Overview

An authoritative review of the long history of federal responses to state and local budget crises, from Alexander Hamilton through the COVID-19 pandemic, that reveals what is at stake when a state or city can't pay its debts and provides policy solutions to an intractable American problem.What should the federal government do if a state like Illinois or a city like Chicago can't pay its debts? From Alexander Hamilton's plan to assume state debts to Congress's efforts to respond to the COVID-19 pandemic, many of the most important political disputes in American history have involved federal government responses to state or local fiscal crises.In a Bad State provides the first comprehensive historical and theoretical analysis of how the federal government has addressed subnational debt crises. Tracing the long history of state and local borrowing, David Schleicher argues that federal officials want to achieve three things when a state or city nears default: prevent macroeconomic distress, encourage lending to states and cities to build infrastructure, and avoid creating incentives for reckless future state budgeting. But whether they demand state austerity, permit state defaults, or provide bailouts-and all have been tried-federal officials can only achieve two of these three goals, at best. Rather than imagining that there is a single easy federal solution, Schleicher suggests some ways the federal government could ameliorate the problem by conditioning federal aid on future state fiscal responsibility, spreading losses across governments and interests, and building resilience against crises into federal spending and tax policy. Authoritative and accessible, In a Bad State offers a guide to understanding the pressing fiscal problems that local, state, and federal officials face, and to the policy options they possess for responding to crises.

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9780197629154

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Reviews

Faced with mounting Medicaid costs, footloose taxpayers, powerful public employees, and a nationalized political climate that rewards ideological grandstanding over basic competence, America's state governments have become fiscal basket cases. Confident that they'll be bailed out by the federal government at the first sign of economic distress, elected officials in state after state are choosing budget gimmickry over spending discipline, reaping political dividends all the while. But what happens when the bailout doesn't materialize, or isn't quite as generous as expected? Drawing on the history of federal responses to state fiscal disasters from the 1790s to the Covid pandemic, David Schleicher's In a Bad State offers a brilliant and engaging exposition of exactly why these fiscal reckonings have proven so painful in the past, and why the inevitable next one will be no exception. * Reihan Salam, Manhattan Institute * David Schleicher, the leading lawyer on state and city governments, has written an extraordinary book that describes with incredible clarity the complexity of the fiscal decisions that lie ahead for cities and states. It is well worth reading. * Richard Ravitch, Former Lt. Governor of New York and Chairman of the Metropolitan Transit Authority * David Schleicher, one of the most brilliant and far-ranging political thinkers of his generation, here takes on a very specific question: How federal governments should respond when state and local governments default. Schleicher's timely insight is that overspending is inextricable from the question of growth, and In a Bad State's deft history channels all the ways in which federalism has complicated and shaped the efforts to build a bigger and more modern country. The pragmatic question with which this gem-like policy book begins opens into a literary one: Of how existing legal and policy regimes might be bent in order to account for the future. * Benjamin Wallace-Wells, The New Yorker *

David Schleicher is the ideal legal scholar of cities. Anyone who is worried about the fiscal future of our states and local governments should read his insightful new book. It is remarkably deep given how much fun it is to read, and it is remarkably fun to read given the seriousness of the topic. * Edward Glaeser, Fred and Eleanor Glimp Professor of Economics and Chairman of the Department of Economics, Harvard University * Faced with mounting Medicaid costs, footloose taxpayers, powerful public employees, and a nationalized political climate that rewards ideological grandstanding over basic competence, America's state governments have become fiscal basket cases. Confident that they'll be bailed out by the federal government at the first sign of economic distress, elected officials in state after state are choosing budget gimmickry over spending discipline, reaping political dividends all the while. But what happens when the bailout doesn't materialize, or isn't quite as generous as expected? Drawing on the history of federal responses to state fiscal disasters from the 1790s to the Covid pandemic, David Schleicher's In a Bad State offers a brilliant and engaging exposition of exactly why these fiscal reckonings have proven so painful in the past, and why the inevitable next one will be no exception. * Reihan Salam, Manhattan Institute * David Schleicher, the leading lawyer on state and city governments, has written an extraordinary book that describes with incredible clarity the complexity of the fiscal decisions that lie ahead for cities and states. It is well worth reading. * Richard Ravitch, Former Lt. Governor of New York and Chairman of the Metropolitan Transit Authority * David Schleicher, one of the most brilliant and far-ranging political thinkers of his generation, here takes on a very specific question: How federal governments should respond when state and local governments default. Schleicher's timely insight is that overspending is inextricable from the question of growth, and In a Bad State's deft history channels all the ways in which federalism has complicated and shaped the efforts to build a bigger and more modern country. The pragmatic question with which this gem-like policy book begins opens into a literary one: Of how existing legal and policy regimes might be bent in order to account for the future. * Benjamin Wallace-Wells, The New Yorker *

Author Information

"David Schleicher is a Professor of Law at Yale Law School. He is an expert in local government law, federalism, land use, state and local finance, and urban development. His work has been published widely in academic journals, including the Yale Law Journal and the University of Chicago Law Review, as well as in popular outlets like The New York Times, The Atlantic, and Slate. He has been called ""the most important thinker we have on the subject of local government"" and ""ingenious"" by National Review, one of the ""most interesting writers on land use"" by Washington Monthly, ""interesting"" by The Nation, ""clever"" by The Economist, ""neat"" by Slate, and ""great but old fashioned"" by Vox. He is also the co-host of the podcast, ""Digging a Hole: The Legal Theory Podcast."""

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