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America's Public Health Experiment: More checks, less politics

2021-12-17

In the penultimate episode of our series America’s Public Health Experiment, Vox policy reporter Jerusalem Demsas talks to Arnab Datta, senior counsel at Employ America, about automatic stabilizers: what they are and how they could help during a crisis that affects the economy, such as a global pandemic.

References:

Vox's Emily Stewart on Democrats abandoning automatic stabilizers

Recession Ready: Fiscal Policies to Stabilize the American Economy

Structuring Federal Aid To States As An Automatic (And Autonomous) Stabilizer 

A Historic Decrease in Poverty

GOP Governors Reject Extra Federal Unemployment Payments

Host:

Jerusalem Demsas (@jerusalemdemsas), policy reporter, Vox

Credits:

Sofi LaLonde, producer & engineer

Libby Nelson, editorial adviser

Amber Hall, deputy editorial director of talk podcasts

Sign up for The Weeds newsletter each Friday: vox.com/weedsletter 

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This is an unofficial transcript meant for reference. Accuracy is not guaranteed.
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babies, screenwriter, Ed, singular and directed by will shop before episode Series paints. A picture of love and marriage with a dog twist make short check out. New episodes of landscape is every Monday on HBO Max. hello and wasn't to another episode of the weeds I'm doing Matthews today. We're bringing you? The third episode in our Series, America's public health experiment, the focus of this week's episode are romantic stabilizers to help better understand would automatically voices are, and how they could hope during a crisis that affects the economy like a global pandemic, we turned to weeds co host Jerusalem respond everyone, its Jerusalem, so
sit down art of data. He is the senior Council employ America, which is a think tank, slash, pulse advocacy group here in DC working on macroeconomic policy, and he previously also work on the hill for sender, Michael Bennet, Morgan Housing policy stuff. So we obviously have a lot to talk about with that, but today were focused on the federal government's fiscal response to the global pandemic in the United States are not great to have you bring someone frowning narrow, excited about this yeah me too, so frightened and purposes. We know we read in the federal government a lot during this areas with their public health response, but these governments, fiscal response, has been be strong. We pass trillions of economic relief, both under President Donald Trump and under President Joe Biden, including direct checks to individuals like you and me, accident unemployment benefits to folks who lost their jobs, rent relief, direct aid to state in local governments. The list really can go on, but one thing that people have been advocating for including Arnold is this
you called automatic stabilizers end that formal definition of automatic stabilizers is that they are automatic, increases in revenues and decreases in outlays in the federal budget that occur when the economy strengthens and the opposite changes that occur when the economy weakens. But you know in more general terminology. Basically, you pick an economic indicator, let's say as the unemployment rate and if unemployment employment rate goes up, let sated like six percent or whatever number we ve picked, is like really bad, then automatically. We would have some sort of fiscal response immediately trigger whether its direct checks being sent to people's bank accounts, or it is further investments in the unemployment insurance, so ever gets extended unemployment Europe at this time, whatever it is that the government picks is the appropriate response to that specific pain that the economy is feeling and the goal would be for these automatic stabilizers to exist that, regardless of what type of economic emergency is happening, there is a sort of base floor,
will always occur in response, so one again to the weeds of all of that. But before we do, I really want to set the stage for us a bit, because a lot has changed in America's fiscal responds to macro economic crises, watches compare it to the great recession. What did we see differently from the federal government in terms of their macroeconomic responds fiscal response with covered relative to the great recession? What were the big lessons learned that you think were implemented this time around that weren't in two thousand nine into in ten, so I think in terms of differentiating between this recession lastline, I think it's really really important for us to realise that we did a huge, huge think here. The pandemic response it's that we had with the care that we do extension of a number of provisions of that throughout the year and then with the american Rescue Plan had really really big impacts and things that we have not seen in several ass recessions, so I went out.
Start with the Cares ACT which Number of really really great programmes I would highlight the unemployment insurance programmes. Our part of their where six hundred dollars was added to every check it. Expanded eligibility to include gig workers, there is also increases in stab payments for food stamps. There were direct checks that were sent out. We hadn't tried this level ass, stabilizing, demanding and replacing income for votes in a long time and the end result of this was that even though unemployment rose above twenty percent, two great depression levels we are able to cap arise and poverty yeah. I know this is the weeds, and so we liked to be technical here but to be emotional. For a minute. I remember in the summer of twenty two, I think it was getting enough.
vacation on my phone about it was adjacent prowl story at the New York Times. Making that exact point that we had tapped arise and poverty because of it huge federal expansion and of these programmes, and that is really unheard of. in human history- and I think we need to give a lot of credit- the legislators are involved with that sounds. Widen centre has been at all. Secretary diminution. That was a big thing, so I think my big lesson there is that this works, that we can do a really incredible thing in just a finish it up American rescue plan is another good example of this. I think, if you looked at all external independent reports, had predicted where unemployment would be today this point right now it would not be around for point
