Automatic stabilizers during recession2/21/2023 ![]() ![]() For example, Congress did not expand UI until six months after the Great Recession began, and Republicans let that expansion expire in 2013 even though nearly 4 million people were long-term unemployed.Īs the pandemic lockdowns took hold last May, Congress passed the CARES Act more quickly, but interrupted that aid by creating and then missing self-imposed deadlines to extend the bill’s programs. Lawmakers can always vote to spend more or less than automatic stabilizers prescribe, but strong stabilizers would mitigate changes in economic demand even if Congress failed to change aid policy quickly, as they often have during recent downturns. Giving state and local governments direct aid during downturns, which could be paid for by making the cap on the regressive deduction for state and local taxes (SALT) permanent.Providing matching funds for state and local infrastructure maintenance projects with a higher matching rate during downturns.Increasing the federal share of Medicaid funding during recessions and reducing it during expansions.Adjusting the size and duration of UI benefits when the unemployment rate changes, as President Biden has proposed, as well as expanding UI eligibility and paying for the costs across the business cycle by taxing higher incomes than UI does today.As a result, automatic stabilizers dampened the severity of economic swings roughly as much as discretionary stimulus bills did between 19, according to experts at the Brookings Institution. Timely stimulus can forestall layoffs early in a downturn without overheating the economy once it has recovered. Economic stimulus from automatic stabilizers is well-timed to ramp up at the start of downturns and wind down at the end because it responds directly to changes in peoples’ incomes or the unemployment rate. To avoid these risks d uring future recessions, federal lawmakers should replace most ad hoc stimulus with stronger “automatic stabilizers,” stimulus programs that naturally adjust in size to the economy’s needs and can pay for their spending in downturns with savings during expansions.Īutomatic stabilizers are government programs that benefit more people when incomes fall - such as UI and the Supplemental Nutrition Assistance Program - or those that grow more generous during downturns, such as the Extended Benefits program within UI that lengthens benefits by 13–20 weeks in states with high unemployment. ![]() These arbitrary dates risk ending aid well before - or after - the economy stops needing it. Yet lawmakers also set arbitrary expiration dates for many of those programs, such as the expanded unemployment insurance (UI) benefits that expire in September and the $350 billion aid program that state and local governments can use until 2024. ![]() Congress responded to the pandemic recession with bold aid and stimulus programs that are fueling the economy’s impressive recovery. ![]()
0 Comments
Leave a Reply.AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |