Summary of Taking ‘Middle-Out Economics’ Seriously in This Fall’s Fiscal Debates

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Taking ‘Middle-Out Economics’ Seriously in This Fall’s Fiscal Debates summary
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Recommendation

The “superstar” model of income distribution – in which the extremely talented (or the very lucky or well-connected) take most of the profits from increased productivity – garners a lot of discussion. But economists Josh Bivens and Hillary Wething explore an intriguing new perspective: income inequity as a private tax the rich impose on everyone else. Bivens and Wething consider how cutting this tax makes it possible to bolster the middle class, counteract austerity and reduce deficits. getAbstract recommends this concise and accessible paper for its alternative views on how to improve the lot of the ordinary many in competition with the extraordinary few.

In this summary, you will learn

  • Why fiscal policy should aim to eliminate America’s “output gap,”
  • Why inequality acts like a tax on the middle class, and
  • How tighter labor markets can help restore demand and drive growth.
 

About the Authors

Josh Bivens is director of research and policy at the Economic Policy Institute, where Hilary Wething is a senior research assistant.

 

Summary

Some US politicians tout “middle-out economics” as a way to revive the slumping middle class. That starts with eliminating the “output gap” – that is, the difference between an economy’s potential and actual performance. For the US, the gap totaled $900 billion, or 5.9% of potential US GDP, at the end...

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