Government responses to the coronavirus in the United States: immediate remedial actions, rising debt levels and budgetary hangovers

Purpose - This paper reviews the response of both the national and state governments in the United States to the coronavirus pandemic and discusses budgetary challenges that are likely to be faced by the country over the next several years. Design/methodology/approach - The paper uses government sources, analysis by internal and external think tanks and contemporaneous media accounts to describe both the problem and the governmental responses. Findings - Since the first cases appeared in the US in early 2020, and particularly as the numbers started to expand substantially by March of that year, governments at all levels have worked to both respond to the immediate public health crisis and mitigate the economic effects of the pandemic. This included some immediate actions by the Federal Reserve to introduce more liquidity and four separate pieces of legislation passed in March and April 2020. The effect of this legislation has been to add $2.5 tr to 2020 and 2021 deficits. State and local governments, meanwhile, face years of budget shortfalls, which will require them ultimately to raise taxes and cut spending and may also require additional fiscal stimulus from the federal government. The magnitude of the fiscal effects will be driven by whether there is a second wave, how long the recession lasts, and what additional responses will be necessary in order to get the pandemic under control and deal with its aftermath. Originality/value - The paper is likely the first to summarize the information about the federal and state responses, and the likely future impacts, in a single place.