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Barack Obama's statement that he wants to spread the wealth around to make the economy grow from the bottom up caused a firestorm of reaction and revealed a serious lack of understanding of economics.

Dollars are fungible, meaning that they cannot be distinguished from one another. Since there is no way of telling them apart and they all have the same value, when taxes are cut and "spendable" income increases as a result, do we really understand where the money actually goes?

Liberals, who oppose tax-cuts in general, argue that reducing everyone's taxes simply makes "the rich" and big corporations richer. The implication is that affluent taxpayers do not spend tax savings but hoard it or that the money disappears into corporate coffers, as if never to be seen again. They also claim that tax cuts for the middle class and low-income taxpayers boost the economy because the money is spent immediately and that each dollar that is spent has a "multiplier effect" of two to two-and-a-half times, that is, has an impact on the economy of $2.50.

On the other side, Conservatives believe that reducing marginal tax rates and implementing across-the-board tax cuts increases incentives to earn and invest, thereby stimulating the economy and creating jobs.

Where does a tax cut, any tax cut, go -- since on the surface the money all appears to follow the same path, at least initially?

The impact of tax cuts for low-income taxpayers is obvious. The savings are normally spent on day-to-day needs, to help pay for rent, food or various goods and services, which are presumed to immediately stimulate the economy. The "stimulus" distributions last year were intended to have this effect, but it didn't work.

For one thing, most low-income taxpayers don't pay any income tax at all. As a matter of fact, approximately 21 million wage earners are classified as "low and moderate income," and since almost 50 percent of all American wage earners pay no income tax, a "tax cut" has no direct effect on them.

On the other hand, the tax savings that businesses receive are subsequently passed on to vendors, suppliers, employees, creditors and/or owners (stockholders, partners, etc.), then make the same journey through the economy that the money of low-wage earners does.

Contrary to popular hype, the rich don't just sit on tax cuts. They either spend it or invest it. If it is spent, the money goes to vendors, suppliers and employees, or to repay debt and, in turn, follows the same route that low-income taxpayers' tax cuts do - it is either spent or saved. If it is saved, it isn't hidden under the mattress but is deposited in banks or savings accounts, perhaps is used to buy securities, or it may be invested in real estate, to start new ventures or expand existing businesses, all of which stimulate growth.

The tax savings of the "rich" that are deposited with institutions are loaned out and repeat the same journey through the economy that any dollars do, while stock purchases send it to other individuals or to corporations, to be spent for equipment, services, goods and payrolls, to expand or to pay dividends to their shareholders, thus repeating the cycle again, including turning over in the economy the same two-and-a-half times as the money that is spent by low-wage-earners.

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