two percent, which is where it is, and that recovery, how fast that's happened, the job gains We ve had a really really incredible, and so I think that's really what we should point There is a lesson that is a really big things, and we can do that if we extend the effort yeah, They saw a recent New York Times, article kind of following up on that that essentially, the huge increase in government aid cuts, poverty and nearly half from Pre pandemic levels I had made the Americans the share of Americans poverty at the lowest level on record, which is you know, pre astonishing, not just in response to that. Ready increase that could have happened during the pandemic, but but from pre pandemic levels on which indicates how much this fiscal response matter to me. We basically had all told probably more than five trillion in spending from the federal government in response to the covered recession, but just taking us back a little bit too can, broadly speaking, it seems like one the big
make a ways that we had from the great recession recovery, especially because it just took so long. We took nine years essentially for us to get to the point where the unemployment rate fell to the sea because estimate the natural rate of unemployment that that's a really really time in the previous sphere recessions, it took about five to six years for the unemployment rate to fall to that estimate, and I think one of the big things that I saw happening among sort. the Econ Twitter and the economic discourse. Folks in general was just that people started believing and acting in their own policy analysis. This sentiment that the government can do a lot prevent recessions and that recessions in some level or policy choice, whereas there are, of course, you know, exactness economic shocks like whether its covert nineteen or, like you know an oil shock, or something like that. That can happen that can cause that immediate economic pain. The federal government can do quite a bit to ensure that that pain goes away very quickly for workers have you kind of observers is well both in Congress,
in your own work at Lyme, Erika. It's amazing how much the discourse was changed and uninstall evolving. I think I mean Obviously there is a big debate happening right now about the inflation that work Marion saying on and one of the causal factors there. I tend to think that we air on the side of giving more which is better and that some of the pain that we are seeing now while difficult I don't wanna underrated trading, our laws is, is not the right tradeoff either and I wouldn't put it there and seeing a lot of conventional wisdom from the past, particularly out The great recession, that's being debunked in real time. I think a lot of us who remember the debates about the skills gap at that time or whether manufacture can ever come back to America manufacturing job losses. A great example to be concentrated around recessions. I think one thing: that's,
amazing to see now is this investment boom but we are seeing a lot of capital expenditure, a lot of capital investment. I think, if you, if you think back to the great reset and if I told you that I saw mill was closing, I think you could find any number of economic commentators who would say well there are new lumber production in America like that's, never coming back, but I remember a couple: months ago? There are still his about sawmills being brought back on life now found. Trees are opening and you're. Seeing all these amazing things happen that really chip it back conventional wisdom. I think again if it goes back to the point: This is really a policy choice. We can be a lot better and we can really minimize the pain that we see and we can stabilize demanding away where some of the investment
continue some of this type of capital in expenditure and things that we see. So, I think that's like a really positive development, and it is something that legislators and also makers are talking about more building I'd like stabilizers, a sort of kind of the natural extension of a lot of this new thinking. So how does this sort of kind of enter into the debate remember, I'm Michael Bennett having a proposal was extorted the beginning of this entering the broader federal conversation around how to respond to these kinds of crises Ivan Sir bad, I mean he's. I'll Boston and Muslims, who I would love to give him a lot of credit. I do think you know this is an idea that spin kicking around for some time, I think in terms of organizations- I think, places like south american Progress, C, p, p, p M the Centre for budget policy prior this year. This is something that had been on the think tank circuit for quite some time, but in terms of legislative proposals, I think so. Benefits in kind of comprehend,
A programme of this wealth, planet, insurance in and reforming the extended benefits programme, particularly, but then Also, a snap automatic stabilizer that yet released at the beginning of a pandemic Certainly it deserves a lot of credit. I think those about the first legislative proposals, the kind of really think about this about deep level for sure it feels like this is a pretty big topping like these like on MAC stabilizers there so many different ways you can design them, there's somebody always think about them before we jump into the different types of policy design that can go into this Peters. Talk about the types of automatic stabilizers that already exists. Mentioning is the job of the unemployment insurance, but he's walkest through ones that exist right now and end and how they help us stabilize the economy during crises. I think I would join in here about between what I would call me: troll automatic stabilizers- and these are things like the regular,
unemployment chance, the food stamps programme, snap tariff, which is the welfare programme and the general tax system. but we have. These are natural in the sense that they don't change weather wherein recession they just kind of exists or the way they work to automatically stable. the economy. Is there When you have a big job loss or income loss in the Agro dead, more people qualify for these benefits. More people are getting them and that's kind of how it works. But from that, you have automatic stabilizer programmes, better specific injections or policy changes that happen at the onset of processions and the big one that I would point do is extended benefits programme, which is part of the federal Unemployment Insurance programme. This is it's a state federal partnership,
