Summer 2022 ECO 356
Summary: Every semester when I start this class, my goal is to teach each of my students how the theory that is presented in the textbook operates in the real world of fiscal policy. My hope is that you will have a better understanding of how and why you should stay informed, and most importantly engaged in the process that involves how your Federal, state, and local government spend your money each day. Understanding the context of how these fiscal decisions are made helps you become better informed taxpayers and citizens.
How the Federal, states and localities have responded to the events of the past two years & will continue to respond should be based on some historical context. It should also be based on the theories we have been discussing throughout this course. This final project is intended for you to show me that you have gained the knowledge necessary to analyze what government at all levels has done for you as taxpayers, and what they should focus on in years to come.
Instructions: You should answer 5 out of the following 10 questions, each will be worth 20 points. You may use your notes, slides, and any additional sources available to support your answer. I will be looking for you to demonstrate that you understand these issues, the fundamentals or policy behind each, how they will shape what we can anticipate from policy makers, and/or what you believe should be done. The links included in the questions are intended to be a guide. Feel free to find other sources to support your answer. Include your sources as a link, formal citation is not necessary for your additional sources, but you should include links to the articles.
Save this document and answer directly following the question. Final exams should be returned to me via Blackboard by Saturday July 2 at 1159 pm.
(1) TAX = EXP. From day one of this class, we discussed how the study of State and Local finance is inherently different from the issues addressed by Federal Government in their respective budgets. The first article below is a great example of the fiscal choices that State/Local governments make. How States and localities will manage through this crisis is dependent upon their prior fiscal choices. What are the differences between what the Federal government can do, and what the states and localities can do? What are the implications? You should discuss why these differences matter.
The recent American Recovery Plan addressed some of the above issues, as seen in the article below – what remains to be done from your perspective? Provide examples and your justification or support.
(2) Richard Musgrave’s 3-part definition of the “role” of government provides us with the rationalization for many of the policies enacted by Federal, State, and Local governments. Please describe each and provide an example of how a government program (or policy) enacted to date to address the COVID crisis help accomplish each of the three roles. You should have a recent example for each role.
https://www.usa.gov/coronavirus
https://www.gao.gov/coronavirus
(3) The United States recently participated in the democratic tradition that stretches back to the founding of the republic: the once-a-decade census of its population. From 1790 (U.S. population: 3.9 million) to 2010 (U.S. population: 309 million), the decennial census has changed alongside the nation itself. From the territory it covers, to the questions it asks, to how it collects the information, the census has reflected evolution in technology, the role of the federal government, and the size of the country itself. The stakes are high for States, local governments, and regions across the country, which depend on a full and accurate count of their populations to ensure their fiscal health and political strength. How has the current crisis impact this vital account of the US population? What are areas of fiscal health that the States and local governments should be concerned about? What will be some of the challenges?
https://www.census.gov/newsroom/press-releases/2021/2020-census-apportionment-results.html
(4) As we discussed in class, grants from the Federal government are generally provided through three different types. Please describe the four elements that support grant policy and the three types of grants that the Federal government utilizes. The article below discusses some of the outstanding issues relating to the need for additional funds from the Federal governments for the states and localities, as well as a second article which describes the most recent package signed by President Biden last month. Based on your knowledge of why grants exist, and how they are calculated, how would you alter some of the formulas being used to distribute aid? What recommendations should policy makers consider ensuring that the States that have been hardest hit by the crisis are compensated? Alternatively, if you believe it is not up to the Federal government to support these states with additional relief, defend your position and offer alternatives for revenues that the State should consider.
https://taxfoundation.org/biden-stimulus-american-rescue-plan/
(5) Fiscal choices determine the mix of revenues that a State relies on to fund their budget on an annual basis. Describe the primary sources of revenues that the States rely on, noting if they are progressive, regressive or proportional (explaining each). How has each source been impacted by the current crisis, and what should policy makers do to address the shortfall in receipts that is likely to occur in the upcoming fiscal years? How does the provision below that was included in the American Recovery Plan impact these choices?
https://taxfoundation.org/arpa-state-tax-cuts-limitation/
(6) When looking at the amount and proportion of state/local dollars that are spent annually on education, it is easy to see why there is a concern regarding the question of declining performance – that is, why, despite the investment by States/localities, scores for exams such as the SAT’s have remained constant over the last several years. Describe the relationship between inputs and outputs or outcomes in the production of education. What are at least two things that you believe are measured currently in your local district. In thinking about the impact of the corona virus on lower education across the country, how do you think these validation measures could/should change? In your answer, you should address the Lindahl theory of benefit taxation – ie. What are you willing to pay for through a property tax?
https://learningpolicyinstitute.org/blog/covid-analysis-american-rescue-plan-act-2021
(7) New York State recently enacted its State fiscal year budget for 2022-23. It was based on several assumptions and included several provisions relating to borrowing by the State to provide a source of funds for in the upcoming fiscal year. The article below describes most of the debt related provisions included in the last year’s budget. What are the three primary reasons that State and local governments borrow? What are the two types of debt which is utilized? What is the difference in growth rate between the two? Using the article below and other sources give me an example of each type of debt, and why the issuance of debt is supportable for this purpose. Do you agree with further increasing our debt burden? Support your position. Alternatively, if you do not agree with these choices, defend your position, and offer alternatives for revenues that the State should consider.
(8) Please provide an overview of the role of the Federal Government in Transportation Financing (as it relates to State & Local Governments). What funding streams are used to finance these projects? What is the basis for the difference in level of funding between transportation modes (highways, mass transit, rail, air & water)? Identify the rationale behind the Federal government’s level of involvement historically. What are the current transportation issues facing New Yorkers (specifically those downstate in the NYC metropolitan region)? How will the current economic crisis affect these revenues? What additional issues do you foresee in the future?
http://www.trb.org/Main/Blurbs/180480.aspx
(9) Economic Development is a significant programmatic area in the States, as they (i.e. the States) compete against each other to attract new businesses and the accompanying jobs in a specific state. In addition to comparison of tax rates, there are essentially two types of incentives offered by the states – please define and explain the primary differences between the two approaches. Your answer should include two examples of each. Which approach do you believe is most effective why? In light of the current crisis, what would you change or recommend as an alternative economic development program?
https://www.newsweek.com/why-us-economy-may-never-same-again-after-coronavirusanalysis-1501830
(10) The COVID-19 crisis has impacted certain individuals and family units more than others. The strain on the traditional safety net programs can be seen from an analysis of the preliminary data.
Using the three roles of R. Musgrave, what would you recommend to the both the Federal & State government amend, expand or enact to correct for these inequities? For each of the three roles, you should develop a proposal (supported by data) which you support and justify.
