What Is the Remedy for State and Local Fiscal Squeeze During the COVID-19 Recession? More Debt, and That Is Okay. Issue 6 (August 2020)

• Record Type: Journal Article
• Authors: Douglas, James W.; Raudla, Ringa
• Other Names: Holzer Marc guest-editor.; Newbold Stephanie P. guest-editor.
• Is Part Of: American review of public administration. Volume 50:Issue 6/7(2020)
• Page Start: 584
• Page End: 589
• Publication Date: 2020-08
• Subjects: public debt -- public deficits -- balanced budget norms -- fiscal crisis; Public administration -- Periodicals; Public administration -- United States -- Periodicals; 351
• DOI: 10.1177/0275074020941717
• Languages: English
• ISSNs: 0275-0740

Abstract

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.