it's fifty percent financed by the states and fifty percent by the federal government and the way that works is when the unemployment reaches a certain level. You get in a day, a number of weeks for people who are on unemployment chance. So that's gonna, big existing one. That, I would say, is that kind of programme. One thing I would just ask There too, is that a lot of my focus on our focus on employee miracle has been on that latter part that latter kind of automatic stabilizer programme and the real for that is that our natural ones don't work. girly well planet insurance replaces a pretty small amount of lost wages on average about forty to fifty percent snap as a great programme, but it also has a lot of honour us. firemen. Since it's hard to access the struggle and welfare programmes here, and so I think we need to strengthen both We need to make our permanent system here a bit better functioning.
But then also we need do plus up support when recession said tied to some kind of economic indicators so that they start early stay on as long as we need, and this isn't it- that was included in the discussions around the formation of the bill. Backbiter bill on in general run widen, I think, let around ten demo, EC senators and other members in the house, her tentatives, to try to include outright stabilized who's in build back better, but that effort failed, keep kinda sky, but their plan was and what happened to it. So, basically, the the way this would have worked is they would have tied direct payments? the unemployment insurance extensions that were passed at the at the tail end of twenty twenty they would have tied that to an economic indicator is gloomy employment rate. There were a couple of different proposals around that had different rates, but I think general,
they fell between five point five and six point: five percent unemployment rate, so the benefits would keep going out until you read that level of unemployment and the benefit. Obviously of this is that you're, not sitting arbitrary day and you don't have to rely on Congress to pass another extension so that's really how it would work come in in simple terms and and so what happened? Thrilling really I mean the reality is that during recessions, when unemployment is high, policies score really high. The ceo score for this would have been very high. They cost a lot of money now. I think it's a really important to talk about how absurd that is because, of course, they cost a lot of money. The economy is bad Right, so if you, if you think about gonna, how in enough nine recession, time how to see me
score this they went, maybe is dying, exploring and they would place a probability on recession and then apply that probably did the total costs, but if they have a certain estimate of what's going to happen to the unemployment rate, where it's gonna be over the next ten there's an they tend to err on the side of you, no longer recovery and say what they did in this case. It just cost a lot of so we had a fixed amount then, and they tend to cause. That's also the reason why the benefits warrant in the Heroes ACT which of you remember that, but that was kind of the bill that the house was pushing for, particularly after chairs. pass, and there is a lot of discussion about tying. The unemployment benefits to an extent economic trigger. I helped them a couple of legislators. Work something called the worker Relations Security act that would have tied to tears basically, but that also
They d been there and the big reason wasn't just would have cost a lot of money, I'll we're getting a quick break. But when we come back We're gonna die even more in the weeds on all the ways you can design automatic, stabilizers if you're in the business of selling stuff there's one thing- that's a pretty sure bet you'd like to sell more of it than a play the pie, shops on main street and multinational businesses selling goods all over the world. There are looking for ways to connect with customers and supercharged growth, I'll, be wise to start using shop, a fire justifies an all in one commerce platform that makes a running growing every sort of business easier than ever before shop. If I've We give small businesses the same tools. The huge companies have relied on for decades. There sing easy to use platform was business, to boost sales sink up online and in person sales and stay on top of the analytics that matter most pressing.
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it wasn't. A pike ass for the power of knowledge is switched to boost mobile for the power of saving money, because with boost giving it the power of a free five g phone, so you can listen to all the latest episode. The power of three unlimited data lines for thirty bucks a month per line through your family can harness all that brainpower too, and the power of one of America's largest five g networks. So you can do it all at the speed of five g with all that money, all save and all their knowledge will gain just how powerful will you become switch to boost mobile and find out, if reasons and Galaxy eight thirty, two ideas which, to one of America's largest five g networks: more power to save boost mobile disclaimer, free phone limited to new customers in one per light. Additional restrictions apply, offer slashed coverage, not avail everywhere or for all phone slash networks, see booze mobile dot com for details and we're back. Ok. So now, let's figures,
out: so there are a lot of different ways that you can design these programmes. Can you just talk is through what you think of the best few options are and how you would rank them against one another? I mean it eight both, in terms of what types of economic triggers should be used to determine whether not stabilizers go into effect? What types of fiscal spending you think are the most optimal too. You should just be direct check should it be unemployment, insurance or investments in different types of social insurance programme. what's the best way to design this in your world. It's all right. I think I'd like to step back there and talk about having a couple of the lessons we have learned from pandemic responses, while these are just our guiding principles. I'll get into some of the weeds. Sab had to do that in a minute, but am I think too big things, I would say The first is our policy Choices are largely dictated by our lack of ability. To administer things well that ends up an imperfect design.
