THREAD
I don’t know who needs to hear this, but the federal government’s fiscal capacity is robust *across* time. State & local government budgets, on-the-other-hand, are necessarily pro-cyclical. 1/5

That’s because state and local governments are dependent on revenue in ways the federal government is not. When state and local governments experience a collapse in tax revenues, their budgets come under immense pressure. The federal government is different.

The Great Recession (1) caused federal deficits to spike. The Trump tax cuts (2) caused federal deficits to spike. And “turning off the economy” (3) is causing deficits to spike. (1) did not prevent (2), (2) did not stop (3), and (3) will not fiscal capacity in the years ahead

The way we think about deficits is mostly wrong. A short piece I wrote on this: https://www.nytimes.com/2017/10/05/opinion/deficit-tax-cuts-trump.html

A long form treatment https://www.publicaffairsbooks.com/titles/stephanie-kelton/the-deficit-myth/9781541736184/