ABSTRACT
This entry is a review of the counter-cyclical fiscal policy (CCFP) at the subnational level in the United States. The term “subnational” is used in contrast to “national,” referring exclusively to the 50 states. Although the literature and data used are restricted to the United States, the academic and practical implications go beyond this country because budgetary stabilization at the subnational level has been a universal topic, bearing significance in many other countries as well. This entry is organized as follows: The section “Evolution of Theory” examines the origin and development of CCFP in the United States, which, in a period of about 70 years, presents many lessons. The section “The Practice of CCFP by State Governments” looks into the practice of CCFP by state governments, covering the choice and shift of policy instruments and responses to states’ use of CCFP from the capital market, professional organizations, and the United States Congress. The section “The Future of CCFP” shifts focus onto the future of CCFP. It will consider the ongoing argument about the economic stabilization function of CCFP as well as the fundamental public good of reducing revenue shocks from economic fluctuations. It ends with the proposition that CCFP is not a panacea; politics and basic budgetary discipline are the ultimate baseline.