and then he even one, we ve made those imperfect design choices. We still can't really do things effectively, so just to give a quick discussion about this. Employment insurance is a great example from the Cares act The reason why the six hundred dollar check was design and structure. The way was is because a capture and a certain percentage of the gap between lost wages and what the oasis traditionally replaces and so hundred dollars in Massachusetts like a higher income country about percent of the average wage was placed in lowering. said you saw a hundred and sixty percent of wages replaced with that six hundred dollar top off. Now, I'm ok with that. Tell me in the camp the things that's a worthwhile tradeoff, but we had to do it that way because We didn't have a system where states could replace a certain percentage of wages, have lost wages I'll. Never forget when New Jersey
was frantically looking around for people who could code in Kabul which is like Sixty year old programming language, because I couldn't make these changes. And then, furthermore, after that, it still two months for some people to get benefits and we think about who lost their jobs is not people with a ton of d. What's going on, I mean a lot of Americans. Don't have alot disposable income, surely not enough to tied them over first. for months, while they're waiting on unemployment benefits, that really had a huge impact on our bill. It respond here, I'm I think that administrative capacity is something that we really need to take into consideration and had it guides where I would put that money. The second thing I would say that guides part of our decision, making I'm sure I'm trying to think about how to say this careful way. But how do you prevent nefarious actors from try to sabotage policy goals. This is something we see, particularly with programmes that are run through
That's where you might have governors who want to try to sabotage these problems all this time. I, like three quick examples here. One is from cares care. One big piece of cares that helped along where these lending facilities are created at the Federal Reserve. So other federal Reserve as implementing them. They had kind of this interesting structure where the money was appropriated to tee fisheries exchange stabilization fun, but then give to the Federal Reserve to implement so that discretion. That authority was in the secretary of treasuries, hats and in the pandemic. That was fine because everyone was supportive of putting that money out there for some reason in November twenty twenty- I don't know what happened, said, frame and Chin decided to shut these down, even though he claimed A legal obligation to there was no such legal obligation early August justification
but you still vested with that authority in that discretion and so became really hard to push back on that. Now he was using this progress argument. I think we're just think about that legal authority and some of those institutional fractions like between them an treasury a bit more carefully. Next time extend to other quick ones. We saw this after we pass. Extension of unemployment benefits that a lot of jobs. Governors shut them down early. the spurious arguments that they were keeping people from jobs. Now we ve seen that that's at best a pretty small impact on job vacancies, and you really do one of us that, if you, if you don't have to you'd rather easier it does not have the ability to just shut down these various programmes. Finally, one. Last these there anymore I can rescue plan, there is a provision to help states, Phil fiscal shortfalls and one
Conditions of those was that the receiving state could not lower its taxes in the two as following receipt of that money. Everyone policy perspective that makes lotta sends you don't want states to get a bunch of money and then just going taxes for corporations or whatever it is. Presumably, if they can cut taxes, they can sell them shortfalls themselves, don't ever shortfall, but I think it We need to assume that certain governors, a challenge provisions like that which they did in court and we don't have very friendly courts at the moment if you're someone, a leans left, and so you know these are difficult tradeoffs and I want to say that their using, but there's something that I think we need to be thinking about. A little bit more carefully where were vest, that authority. In that discretion So those are some big lessons, and- and now I am tell you how that will guide, how I would
Finally, is I think the first thing is talking about what programmes were picking here. I think direct checks since unemployment insurance through extended benefits and state and local aid, or play for really really good things to focus on, part of the reason is we saw this with direct checks it's pretty easy to implement for Treasury now, so they can just send. Checks is later people direct deposit for a lot of people. Now, with snap, it's the same thing relatively easy to just add some more. a card that people use for their benefits? So those are the programmes I would focus on. The simplicity of the programme is, is really really important year boat in simple nice, for people to be able to access it like they know how to get it. They know that its availability of them to understand and also simplicity, for the government to be able to get it out quickly doesn't require a bunch of work too
up that kind of a system of in the middle of a crisis. I guess one of the big problems we ve seen of a pandemic is just that: the inability for us to reach some of the worst off individuals in society and it feels like setting Our most legitimate, consistent across different crises, would make it easier to reach these people do feel it that's right or eating. There's. Something else needs to be done in order to make sure you're not missing the very bottom earners and society, but of a drug care about been covered, ass, our fan, and so you know where he said in field of dreams. If you keep, if we build it, they all come. I think if you build these programs, you can you can over time, have people really come to them and it's not going to be perfect. I think we're seeing this with the child tax credit. It's time a lot better. I'm really really excited about the child tax credit as just another vessel for us to reach some of the hardest to reach in society and all
