Ep. 24. COVID-19: Calculating the Balance of Payments
In a new episode of Policy Outsider, guest Laura Schultz, executive director of research at the Rockefeller Institute of Government, discusses the methods used in the Institute’s Balance of Payments report and how federal economic relief for COVID-19 is likely to impact state balance of payments and rankings.
States throughout the nation are grappling with massive budget deficits caused by the economic downturn associated with COVID-19. While states plan for major cutbacks to critical areas like education and infrastructure, relief in the form of an additional federal stimulus bill is being negotiated in Congress. Several of the states hardest hit by the pandemic, such as New York and New Jersey, are Democrat-controlled and the debate over relief funding has become politicized, with relief funding being characterized by some as a “blue state bailout.” But, as policymakers in these states have pointed out, taxpayers in these states give more to the federal government in taxes than their states get back in federal spending—a negative balance of payments—while many “red” states get more in federal spending than they give to the federal government in taxes.
Understanding how funding flows among states and the federal government provides important context for evaluating these claims and understanding the potential effects of federal stimulus spending.