Following up from my previous detailing why the CARES Act will provide an insufficient lifeline to state and local governments, among other sectors:

• Bloomberg (4/1/20): Billion-Dollar Blows to U.S. States Crater Spending Plans
• Seattle Times (4/1/20): Coronavirus necessitates painful cuts to Washington state budget
• The Center Square (4/1/20): Sununu warns that revenue shortfalls will force budget cuts
• The Kansas City Star (4/1/20): Missouri Gov. Parson cutting $180 million from budget. Colleges taking biggest hit
• Lexington Herald Leader (4/1/20): No pay raises. Kentucky lawmakers pass a one-year state budget with no new spending
• NYT (3/30/20): N.Y. Hospitals Face $400 Million in Cuts Even as Virus Battle Rages

The rapid collapse of employment and forced pandemic pause in economic activity will induce a much faster deterioration in state and local public finances than we saw during the Great Recession. These state and local budget cuts will, in turn, further drag at economic output and employment, just as they chronically did during the anemic recovery from the Great Recession. Via FRED:

Congress could instantly alleviate pressure to cut state and local budgets by increasing the federal matching rates for state Medicaid programs, as we did in the Recovery Act of 2009. And the state fiscal relief provisions in the CARES Act don’t even pass the mediocre bar set by the Recovery Act.