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Abstract: 

A review of recent fiscal history can help us understand the mechanisms by which subnational governments adapt their tax, expenditure, and debt policies to an ever-changing economic environment as well as the role fiscal assistance from higher level governments plays in this process. In principle, proposed federal assistance to states and localities may provide useful macroeconomic stimulus and financial support, but past experience, in the United States and elsewhere, highlights the pitfalls in achieving rapid delivery of substantial assistance while simultaneously targeting scarce fiscal resources to the most urgent needs and preserving incentives for prudent financial management by states and localities.

Keywords: Subnational government fiscal adjustment

Affiliations:  1: University of Kentucky Martin School of Public Policy and Administration.