and bringing them into the tax system, but have all you need to build these over time. I think that's one of the benefits of having these permanent programmes if we build a really great sat of our man automatic stabilizers weekend, learn weaken tinker with them, we can refine them over time, but they're always there, and we now It doesn't mean that Congress won't act in the future there. always gonna be idiosyncratic issues We need to deal with a given recession and the global and the global financial crisis, housing probably would have you and I both love housing. I got my star work down housing policy, but I dont know design an automatic stabilizer around it. But in the past recession could have imagined Congress having something like some place where employment, insurance, indirect checks were going out. There is a lot of pain, and then it does
I'm something a bit more targeted at the problem, particularly that we are seeing in the housing sector there funny I was going to say that it felt like rent belief actually is a particularly good candidate for our next obliges, but it seems that you disagrees had loved. Her looks divergent from my end. Seems. Like I mean what we ve seen in general is at renters are lower income on average being evicted, as is actually quite closely, not just for you as an individual, but for society a whole if it means that what children can attend school regularly or if there is any kind of pandemic going on. That also increases the spread, but even outside of the idiosyncrasies of of covert itself like eviction is, is really costly for victims of domestic violence, or community cohesion people can't access basic needs or even like get to a better place economically, if they don't have the very foundation of a roof over there, Heads or shelter, and so to me, it seems like an ocean released actually are really really good tool to be using general, but it seems like you think that you d priorities that over direct checks are snap or something like that. I too
I agree with you on everyone has points I think evictions are one of the most harmful things that we have in society and their so bad during recessions. Obviously, but their generally really bad. I think and if we had a really strong Santa stabilizes in terms of direct checks, you know, unemployment insurance that might help with the eviction, waves, but we see an recessions and I'll, I think, Only concern with housing, supporter rental support is that we don't have bright mechanisms for getting that support the door. I let you see us a bit with the rental relieved now, where it's it's taken so long, even I mean who I think there are a lot reasons why has taken so long. Obviously, in that amendment goes regular landlords, but it is a problem that we can't really just easily build that up through. sing programmes. A lot of states and a lot of local governments have emergency Randal access
programmes, even Europe's citizens, by the biggest in the country where you know, if you are at risk, conviction and there's some issue that turned up you lower wages are broke down whatever it is, you can go access that money, but they're not as wide as we were I certainly generous recession, and so are you I run into all of the same implementation problems and then the other option is obviously the housing trace, bachelor programmes, but that's already in only one in four people are getting vouchers. anyway, so designing a trigger around something where already not enough people are getting, it would be a little store, because I'm, when you turn it off, doesn't mean that those people who fall, if I and I guess I just. I think there are like a lot of problems with how we administer housing, but I- and I think we can fix most-
those three very generous on employment and drug checks. On things like that, yeah me that someday we saw even without rent relief. People obviously were using their unemployment insurance and the direct checks they got on rent, which meant rent payment state pretty pretty high during even the worst parts of the crisis. last year, so one of the things do that I wanted to get on as like what types of triggers are the best or what types of economic indicators are the best to actually trigger these types of things. It seems like unemployment. Insurance is one that people throw it a lot, but he walk us through, like which ones or the relative benefits of you, know you BP, growth or or something else entirely is. There is a reason why we fix it on an unemployment rate and say, general. I would love to see a robust suite of triggers that cutting corners and a lot of different situations. I think, if we're talking about unemployment rates, there are a lot of different ways: the measure on employing itself stairs here then
what kind of unemployment rate that we talk about a lot in the discord, there's the insured unemployment rate, which is part of the extend a bet. It's one of the triggers for the extended benefits programme, the employment- population ratio, these measure different things and they tend to work a bit differently somewhat better than others, depending on the recession. So for a long time, conventional wisdom was that he ensured, unemployment rate was not very good lag behind. The other ones in terms of high response that was at this time around. It was the best indicator that we have, was the one that responded the fastest and so within the unemployment rate. Their trade offs that we would make- and I think you would be best to have- robust sweep of trainers, that's Catherine alone, these different things so that the next time we have a idiosyncratic
recession. For whatever reason it is by it's like an oil shock or some other thing, we have a bunch of different triggers. I can respond to that. Think we want to make sure that whatever triggers we are picking are responsive and regularly collected that don't have a lot of he's all adjustment. What's our cards, so you know we used for most of our proposals, is the site trigger that was created by my friend Claudius on this essentially word if within a twelve month period the unemployed and she and she's the one that's Nazis way, adjusted if it goes up by point five percent above the law in the twelve month period it triggers so, let's just aunt, Jane or in January, In January the unemployment rate is four percent and then in September fits and that's gonna, that the lowest period and that told them period
it goes up to four point: five it triggers on and you have the benefits that worked pretty well, it's better than one of the things that we use. If you look at GDP, but I have to go back in the Did I hear and see how often its collected but one day in offering I like the definition that the National Bureau for Economic Research uses for recessions is gdp? Base ex them a year after the recession has started or more yet, actually classical Something is a recession, so that's like way too long a leg. We already have too long in the lake because congresses and fast enough to respond to these things, I don't think we need a metric also that is so quick delay, exciting. That's one thing about unemployment data is, it is pretty good, at least at the fact that it comes out every month then, and we can track it pretty easily. I mean speaking of difficulty measuring things. One of the proposals that I believe
