US economy

We Are Not Powerless Against a Recession


Food stamps already work this way, to some extent. The Supplemental Nutrition Assistance Program is an entitlement, which means that as more people experience financial hardship and become eligible, the federal government steps up its spending to make sure they can get benefits. “As your earnings drop down, you automatically gain eligibility, or your benefit increases,” Dr. Hoynes said. Unlike, say, the rigidly block-granted Temporary Assistance for Needy Families cash assistance program, SNAP increases quickly and robustly in a downturn.

Still, in both the Great Recession and the pandemic, Congress had to act to increase food stamps to battle such extreme income losses. That could instead be mandated: As the unemployment rate rises, SNAP benefits could automatically increase by certain percentage points. Eligibility restrictions could also automatically loosen to keep families who have suddenly lost income fed while injecting quick stimulus into the economy.

Unemployment insurance could automatically add weeks as unemployment shoots up, given that people will be more likely to be out of work longer in a weak economy. The program already has extended benefits that are meant to be triggered by unemployment reaching certain levels in each state, but those levels are set so high that they rarely, if ever, are met. Rental assistance similar to what Congress offered last year could receive an influx of funding when tenants face mass eviction. More federal funding for Temporary Assistance for Needy Families could automatically be sent to states so that they could help more people. Federal aid to state and local governments could flow based on decreases in taxable income that drain their coffers.

The important thing is to do these things now, not in the middle of an epic economic meltdown. “It is very, very hard to stand up a program in the middle of a crisis,” Dr. Edelberg noted. During the pandemic, rental assistance took months to actually reach tenants as states scrambled to create portals and programs. The Paycheck Protection Program botched many parts of its rollout. “Putting this infrastructure in place ahead of time is critical,” she said.

An adequate response to financial hardship shouldn’t depend on the political alignment of Congress and the White House, but right now it does. Republicans may have been motivated to back the initial rounds of Covid relief because they controlled the Senate and White House and risked shouldering the blame for a poor response. The nature of the crisis was also so widespread and so urgent that it prompted lawmakers to act quickly. Once Republicans were out of power in 2021, however, they refused to vote for any further stimulus. “My worry is that with Congress being so divided, in the next recession they may not be able to agree,” Ms. Dixon said.

The barriers standing in the way of congressional action are not hard to see, however. Once a crisis passes, it’s difficult to get lawmakers to focus their limited attention on fixing systems to be ready for the next one. All of the early pandemic enhancements to unemployment insurance, for example, have expired, and reforming the system didn’t even make it into the ultimately doomed Build Back Better package. Lawmakers may enjoy the opportunity to swoop in during hard times and vote to make changes as a way to show they’re being responsive, an opportunity that would diminish if our systems were set up to respond on their own.



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