A Closer Look

Automatic stabilizers in US – A major tool the government uses to respond to recession (video)

Automatic stabilizers—mechanisms built into the federal budget that increase spending or decrease taxes when the economy slows without any vote from Congress– are a major tool the government uses to respond to recession. For instance, spending on unemployment compensation automatically increases when there are more people out of work.

During the Great Recession, automatic stabilizers worked to boost consumer spending, as the Congressional Budget Office’s Wendy Edelberg explains in the video below.

Source: Should we make automatic stabilizers bigger and better before the next recession? | Brookings Institution

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