Bubble Up Economics

Ronald Reagan popularized the notion of "Trickle Down Economics".  The thinking went that if you gave rich people a big tax break, they would spend all of those tax savings and stimulate the economy.  The jury is still out on how well this theory worked.

The economy did improve under Reagan.  Was it due to trickle down, or to the fact that Reagan increased government spending by 2.5% (mostly on  the military)?  Under Reagan's presidency the country experienced stagflation (double digit unemployment and double digit inflation).

Both George W. Bush and Barack Obama tried a version of Bubble Up economics.  Bush did it with a tax rebate in 2001 and 2008.  (the rebate did not prevent the fiscal collapse of 2008).  Obama gave people a 14 month payroll tax cut, from 6.2% to 4.2%.

The multiplier effect (the number of times a dollar circulates throughout the economy) was not what I expected it to be from either of these programs.  Some data suggest that the working poor and the wealthy spent a bigger percentage of the give-back than did the middle class (who spent most of it on savings and paying off debt.)

However, an article from a 12/9/10 blog posting in The Economist (the blog is called "Democracy in America") called "The rich are harder to stimulate than the poor" stated:  "To wit, the gross value of the tax cut for income under $250,000 is much larger than that for incomes over the line."

I do not know whether "Bubble Up" economics works.  I do know that it is a legitimate idea for stimulating the economy, and would probably appeal to working and middle class people.