Trickle-down economics — the idea that tax cuts and other financial incentives for companies and individuals in the upper tiers of society fuel growth that indirectly benefits everyone — has been a cornerstone of Republican domestic policy since the Reagan era. This general notion is quite pervasive, however, and didn’t start in the 1980s. The writer and comedian Will Rogers noted that the Hoover Administration was handing out money to the rich in hopes that it would eventually “trickle down to the needy.” The proverb, “a rising tide lifts all boats,” which John F. Kennedy used in a 1963 speech, is sometimes invoked to get across a similar idea — namely, that economic growth will help everyone, regardless of whether he has a 100-foot yacht or a dinghy.
“Those old clichés have recently been called into question, because little money seems to be trickling down and most growth has been at the top,” says Harvard Kennedy School Professor Christopher Jencks. “The question is whether people at the bottom get any lift at all. Even if the rich get most of the money, you still might want to consider a policy if everybody is going to get more than they would have gotten otherwise.” And that, indeed, is the subject of a paper Jencks wrote with Dan Andrews and Andrew Leigh.