In a Bad State: Responding to State and Local Budget Crises

The federal government has responded to state and local budget crises throughout history, from Alexander Hamilton's plan to assume state debts to Congress's efforts to respond to the COVID-19 pandemic. In a Bad State provides a comprehensive historical and theoretical analysis of how the federal government has addressed subnational debt crises, arguing that federal officials want to achieve three things: prevent macroeconomic distress, encourage lending to states and cities, and avoid creating incentives for reckless future state budgeting. However, federal officials can only achieve two of these three goals, at best. The book offers policy solutions to an intractable American problem, such as conditioning federal aid on future state fiscal responsibility, spreading losses across governments and interests, and building resilience against crises into federal spending and tax policy.

Format: Hardback
Length: 248 pages
Publication date: 12 July 2023
Publisher: Oxford University Press Inc

The long history of federal responses to state and local budget crises, from Alexander Hamilton to the COVID-19 pandemic, is examined in this comprehensive review. It explores what is at stake when a state or city cannot pay its debts and provides policy solutions to an intractable American problem.

From Alexander Hamilton's plan to assume state debts to Congress's efforts to respond to the COVID-19 pandemic, many of the most important political disputes in American history have involved federal government responses to state or local fiscal crises. In a Bad State provides the first comprehensive historical and theoretical analysis of how the federal government has addressed subnational debt crises.

David Schleicher, the author, argues that federal officials have three goals when a state or city nears default: prevent macroeconomic distress, encourage lending to states and cities to build infrastructure, and avoid creating incentives for reckless future state budgeting. However, federal officials can only achieve two of these three goals, at best.

Instead of imagining a single easy federal solution, Schleicher suggests several ways the federal government could ameliorate the problem. These include conditioning federal aid on future state fiscal responsibility, spreading losses across governments and interests, and building resilience against crises into federal spending and tax policy.

In a Bad State is an authoritative and accessible guide to understanding the pressing fiscal problems that local, state, and federal officials face. It provides valuable insights into the historical and theoretical aspects of federal responses to subnational debt crises and offers practical solutions to address this critical issue.

Weight: 478g
Dimension: 165 x 243 x 28 (mm)
ISBN-13: 9780197629154