progress in reducing poverty (see, e.g., Piketty and Saez, 2004; Sherman et al., 2009; Smeeding, 2005). Budgets can affect the distribution of income in two ways: directly, by specifying how revenues will be collected from one income group and distributed to another; and indirectly, by incorporating policies that affect economic opportunities. Over time, for example, budgets that provide education and other basic services to economically disadvantaged people can increase their chances for solid jobs and productive lives and thereby reduce income inequality.
People do not agree on the extent to which governments should aid or tax different groups differently or act to increase opportunities for particular groups. Most people argue that, as a matter of fairness, the government should support people who are unable to support themselves, including the indigent elderly and children of poor families; however, people differ on what degree or scope of support is appropriate.
In their attitudes toward social spending—including programs such as Social Security, Medicare, and Medicaid—Americans have tried to reconcile conflicting concepts of fairness: one based on what people need and another based on what people deserve.1 In trying to reconcile these two concepts, many people embrace a principle of “reciprocity,” which says that people should not get something for nothing, but should get something if they “play by the rules” (Yankelovich, 1994).
Another dimension of fairness concerns the distribution of public burdens and benefits across generations. It is difficult to measure how budgets redistribute costs and benefits from one generation to another. Many have argued, however, that the current federal budget—by failing to pay for current and expected obligations from current revenues—unfairly burdens future generations.2
A budget should sustain and assist in expanding the nation’s economy, the ultimate base of resources that are available both for personal consumption and investment and to fund public goods and services. Yet there is no consensus—among either economists or policy makers—about the best policies to advance this goal under any given set of economic circumstances.
Budget choices can have large influence on future economic growth. In principle, well-targeted public investments that accelerate development and the application of new technologies or that increase education levels lead to economic growth and higher incomes on average (Romer, 1986). However, governments may have difficulty determining in advance which investments will stimulate growth and which will not. On the revenue side, many people favor tax reductions as a policy to stimulate private investment and growth; others argue for a tax structure that encourages savings and rewards pro-