makes sense that he would seek to re-create the policy landscape that enabled his ascent.

But, the world in which this new version of Reaganomics is being applied is far more fragile than the one he benefited from.

Today’s economy is shaped by challenges that didn’t exist in 1981. Wages have lagged far behind housing, health care and education costs. Gig and contract labor have replaced stable employment and retirement accounts in up to one-third of the labor market. Labor force participation is lower than it was in the 1980s. Home ownership is increasingly out of reach. Public systems like child care, transit and water infrastructure are stretched thin. The country’s infrastructure is aging, and climate related disasters are growing more frequent and more costly, including the tragic flash flood in Texas over the weekend where as of the time of writing this, over 90 people have died. Events like this test our infrastructure, expose how fragile our safety nets and systems have become, and put on display how deeply unequal the consequences of underinvestment really are.

But what distinguishes this version of supply-side economics is its pairing with symbolic populist flourishes that amount to very little in the end — our cake. Trump’s bill includes handpicked and headline-ready giveaways like “Trump Accounts” that are designed to spread crumbs with a smile while feasting happens elsewhere.

At the same time, the Federal Reserve is operating with limited tools, an unpredictable administration, and an increasingly interconnected and volatile global economy. Monetary policy no longer moves in isolation. This makes public policy even more critical but in this context, a tax and spending bill that prioritizes high-income earners and corporate-friendly incentives while effectively degrading structural support to working families is akin to going all in on the hopes that a royal flush flips on the river.

And yet, it sells. Tax cuts are easy to pitch and hard to trace. Empty populist gestures don’t need to be economically meaningful to be politically powerful. This flavor of political theater isn’t new, and ancient emperors knew the value of bread and circuses. Today, however, policy that prioritizes appearance over function is just Reaganomics in a red hat tossing bits of cake to keep the crowd clapping even as the foundation underneath them cracks.

So, here we are. Not a doomsday prophecy, but rather a call to put your boots on because it will inevitably fall to the people to pick up where social programs fall short. And of course, midterm elections are just around the corner.