On Tuesday, the Senate confirmation hearing for Janet Yellen, President Biden’s nominee to be the next Treasury secretary, turned into a de facto hearing on the president’s economic relief plan. While Ms. Yellen, a former Federal Reserve chair, is expected to be confirmed, the fate of the Biden plan is up in the air and became the focus of senators’ back and forth.
Democrats generally cheered Mr. Biden’s proposed $1.9 trillion package, while Republicans peppered Ms. Yellen with questions about whether that level of spending might be overkill. The price tag is indeed big — as it should be. This moment of crisis demands it.
But members of Congress should carefully consider the necessary levels of spending, particularly amid so much uncertainty.
Many lawmakers seem to be asking, “How much is enough?” while “When have we done enough?” is the better question. When those 10 million jobs still missing are back, when the half of families who have lost income from work are made whole and when those who had to leave their jobs because of extra parenting burdens begin to return — that’s when relief should turn off.
Rather than setting an arbitrary expiration date and banking on yet another 11th-hour scramble for more relief, Congress could base its policy on how people and businesses are doing, not on the passage of time. In policy circles, such tools are known as “automatic stabilizers.” They’re quite simple: If the economy comes roaring back, then the stabilizers put in place turn off; if it takes longer to recover, they stay on.
A broad cross-section of research shows that auto stabilizers will help us do enough without doing too much.
Putting policy on autopilot is not new. For the U.S. government, it began in 1935 when, with the guidance of Labor Secretary Frances Perkins, our first female cabinet secretary, the Roosevelt administration introduced unemployment insurance as part of the New Deal. Employers pay into the system, so that laid-off workers can receive benefits. More workers are laid off in recessions, so more money is spent on benefits. Then in expansions, much less is spent.
Food stamps and progressive income taxes are also, in their own ways, automatic stabilizers.
Another great advantage to automatic stabilizers is that Congress can bump up the generosity of their benefits in bad times. Currently, 16 million people are receiving some form of jobless benefits — more than seven times the number of recipients a year ago.
In light of the pandemic, it was both humane and economically astute when, this past March, Congress made jobless benefits more generous through the CARES Act: The $600 a week federal supplement to state unemployment checks; the expanded eligibility for benefits; the increased number of weeks the unemployed could get support; the $1,200 direct checks to the vast majority of adults. It was all a strong start.