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Title page 1

Contents 4

Highlights 2

Letter 7

Background 10

Automatic Stabilizers Are Fiscal Mechanisms That Help Stabilize the Economy During Downturns 10

Key Automatic Stabilizer Programs 12

Discretionary Fiscal Policies 13

Automatic Stabilizers in Other Advanced Economies 13

Automatic Stabilizers are More Effective if They Are Timely, Temporary, Targeted, and Predictable 14

Automatic Stabilizers Are More Effective When They Are Timely 15

Automatic Stabilizers Are More Effective When They Are Temporary 17

Automatic Stabilizers Are More Effective When They Are Targeted 22

Automatic Stabilizers Are More Effective When They Are Predictable 27

Well-Designed Triggers Can Enhance Automatic Stabilization 29

Options to Strengthen Automatic Stabilizers Involve Trade-Offs 34

Trade-Offs and Other Considerations for Strengthening Automatic Stabilizers 35

Policy Area: Unemployment Insurance 38

Policy Area: Supplemental Nutrition Assistance Program 55

Policy Area: Medicaid 67

Policy Area: Tax System 74

Policy Area: Earned Income Tax Credit 81

Policy Area: Child Tax Credit 94

Agency Comments and Our Evaluation 97

Appendix I: Objectives, Scope, and Methodology 99

Appendix II: Examples Of Automatic Stabilizers in Other Advanced Economies 104

Appendix III: GAO Contact and Staff Acknowledgments 113

Appendix IV: Additional Source Information for Graphics 114

Related GAO Products 116

Tables 4

Table 1. Principles and Factors for Effective Design of Automatic Stabilizers 15

Table 2. Potential Policy Options to Strengthen Automatic Stabilizers 34

Table 3. Example of Variation in Canadian Employment Insurance (EI) Benefits 106

Figures 4

Figure 1. Effects of Automatic Stabilizers During Economic Downturns 11

Figure 2. Recent Recessions Compared to a Potential Trigger to Automatically Stimulate the Economy 31

Figure 3. GAO Prototype Formula for Temporary Increased FMAP Assistance to States 70

Figure 4. Earned Income Tax Credit (EITC) Amount for Single-Filer Taxpayers by Number of Qualifying Children and Income for 2025 83

Figure 5. Illustrative Example of a Taxpayer in the Phase-In Range Where the Earned Income Tax Credit (EITC) Amount Decreases with Their Earned Income 87

Figure 6. Illustrative Example of a Taxpayer in the Phase-Out Range Where Unemployment Insurance (UI) Compensation Decreases Their Earned Income Tax Credit (EITC) Amount 88