Could cash payments ease recessions?

Podcast Summary

• Automatic Cash Payments as a Solution to Economic Recessions: Economist Derek Hamilton suggests automatic cash payments to households as a proactive solution to economic recessions, potentially providing trillions in relief and a more effective response than traditional methods.

  Economist Derek Hamilton proposes a new approach to combating economic recessions. Instead of the usual scramble for tax cuts and emergency aid, Hamilton suggests a more proactive solution: automatic cash payments to households. This idea, which involves potentially trillions of dollars in relief, could help mitigate the negative effects of economic downturns without the political debates and delays. Hamilton, the founding director of the Institute on Race, Power, and Political Economy at The New School, believes this approach could provide a more effective and stable response to economic cycles.

• Automatic stabilizers: Policies that kick in during economic downturns: Automatic stabilizers, like unemployment insurance and food stamps, provide relief during economic stress and ensure resources are directed towards productivity, limiting the risk of severe recessions and reducing their duration. A new proposal suggests monthly cash payments as an effective and efficient automatic stabilizer.

  Automatic stabilizers are essential economic policies designed to provide relief during times of economic stress. These programs, which include unemployment insurance, food stamps, and individual income tax, are already built into a government's budget and automatically kick in when needed. Unlike one-off policies, automatic stabilizers ensure resources are directed towards productivity, limiting the risk of severe recessions, and reducing their duration. Economist Derek Thompson has advocated for a new kind of automatic stabilizer: monthly cash payments. Along with Chris Hughes of The New School and Naomi Zote of UCLA, Thompson proposed this solution in a recent paper. Unlike previous one-off measures, such as tax rebates and stimulus checks, which required congressional approval, monthly cash payments would automatically provide relief, making them a more effective and efficient tool for economic stabilization.

• Recession-Targeted Cash Transfers: A Proposed Solution: During economic downturns, targeted cash transfers provide temporary, income-adjusted, and regular payments to families in need, encouraging spending and contributing to economic growth.

  Economist Derek Thompson proposes a recession-targeted cash transfer program, which is different from universal basic income. This program, triggered by the Saum rule during economic downturns, provides temporary, income-adjusted, and regular payments to families in need. The monthly payments are designed to help families plan better and encourage spending, contributing to economic growth. The targeted income threshold ensures the payments reach those most in need, recognizing the importance of income as a flow concept for addressing economic sovereignty and insecurity.

• Automatic stabilizer program as an economic safety net during recessions: An automatic stabilizer program, providing $35,100 annual benefits to eligible adults, could boost national output by up to 2% during recessions, particularly benefiting low-income families and reducing racial disparities, but its $430 billion annual cost could lead to debates among lawmakers.

  The proposed automatic stabilizer program, which would provide eligible adults with an average annual benefit of $35,100 and give a significant income boost to low-income families, particularly those of Black and Hispanic descent, could amount to up to 2% of the national output during a recession. This program, which would operate automatically without requiring discretionary decisions on who is deserving and undeserving, is seen as an anti-racist policy. However, the cost of this program, estimated at $430 billion per year, could contribute to deficits and spark debate among lawmakers. Despite this, studies suggest that these automatic benefits help keep the economy from worsening during recessions. Essentially, the program would serve as an economic safety net, providing much-needed relief during economic downturns.

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