Automatic_Stabilizers_GFX

Ally Larocca/Contributor

Back in August, the extra $600 a week allocated by Congress for the unemployment insurance system expired. The Democratic House and Republican Senate do not appear to be coming to an agreement around a successor to the Coronavirus Aid, Relief, and Economic Security Act anytime soon. Even though the benefits are drying up, the crisis hasn’t passed: 8.4% of Americans are still unemployed, and the coronavirus is still infecting and killing Americans with a death toll of over 180,000.

This is not a new problem. Every time a recession strikes, fierce political battles threaten efforts to pass a stimulus bill to give relief to Americans in need. Rather than fighting the same battles with every new crisis, lawmakers should design social benefits to automatically increase in value when times are hard.

"Recession Ready" is a book of essays by a number of left-wing policy experts, outlining a number of steps lawmakers could take to protect people and industries from a recession’s worst effects. Among the policies proposed are “automatic stabilizers,” benefits designed to deploy automatically in response to a downturn.

Automatic stabilizers aren’t new — the unemployment insurance system is an example, activating when someone loses their job and ending once the recipient finds employment again.

Policymakers can take automatic stabilizers much further. They could design unemployment insurance, food stamps, stimulus payments and other benefits to increase in value as unemployment rises, only returning to normal once the crisis passes.

There are a number of benefits to this approach. For one, they could design extended benefits that don’t have a time limit, guaranteeing assistance for as long as it’s needed. A steady stream of federal benefits would reliably put money in Americans’ pockets, helping them afford what they need and circulating money throughout the economy.

Another benefit to implementing automatic stabilizers before a recession hits is that it gives policymakers time to craft better thought-out mechanisms. When the federal government issued stimulus payments, many Americans mistook them for junk mail. Others waited months to receive unemployment benefits due to overwhelmed state unemployment offices. These are issues that should be mitigated ahead of time, before the time crunch of an urgent crisis.

When relief efforts deploy without a partisan fight, lawmakers have more room to tackle the root causes of each recession. In 2000, the immediate cause was the burst of a technology stock bubble. In 2008, the subprime mortgage crisis kicked off the worst recession since the 1930s. Now, a deadly virus with a spiraling death toll has plunged millions into unemployment and financial insecurity.

There are many good reasons to design a package of programs to fight recessions before they happen. Not only do they get money in Americans’ hands faster, they aren’t cut short after an arbitrary period of time, and they give lawmakers room to address the unique aspects of each crisis.

We can’t stop recessions entirely. But since they are so common and so devastating, their worst effects should be mitigated before they happen.

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(1) comment

wjabbe

Many years ago when I was a student at UC Berkeley it was still expensive to go to college away from home. At Berkeley most students did not have cars because there were no parking spaces and the costs of ownership were high. Lower cost student housing was provided to some by a group which owned a number of buildings where students lived and did part of the work of the building in order to keep costs down. All work was done by students working 5 hours per week except food preparation which was done by professionals who made good Egg Foo Young. I lived in one of these called Oxford Hall , an old hotel with about 100 students. A student manager was paid but students worked in exchange for room and board. This was a good way to make many new friends and keep costs down. We did a lot of walking around Berkeley then. This operation was owned by a group called the University Students Cooperative Assn. I have not observed any such operation here in Athens. They even had a quiet room with many records where one could listen to the music of your choice. We watched the election results when Jack Kennedy was elected. I was house manager during my senior year. I could save up about $1000.00 working during the summer months living at home which would pretty much get me through the year with a little help from my parents. We had little time for partying at Berkeley. Those students who partied often flunked out. Winfield J. Abbe, Ph.D., Physics citizen for 54 years.

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