Can Redistribution Help Build a More Stable Economy?

Dimitri Papadimitriou, Michalis Nikiforos and Gennaro Zezza

Economics Strategic Analysis Archive from Levy Economics Institute

Abstract: Although the ongoing recovery is about to become the longest in the history of the United States, it is also the weakest in postwar history, and as we enter the second quarter of 2019, many clouds have gathered. This Strategic Analysis considers the recent trajectory, the present state, and the future prospects of the US economy. The authors identify four main structural problems that explain how we arrived at the crisis of 2007-09 and why the recovery that has followed has been so weak-as well as why the prospect of a recession is increasingly likely. The US economy is in need of deep structural reforms that will deal with these problems. This report analyzes a pair of policies that begin to move in that direction, both involving an increase in the tax rate for high-income and high-net-worth households. Even if the primary justification for these policies is not economic, this report shows that if such an increase in taxes is accompanied by an equivalent increase in government outlays, the redistributive impact will have a positive macroeconomic effect while moving the US economy toward a more sustainable future.

Date: 2019-04
New Economics Papers: this item is included in nep-pke and nep-pub
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