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Debt and taxes: Fiscal strain and US city budgets during the Great Depression

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  • Siodla, James

Abstract

Although municipal budgets fared well on average during the Great Depression, many suffered greatly. In newspapers and trade publications, observers blamed distress in real estate markets as well as the rise in tax delinquency and real debt obligations. This paper uses a sample of large US cities to estimate how those factors influenced municipal revenue and expenditures during the Depression. Results show that city finances were stable when facing the housing market distress that plagued many urban areas in the 1930s. The principal elements of fiscal strain were actually rising delinquency, which was associated with diminished revenue and operating expenditures, and growing real debt obligations, which were associated with reduced capital outlays. Thus local budgets were driven more by the behavior of taxpayers and obligations to city creditors than by the downturn in real estate markets. These findings illuminate municipal governments’ responses to the fiscal strain wrought by the Depression.

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  • Siodla, James, 2020. "Debt and taxes: Fiscal strain and US city budgets during the Great Depression," Explorations in Economic History, Elsevier, vol. 76(C).
    • Handle: RePEc:eee:exehis:v:76:y:2020:i:c:s0014498320300140
    DOI: 10.1016/j.eeh.2020.101328
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    2. Bordo, Michael D. & Duca, John V., 2023. "How the new fed municipal bond facility capped municipal-treasury yield spreads in the Covid-19 recession," Journal of the Japanese and International Economies, Elsevier, vol. 67(C).

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    More about this item

    Keywords

    Great Depression; Housing; Municipal debt; Municipal finances; Tax delinquency;
    All these keywords.

    JEL classification:

    • N92 - Economic History - - Regional and Urban History - - - U.S.; Canada: 1913-
    • R51 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Finance in Urban and Rural Economies

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