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.