Of course, most recessions raise unemployment by a lot more than 0.5%, so this wouldn’t be enough to instantly reverse a downturn. Sahm would add additional automatic payments in subsequent years of the recession. But the initial burst of spending would help take the edge off.
The Sahm Rule would be an even more effective stimulus if the payments were targeted specifically to lower-income Americans, instead of to everyone. But the political appeal of universality, and the ease of administration, might outweigh the economic expediency of means-tested payments.
Instead of waiting for the next crisis to hit, the U.S. should prepare in advance. Implementing more automatic stabilizers that instantly deploy in a recession would provide a front line of defense that would blunt the onset of every downturn to come.
Noah Smith is a Bloomberg Opinion columnist. He was an assistant professor of finance at Stony Brook University, and he blogs at Noahpinion.