National Fiscal Policies to Fight Recessions in U.S. States

2020, Paper, "States experience recessions that differ in magnitude and timing from national recessions, and those state-level recessions have significant economic and social costs. Yet, countercyclical policy is often viewed through a national lens, where a worsening of national economic conditions leads to policies designed to lower national unemployment or boost national output. Balanced-budget rules prevent states from undertaking effective countercyclical fiscal policies on their own, but the federal government can adopt policies that respond to state-specific needs. For example, cutting federal payroll taxes on a state-by-state basis when unemployment rates rise would substantially reduce the harm of higher unemployment."