Abstract

Arguments against providing fiscal aid to state governments usually rely on a simplistic moral hazard argument: supporting states through a cyclical downturn encourages them to overspend. This argument undergirds the policy recommendations made by the mainstream literature on Fiscal Federalism. I argue that these accounts are predicated on a misunderstanding of what it means to be an agent with respect to one’s budget over the business cycle. Basic corporate finance theory teaches us that in order to have control over the relative movement of income and expenditure in the current period, one must be able to design one’s own capital structure. US State governments are institutionally and constitutionally prevented from designing their own capital structures, and as such, cannot be judged to have budgetary agency across the business cycle. I show that the moral hazard problem presented in the fiscal finance literature is ill-posed, and obscures a second, more important problem of moral hazard. Namely, that politicians at the federal level reap the political rewards of pursuing austerity at the state level while remaining insulated from any political, economic, or social costs or responsibility. This second moral hazard problem admits of a simple solution: trigger-based fiscal aid to state governments.

摘要

反对向州政府提供财政援助的论点通常依赖于一种简单的道德风险论点：通过周期性的经济低迷来支持国家会鼓励它们超支。这一论点支持了关于财政联邦制的主流文献所提出的政策建议。我认为，这些账目是基于对在整个经济周期中作为一个预算的代理商的误解。基本的公司财务理论告诉我们，为了控制当期收入和支出的相对移动，人们必须能够设计自己的资本结构。美国各州政府在制度上和宪法上都无法设计自己的资本结构，因此，不能断定在整个商业周期内都有预算机构。我表明，财政金融文献中提出的道德风险问题是不恰当的，掩盖了第二个更重要的道德风险问题。就是说，联邦一级的政客从政治上获得了在州一级实行紧缩政策的回报，同时又避免了任何政治，经济或社会成本或责任。第二个道德风险问题承认了一个简单的解决方案：对州政府的基于触发的财政援助。