What are programs that automatically adjust benefits in response to economic changes called?

Programs that automatically adjust benefits in response to economic changes are referred to as automatic stabilizers. These programs are designed to help stabilize the economy during fluctuations such as recession or economic booms without the need for deliberate government intervention. For example, during a recession, unemployment benefits increase as more individuals qualify due to job losses, which helps to support consumer spending and stabilize the economy. Similarly, in times of economic prosperity, tax revenues increase automatically without the need for changes in tax policy, as individuals earn more income.

Automatic stabilizers are vital tools for mitigating the impacts of economic cycles, promoting a smoother economic experience. They operate through existing laws and regulations that facilitate automatic changes to benefits and taxes based on current economic conditions, allowing for a responsive and adaptive economic framework. This inherent responsiveness distinguishes them from other types of policies, such as fiscal policies, which require conscious legislative actions or economic stimuli that do not automatically adjust based on economic conditions.