Overview: Fiscal policy, distribution, and the middle class

The economics of distribution has long dominated economic policy debates. The issue of income distribution in rich countries has centered on the question of who gains from public expenditures and who pays for them. In the United States, this discourse was aided analytically by the path-breaking work of Joseph Pechman more than thirty years ago. His research at the Brookings Institution helped us understand not only who benefited from what kind of expenditure but also how they stacked up when aggregated across expenditure categories. Work on fiscal incidence has long been a central part of the economic policy debate as well, beginning long before, but aided by, Arnold Harberger and Richard Musgrave and others. One of the outcomes of this analysis in the United States has been a recurring concern for the fairness of the system and, in particular, concern for the extent to which the middle class was being effectively disadvantaged by fiscal policies. Copyright © 2009 the brookings institution. All rights reserved.