Sunday, March 29, 2009

Safety Net or Stimulus?

Thanks to Ezra Klein, I read this New York Times article  about how European countries, led by Germany are using their expansive social safety net to weather the recession instead of economic stimulus packages like the United States.  This could lead to some conflict at the upcoming G20 summit as the Obama administration pushes for a coordinated global stimulus.

White House Chief of Staff Rahm Emmanuel famously said that we should never waste a crisis.  I hope as part of the recovery projects there is increased investments in the safety net.  Th article points out that even though the German economy is contracting at a shocking rate, many Germans do not feel the squeeze as much as many Americans.  Due to the large social programs, German Chancellor Angela Merkel says that Germany's "social systems are not in decline now, pensions are not cut, unemployment insurance is not reduced."

In the U.S., governments are cutting social programs left and right, and individual pensions and retirement savings disappeared with the fall of the markets.   As the U.S. works its way out this economic mess, not only should take steps to regulate the market but we should also find ways to build a stronger safety net that can withstand an economic downturn.

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