Fiscal Policy’s Futile Equality Expectation on Its Own

By Karen Petrou

  • Distributional data show clearly that, fiscal stimulus notwithstanding, the U.S. was still more economically unequal in 2020.
  • Only fiscal policy once combined also with progressive financial policy will put the inequality engine into reverse.

As we have noted before, the Fed’s new Distributional Financial Accounts of the United States (DFA) is a definitive source of economic-equality data we hope the Fed will not just compile, but also use for policy-making purposes.  The latest edition of the DFA demonstrates yet again why distributional data are so compelling, showing now the profound challenge even unprecedented fiscal policy on its own faces slowing down the inexorable engine of inequality.  Still more fiscal stimulus in 2021 will boost absolute income and wealth numbers a bit at some benefit to low-, moderate-, and even middle-income households.  Still, the upward march of financial markets powered in large part by Fed policy inexorably widens the inequality gap.  No matter the “crust of bread and such” from fiscal programs, inequality still increases the slow pace of economic growth, the risk of financial crises, and the odds that the electorate will be even angrier in 2024 than 2020.  

Continue reading “Fiscal Policy’s Futile Equality Expectation on Its Own”

Central Bankers Can Do More Than Just Care about Economic Inequality

By Karen Petrou

  • New evidence reinforces monetary policy’s distributional impact.
  • Monetary policy can also be redesigned to ensure that its distributional impact enhances equality instead of – as now – making it worse.
  • More evidence also reinforces the link between unequal monetary policy and slow growth.
Continue reading “Central Bankers Can Do More Than Just Care about Economic Inequality”