A Vaccine Will Help, but Complete Recovery Will Require Many Years

Fiscally, the biggest difference between the federal government and state/local governments is that states and localities must balance their operating budgets each and every year. States and localities also typically maintain capital budgets and are allowed to float debt. Significant debt, however, leads to large debt service payments, which are reflected on operating budgets that have to be balanced each year. While the federal government can borrow with relative freedom during periods of economic stress, state and local governments are constrained both in terms of operating and capital budgets. As such, declines in state and local government outlays can suppress the vigor of economic rebounds from crises.