Just-released: my proposal for fed aid to state/local govts that will be timely, responsive to national economic conditions, & targeted where need is greatest: https://www.upjohn.org/research-highlights/proposal-timely-responsive-federal-aid-state-and-local-governments-during-pandemic-recession

Why needed: w/o flexible fed aid, state/locals will face large budget shortfalls, which will likely lead to large spending cuts. These spending cuts will lead to layoffs of state/local workers or state/local funded workers. In turn, this will reduce demand & cut other jobs.

My proposal: (1) Pay aid to state/locals each month, based on most recent unemployment rate; (2) Base total state allocation on the "extra unemployment" in that state compared to 2019; (3) Allocate to locals based on local need & revenue-raising importance.

On (1), for example, if April unemployment, reported in May, ends up being 10.0%, then feds in May would make $35.3 billion payment for that month to state/locals. Then another in June based on May unemployment, etc.

The advantage of formula approach over just providing $x of aid is that this is responsive immediately and flexibly to economic conditions. If fears of a lengthy/severe recession prove unwarranted, then fed aid will rapidly phase out. If recession is worse, aid responds.

The formula for allocating to state based on extra unem would: if 2 states have same increase in UR since 2019, but 1 state is twice as big, the bigger state gets twice as much. If two states same size, but 1 state has twice as great increase in UR, then it gets twice as much.

This formula for state allocation responds to need, which will depend on both state's size and on how badly it has been hit by the pandemic recession.

Current reports are that state aid may not be part of 4th pandemic response bill. But it should be adopted soon, preferably by June. Otherwise, in summer & fall: likely big budget cuts in state/local govt. This will severely damage economy by November. We should take action now.