Our new automatic destabilizers

When the 2008 recession and financial crisis hit what advantage for the Western European countries had over the United States was more automatic stabilizers. Of course, they squandered that with their austerity response. The European countries longer unemployment benefits, government provided health care and other safety net programs. Those programs help to maintain aggregate demand. Now, if in the house have their way we are going to have even fewer stabilizers. Less unemployment compensation, less programs such as food stamps etc. And less Government provided or funded healthcare. Further, they would like to turn social security increasingly into some sort of 401(k) program. They also want to eliminate defined benefit retirement programs for Federal workers and probably for State government employees to the extent they can pressure that to occur. Just imagine what would've happened if in 2008 retirees had a social security program based upon individual 401(k) type plans. They would've had to invade capital, and undoubtedly start spending less. Many state governments have already started switching over from defined benefits to 401(k) type plans for their workers. Ross, we would've had decreased aggregate demand, a further selloff in an already collapsing stockmarket and probably defaults in the housing market. This is apparently what Republicans want although of course their fantasy economics suggest that if we only cut taxes, particularly on the wealthy, we will all have money to burn.

Those business interests who champion the Republican programs constantly harp that they want certainty. What about workers? Where do they get certainty? One place is, for instance, being a unionized government employee with traditional benefits. This also helps to maintain a aggregate demand both from active workers and retirees. It also allows for collective-bargaining which provides at least some small Barrier to increased divergence. If you do a seat-of-the-pants regression analysis, You will see that during the time in the mid-20th century when unions were flourishing so what is the economy and there was some measure of convergence. This was true even though marginal tax rates were much higher than today.(I understand there are many variables I have not accounted for.) I fear the Republicans are really going to screw things up. Other than tax cuts and some measures of economic isolation, who knows what Trump will propose or agree to with the Republican Congress so far, all signs are that he is going to be the ignorant, arrogant jerk that we have seen for the last year.