Taking money from the rich and giving it to those less well-off may not generate the stimulative boost to the economy many economists and policy makers currently believe.
New research from the San Francisco Fed, released Monday, takes stock of so-called redistributive economic policies. Simply put, these strategies take money from those that have the most of it, generally by way of taxation, and give it to those who have the least.
Long-standing economic thinking holds that lower-income households, many of which are already operating beyond their respective means, are likely to spend more of this windfall. As a result, the redistribution can have a more powerful stimulative impact on the economy as a whole, making it an attractive strategy for elected leaders to pursue.
But the San Francisco Fed paper warns this may not be so based on a better understanding of how families in different income brackets spend, save and borrow.
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