employee miracle put out. Was this idea of media using on MAC, stabilizers and end? The benefit would be blocked, grants aid to states, but what one of things I've I find difficult. But this, like, I remember the twenty there's just so much discussion about how, similarly to the great recession states we're gonna be experiencing, is massive shortfalls, like, they were going to have to cut higher education budgets again me a really big problems for teachers, all this kind of stuff, and then you know the end of the year. I it became clear that a lot of seeds actually had budget surpluses, and there are two reasons for that that we want to get into. But are you? Are you concern about set up something like that where it feels like it may not actually immediately get to the people in need in the way that you know simulator checks would want the caveat. I would have there and the reason why I would include esteem. Alcohol aid stabilizer that the nature for one thing we have fifty fifty different sites and all different jurisdictions that budget on very very different time once
decisions are being made for one they have to project forward and sometimes have big cuts because of certain expectations about their own source revenue. I'm begging We do a lot of lay offs of weaken, stabilize and provide some certainty. That's really good! I think that there is a design way out of this. You know Alex's proposal that you mention was made hold off the Office of Macro economic stabilization that was set up a treasure. Wait Seventys the eighties and is one of those weird things that next Sunday that was not a progressive. I guess, but damn think that you can design a way to do this. First of all, where you have, let's call them revisions or where you kind of recertified? Indeed, every quarter so we ve been working on a proposal like this with reaffirms our Bennets office that we haven't had a generally, partly because we're trying to figure out some of these different questions.
If you let's say, if early in recession, we know that a recession is unlikely to just last three months right. It's it's going to be some period of time in the recovery is going to take some beer, this time early on in the recession is the first three mm you're, getting some ass, the men of our report a man of your own source revenue based on We can estimate from the unemployment rate, so that's gonna how we did it. We took an unemployment rate, should give a shoutout too great benefits allies tribal, I'm ready a Cox. They came up with this like pretty simple the a formula that tracks the unemployment rate and alive, to the loss of revenue. So if you can get a decent estimate and then basically recertified that a mountain and have it adapter bent over the court, serve this recession every three months and it you can correct for that problem of light, giving too much money to states which
I think it's ok, if you err on the side of giving them all, money up front of bacon, not have to wait. A lot of people, that's a great thing, and then, if we find out that their revenues are better than we expected. It means that maybe the next border they're not getting it or something like that. Ok will we have a lot more to talk about, but a minute take another quick break and will be right back with you. One way to think about therapy is through analogies. We get our car service to prevent bigger issues down the road we worked out and visit the doktor to prevent injury and disease in our bodies. We see the dentist for a teeth to prevent cavities and other issues, going to therapy is like all of the above. Its routine maintenance for your mental and emotional wellness going to therapy doesn't mean something's wrong with you. means are investing in yourself to keep your mind healthy, better help is
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Power trip check out cover story on Spotify or wherever you listen and were back so we ve got into the weeds a little bit about the pulse design here. But one of the problems that I've been thinking about with a MAC stabilizers is just how different every part of the country can be in its response. Our in its infected this to economic recession under even be obviously localised economic recession, and you can have one region of the country actually doing. Extremely well and having no x is is it: it appeared, expansion, while other regions are in and depression and frequent listeners of the weeds will know that the reduction in interstate mobility caused by things like lonely regulations and occupational licensing, and things like that have made it more forgot. First, have a single her! Haven't you fiscal Montera response that would allow for people to have free movement between places that are experiencing expansion, places that are experiencing I'm depression but feel them
MAX able eyes ears like how do you ensure that a your evil to target people in places that are experiencing depression of most of the countries doing fine? Or you know? How do you make sure that the aid is actually stabilizing on average appropriately, instead of just yet a bunch of people who are in good places are getting money when they don't need it, which obviously has inflationary problems associated with that, and then people who are in pain or are not getting the adequate amount of money so mean. How did I steal it? That thorny issue, I think we have a decent model, then the extended benefits program, I'm so I'll use that is kind of a set up. Above you have some national calibration re one. We haven't a nation wide recession like we saw recently where unemployment is going up everywhere and it's pretty high on average, nationally You want to have that support to the economy, but you're right. I think you seen us, particularly at the tail end of recessions, where certain states taken
