U.S. State and Local Government Finances Over the Current Cycle

Tamim Bayoumi

No 1992/112, IMF Working Papers from International Monetary Fund

Abstract: The recent slowdown in the U.S. economy has led to state and local government tax increases and expenditure cuts that have lowered aggregate demand, in contrast to earlier downturns when the sector provided significant automatic stabilizers. Several explanations for this change are examined, including the role of federal grants, mandates, tax revolts, and compensation. The first three factors are found to be relatively unimportant. There does, however, appear to have been a large change in relative compensation over the 1980s, which can account for much of the deterioration in finances.

Keywords: WP; state government; local government; local government sector; local government balance; aggregate state government; local government employee; local government spending; Fiscal stance; Total expenditures; Public sector (search for similar items in EconPapers)
Pages: 35
Date: 1992-12-01
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Persistent link: https://EconPapers.repec.org/RePEc:imf:imfwpa:1992/112

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