That’s pretty much the whole question, for some detail on what I mean specifically is. How did political parties talk the American people into believing that putting more money into rich peoples pockets would eventually benefit them? The whole thing just seems like a scheme if I’m honest and I’m wondering what made people back then think that if a rich man got richer that they in turn would become better off.
I am an economist, and although my thesis was on housing, I'm definitely equipped to answer this question. To really unpack this, I think we need to walk through the relatively recent history in Macroeconomic thought from the Great Depression to the 1980s.
So, we have the Great Depression. America had some bad economic turmoil before (Panic of 1785 and a number of economic downturns throughout the 1800s), but this was on another scale. In only 4 short years, 11,000 banks failed and wiped out most people's savings, we have at least 25% unemployment, and the average household income has correspondingly dropped by 40%. (1)
Concurrently, John Maynard Keynes publishes A Treatise on Money (1930) and The General Theory of Employment, Interest and Money (1936). The non-technical version of Treatise is that in a depression, the best thing to do is to discourage savings and encourage spending. The General Theory of Employment is much more in-depth, and effectively became the foundation of Macroeconomics from 1936 until the 1970s and 1980s. I don't think we need to go through all the technical aspects of the book, so the short version is that Keynes believed the Great Depression was caused by a low level of government spending. The solution, then, was to increase government spending in order to spur economic growth and lower unemployment. FDR took Keynes' suggestions to heart, and government spending increased by 6.1% by the late 1930s. (2)
Then we have the 1973-1975 recession, which completely changed the Macroeconomic landscape again. Why was it so significant? Keynesian economics outlined that inflation and unemployment were inverses: a decrease in unemployment leads to an increase in inflation, and an increase in unemployment leads to a decrease in inflation. But throughout the 1970s and into the 1980s, we had the phenomena of Stagflation: both inflation AND unemployment are at record highs, and economic growth is slowed.
What is the policy solution? The work of Keynes unfortunately does not have one for us, because the policies of the Great Depression do not work in this scenario. Enter Milton Friedman, and the subsequent rise of supply-side economics. Milton Friedman's argument was that rather than government spending to spur economic growth, we need to lower taxes and decrease regulations on businesses. Ronald Reagan and Federal Reserve Chair Paul Volcker adopted many of these supply-side oriented arguments. The question, however, is how much of this actually worked, especially the trickle-down part.
The short answer is "eh, it kind of worked, but not really." Employment increased by 16.1 million from 1980 to 1988, which was 0.7 million more than during the Ford and Carter Administrations. The inflation rate did fall from 13.5% to 4.1%, and overall household income increased. (3, 4)
But then you look at the numbers for income inequality and housing, and you realize that a lot of the economic polices under Reagan solved the fire of Stagflation by throwing dynamite at the house - no more house, no more problem. The Omnibus Reconciliation Act of 1981 made it really hard for people to qualify for AFDC, a program created by FDR to provided assistance to low to no-income families with children. HUD's budget is slashed by nearly 75% and the budget allocation for Section 8 housing is slashed by nearly 50%. (5) The number of homeless explodes, and Reagan gives his famous Good Morning America talk where he says "people who are sleeping on the grates…the homeless…are homeless, you might say, by choice."
We know from more current studies that it was the monetary policies of Paul Volcker which solved the inflation problem, not Reagan's policies - and yes, those are two distinct things. We also know from reviewing a few decades of economic data, there is not substantive evidence that trickle-down economics actually does what it's supposed to do. And there have been a lot more developments since the 1980s and Friedman, notably the New Neoclassical Synthesis, which fused ideas of Keynes and Friedman. It remains the foundation for most modern, mainstream economics - I say that with an asterisk because there have been several major developments since 2008/2009, primarily concerning the level of detail in DSGE models.
So there you have, a very, very condensed lesson in trickle-down economics and a very short history of Macroeconomics. I'm happy to go more in depth and more technical if anyone has more specific questions.