Lot longer to recover than other, once we I mean this was one of the guiding principle behind certain job governors I'm pulling out unemployment benefits was that they set their unemployment rate was a lot lower than it was in. Let's say you know, Michigan or someplace like that, and so I think, though, the way that I would do, I am thus s say you have them, national level where you have a trigger on, and you have a trigger off but then within that states can be triggered on D. and on their state unemployment rates. You actually have in the extended benefits programme. One of the reasons why states are reluctant to use extended. Benefits is because they have to pay for fifty percent of that which is not ideal when you're going through a recession, so like outside of the great recession. Every area at no time did more than
Eleven states opt into the optional triggers there, so we made that federally financed for one thing state We have more of an incentive dart into it and then the title to their state unemployment rates. You can have a situation where one say a five point: five percent was are trigger for unemployment rate if it goes up above five point five percent it's on. goes below its off, but if the Michigan Unemployment Reign of that time is still eight percent, they dropped in use, the state trigger, and then they would continue to have those that's going on, and so you wouldn't have that regional disparities here. You can't perfect away these issues were. Certainly you can smoothing out so that states that tend to have tougher labour markets, the following recessions, can actually keep them on using their own state.
all data and our Saint level data of unemployment, as is good enough, but I think that that would be ok now. You know particular about the economic benefits of automatic stabilizers, but it's also, like you know of, is responding to the political problem that occurs in crises in open, this is- is the is the partisanship that might arise, making it such that some state governors kind of reject, federal, aid, even if it is mostly paid for we saw this with the extended unemployment insurance, but like one of the big things that are mixed users tries to do is to make it says that what a crisis does hit instead of there being big debate around the floor, help that, though, that you know the very basic help that needs to be provided that that's taken care of and that the federal government can be freed up to focus on the specifics of that crisis. You know it feels like that, something that would make it more
likely for people to be in favour of it, but you know at the same time. It could also see there being a case where you know people really want a lot of leverage and reduce some of the leverage during negotiations. So you know how do you think what the likelihood of his passing, given the political stakes here uncertain, been once I've heard that point four People, often from legislators in Congress slightly, if you do this year, reducing our leverage to like extract more in the future. And frankly, I think it's one of the dumbest arguments I ever heard I'm just gonna like cards on the table really really really bad thing, turf that I'm not saying anything, this obviously but later engine. It's a really really dumb argument, as you said well, we're talking about here. Just raises, the floor. We have a really really bad floor. We have like unemployment. Insurance is just not nearly generous enough to keep people in every direction. families hall when they expire.
His job loss and like we should do, Everything we can to permanently raised that floor. There is all is going to be something for Congress to do, but, as we saw just getting back to that leverage, peace and I think this is a really important to think about in terms of the parties, the nature of our political cycle, if you think about like a long recession like the great recession, the unemployment insurance benefits that past as part of Europe, recovery and reinvestment act. Those benefits lapsed five times before they ultimately inspired in two thousand forty and you can, with a straight face savour Democrats, wanted to extend those benefits. Extra ACT in a lot of concern and in order to extend those benefits each time they lapsed. What they actually had to do was give up a lot of support, so
were you tend to see, is at the beginning, when things are really bad. Everyone is on board with getting money into the economy but as soon as you start to get a whiff of recovery that energy receives, you end up having to give up a lot more concessions to keep them going and what we know about Congress. Is there really bad at picking arbitrary dates for these programmes to expire, so the point at which, like they sent an expiry date for one of these programmes, I think on Labour day, which is just bonkers when you think about it like this is like not something it. Congress does well, they have no idea. I mean nothing. We should have a lot more humility about when arrest. She is going down when the labour market is gonna, get a lot better, but data They don't have a goddamn way of defining this and defining the date on which it expires, and so, if every time
have to accept, as you have to give up more concessions in order to get this important aid. There are like that's just not a good sign of school, that's not a good default, If we try to do some economic indicator for one thing like we'll get, it may not be my problem. economic indicator where I would love to see us get to the abbey. The tightest of tight labour markets before we with all this aid. But if we can get some political consensus around some indicator, at least, were setting a better floor. So I think that generally like we shared it's just a lot better and there's all we're gonna be political jogging around recessions, about what we're doing, there's always gonna, be extension fights, but let's make sure that when applying I unemployment benefits from the economy in two thousand fourteen and then waiting until twenty nineteen for the labour market to really recover. It's not a good place for us to be an. I guess I just
push you little, but on this and Yo R. sleep. There are limits to discretionary fiscal policy, especially in the middle of a crisis, but it I feel like in some ways that this could be a very blunt tool to respond to recession. So is the art that you're. Making that our backs able ledgers are the ideal way to respond. Or are you saying that, given the federal government has not shown itself on cable, of responding in a tailored and quick and forceful manner. In response to recessions, we have to rely on automatic stabilizers. I think that automatic stabilizers are tailor made to address and challenges that we see happen. Every recession ever recession. We have you see get demand drop off a certain level. These people have lessened gum and are losing their jobs, so things like direct checks so a generous unemployment insurance system would
