Here's the central tenet of supply-side/trickle-down/voodoo Reaganomics:
That would (perhaps) be true if a shortage of investment were an important constraint on businesses and on economic growth. But according to the people who run those businesses, availability of investment money is the least important constraint.
A company called Grant Thornton runs an annual survey (PDF) of privately held businesses worldwide, asking them among other things what constrains their growth.
In 2007, only 9% of privately-held U.S. businesses (21% worldwide) cited a "shortage of long-term finance" as a constraint on expansion.
Constraints on Growth Reported by Privately-Held Businesses
Presumably even fewer cite it as a "major constraint." Both domestically and worldwide, it ranks dead last on the list of business constraints.
(I can attest to this from personal experience. My partner and I had to make some small--low five-figure--personal loans while building a multimillion-dollar business. But we never tapped credit of any kind--though we could have, easily).
Understand: these are privately-held businesses being surveyed--not public corporations (which have far greater access to financing through debt and equity issues, and from massive global pools of private-equity and sovereign-wealth cash). These are the very hotbeds of entrepreneurship that supply-siders constantly tout as the innovative engines of economic growth.
A dearth of financing definitely isn't impeding their growth. Grant Thornton's 2007 study puts regulations and red tape at the top of the list, and it's been there for some years. But in 2008 (for which I can only find global numbers), that changed.
A shortage of skilled workers in now the #1 constraint. (35% of businesses cited it.)
This is completely in keeping with the economic view so ably explicated by James Livingston, which I summarize and link to here. The fact is that wealthy people can't find truly productive investments offering sufficient returns, so they turn instead to investments that don't have anything to do with production or productivity. (Think: MBSes, CDOs, CDSes, etc.)
Since the greatest constraint on growth is currently a shortage of skilled workers, the best path to prosperity seems to be taxing those unproductive dollars and investing them in the thing that every economist (and most people and politicians) agree is prosperity-producing: education.
Making sure that wealthy people have plenty of money is not the way to produce prosperity. That's a self-serving myth—one that needs to be soundly discredited.
