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Great Recession and Fiscal Squeeze at U.S. Subnational Government Level

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  • Jiri Jonas

Abstract

The paper discusses the fiscal impact of the Great Recession of 2007-08 on state and local governments in the United States. It documents the sharp decline in tax revenue and discusses how states responded to close the budget gaps in order to obey the balanced budget provisions. It highligts the procyclical nature of this policy response, provides a brief comparison with subnational policy stances in other advanced economies, and discusses some options for making subnational fiscal policy less procyclical within the framework of current rules.

Suggested Citation

  • Jiri Jonas, 2012. "Great Recession and Fiscal Squeeze at U.S. Subnational Government Level," IMF Working Papers 12/184, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:12/184
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    File URL: http://www.imf.org/external/pubs/cat/longres.aspx?sk=26060
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    References listed on IDEAS

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    1. Lutz, Byron & Molloy, Raven & Shan, Hui, 2011. "The housing crisis and state and local government tax revenue: Five channels," Regional Science and Urban Economics, Elsevier, vol. 41(4), pages 306-319, July.
    2. Svec Justin & Kondo Ayako, 2012. "Fiscal Policy Cyclicality and Growth within the US States," The B.E. Journal of Macroeconomics, De Gruyter, vol. 12(2), pages 1-35, March.
    3. Aizenman, Joshua & Pasricha, Gurnain Kaur, 2011. "Net Fiscal Stimulus During The Great Recession," Santa Cruz Department of Economics, Working Paper Series qt8df5z6j8, Department of Economics, UC Santa Cruz.
    4. James M. Poterba, 1996. "Do Budget Rules Work?," NBER Working Papers 5550, National Bureau of Economic Research, Inc.
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