What Is the Remedy for State and Local Fiscal Squeeze During the COVID-19 Recession? More Debt, and That Is Okay

The COVID-19 crisis is placing a tremendous fiscal squeeze on state and local governments in the United States. We argue that the federal government should increase its deficit to fill in the fiscal gap. In the absence of sufficient federal assistance, we recommend that states suspend their balanced...

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Bibliographic Details
Published inAmerican review of public administration Vol. 50; no. 6-7; pp. 584 - 589
Main Authors Douglas, James W., Raudla, Ringa
Format Journal Article
LanguageEnglish
Published Los Angeles, CA SAGE Publications 01.08.2020
Sage Publications, Inc
SAGE PUBLICATIONS, INC
Subjects
Budget deficits
Budgets
Comparative analysis
Coronaviruses
COVID-19
Crises
External debt
Federal government
Health aspects
Local finance
Local government
Management
Norms
Obligations
Pandemics
Public debt
State finance
public debt
fiscal crisis
balanced budget norms
public deficits
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Summary:The COVID-19 crisis is placing a tremendous fiscal squeeze on state and local governments in the United States. We argue that the federal government should increase its deficit to fill in the fiscal gap. In the absence of sufficient federal assistance, we recommend that states suspend their balanced budget rules and norms and run deficits in their operating budgets to maintain services and meet additional obligations due to the pandemic. A comparison with Eurozone countries shows that states have more than enough debt capacity to run short-term deficits to respond to the crisis.
ISSN:0275-0740
1552-3357
DOI:10.1177/0275074020941717