stabilizer. They would help us not have that huge job off in aggregate man and accordingly, having the impact of that would be less our glass men are shorter recession. I dont think Then it's gonna solve every problem, obviously, but a few consistent problems that tend to happen that these types of automatic stabilizers could go a long way in addressing things like food. And security helping people keep them. that last wages now automatic stabilizer is not going to addressing the liquidity challenges that we see necessarily where businesses have trouble accessing credit. So that's why it's great that Congress passed in the cares. The prevention. I mentioned about the feds facilities, which stabilized a lot of the liquidity this is where a saint, just as as one example, this pretty directly
I'm between the municipal lending facility that was created and a drop in municipal bond yells of their pre pandemic level. So something like that, Congo, did a great job on addressing idiosyncratic problem. They also put a lot of money and do Mickey and funding some of the funding for operation warp. Speed came out of the cares. I liked there are really really good and idiosyncratic things. A baker put a lot of money into the thing that they're, just not good at doing, is good the timing right on of these big aggregate problems that happen every recession and that's what the automatic stabilizers would help solve, and I mean you ve been involved in the legislative process is this something that we could see happen in the future. You think under democrat or republican administrations. Or is this a minute you think that like states could start pursuing on their own some sort of kind of honour stabilizers that they have at state level that my
the way forward or- or what do you think is gonna happen with this policy in the next time you know decade. I think it's tough for states to do just because they have limited fiscal As long as it is so I mean I loved it, like I'm sure, but there are some states well governed states that are better thinking about some of these things in terms of the next decade one thing that we tend to see, is that the energy to do so like this only happens during recessions. I was working on these automatic stabilizer proposals before overhead and it wasn't easy. even though the euro is one of the back of it says when wherein recovery or a strong economy scores, I quite a bit lower, so that's actually the best time to pass it because it score is lower and we have in place the next recession, and it gets, It's gonna be a really tough. If we continue to be pretty constraint,
What we can spend on these programmes, but so think. There's a lot of consensus among economists and politicians that matter, and policymakers in doing some version of this, and so I don't want to wanna oversell answer that we're gonna get a big bipartisan automatic stabilizes bill. But am I tend to be optimists and I think that there is an imperfect, maybe consensus around making it's better the next time I think one thing like eyes: pretty hardened by during color You didn't see a lot of policy limitations. As I remember, there was a bill that other centres the young and bends ass, put forward that were kind of force. States test the surge capacity of their unemployment insurance systems. make sure that, like, if you had a twenty fold increase in applications, are you gonna? Do deal with that there's a little against.
administrative things out in particular that you can do terms of a permanent. You know better I say lies where we had extended benefits the triggers reform to be a little bit better and have a hundred bucks federal financing. Now it's gonna be what exactly what I want, but I am sure that I feel that there is a consensus. Where are we get to some level of agreement in terms of the trade off between how much for compensating a lot that's better than nothing, even if it kicks off at
six point: five percent, instead of four point five percent or whenever it as I try to be hopeful that stuff yeah. I think it's interesting to think about what the lessons learned from this recession are gonna be next time. I think economist Anatomize MC had this line on twitter that the lesson we learned from blast recession was, you need we'd, be spending a lot more money and then from this recession that maybe we need to be a lot more targeted and how our spending that money it felt like in out of you know that the common refrain we heard wishes it's better to do more than it is do less, but it would have been better to do the the amount that we need to do away with the driveway. No, we need to do it and it feels like next able eyes ears. You know if there's a another recession in the next ten twenty years or whatever that it would be likely. This is kind of like the policy idea that could stick through to help Pino smooth out some of the uncertainties of how much we spending in all kinds of things to be. ending on said just taking a sledge hammer, I'm with the federal fiscal response,
to try and with such implore, the best one, but maybe it's like opening the floodgates with all of the economic stimulus that you know we could. We could think about. Thank you, much aren't for coming enjoining me to talk about our backs stabilizer just like this is when a warm in the weeds episodes of. Hopefully, our listeners are excited about that, but yeah thanks for coming on someone frowningly, that's all for us today. to America's art of data for joining us talk about automatic stabilizers are producer is healthy blonde Liddy Nelson, as our editorial adviser, Amber Hall as be deputy editorial director for talk podcast and on your hosts Jerusalem, Damn says: go to vocs dot com flash reads letter to sign up for our newsletter in your inbox every week and we would back in your feet neck.
Tuesday, with the final in our series on America's public health experiment, I will do the panel with me deal Matthews and DORA Lynn we'll see. Then the weeds part of the box media podcast network. Cover story: a new investigative podcast from New York magazine. Our first season is about a secretive underground. That's about to go mainstream psychedelic there I would love for you to talk about the moment where it went from being something safe to something treacherous and bad. Oh boy, with dark cover story season, one power trip check out, cover story on Spotify or wherever you listen
Transcript generated on 2021-12-17.