Why We Need Automatic Stabilizers to Prevent Economic Recession

Economic instability and recession can harm society, with job loss and a decrease in living standards becoming prevalent. Traditionally, we have relied on politicians to enact policies to prevent economic instability, but they are often too little or too late. Imagine if we could prevent economic downturns before they even happened. This is where the concept of automatic stabilizers comes into play.

What Are Automatic Stabilizers?

Automatic stabilizers are policies that the government can use to stabilize the economy without taking legislative action or making decisions to prevent an economic recession. These are generally implemented in ways where government spending and tax revenue move in opposite directions automatically. For example, when the economy is in a downturn, automatic stabilizers kick in, with unemployment rates increasing, which in turn sees government spending increase on social welfare programs, thereby increasing aggregate demand and preventing the economy from plummeting further. In short, it’s a way to keep the economy running smoothly without leaving it to politicians.

Why We Need Automatic Stabilizers

The current economic trend in society is that we’re relying on the political and legislative process to get us out of a recession, which is proving inefficient. Stimulus packages rolled out are always “too little, too late.” It’s time for a change, and one of these changes involves accepting the power that automatic stabilizers can have in pre-emptively preventing economic downturns from happening.

Related Facts

• One of the main benefits of automatic stabilizers is that they are not as subject to political pressure as discretionary fiscal measures like tax cuts or infrastructure spending.
• Some examples of automatic stabilizers include unemployment insurance, food stamps, social security, and progressive taxes.
• Between 2008 and 2012, revenues for automatic stabilizers increased by 60 percent or $410 billion due to the Great Recession of 2008.

Key Takeaway

By implementing automatic stabilizers in society, we can reduce our reliance on politicians and their decisions around the economy. The benefits are minimizing the occurrence of economic recessions, reducing job losses, and boosting living standards for more people in society. Of course, automatic stabilizers aren’t a cure-all, but they are a step in the right direction.

Conclusion

Economic recession and instability can cause long-term negative effects on society. While politicians have the power to implement fiscal measures to minimize these implications, they aren’t always effective. This is where automatic stabilizers come into play, ensuring that essential societal programs kick in automatically during economic downturns. The result is less reliance on politicians and more programs that help prevent economic slumps from happening.