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date: 22 March 2019

Abstract and Keywords

This article takes a longer-term look at the roles of the state and local government sector in the nation's economy. Over the last four decades, the sector has played a fairly constant, but substantial, role in the national economy as contributors to GDP when measured by their purchases. But there have been important changes in the composition of the sector's spending and revenues. An increasing share of expenditures has gone to social benefits (in particular, for Medicaid) and there has been growing reliance on the federal government as a source of funds. There has also been increasing dependence by states on personal income tax and a heightened sensitivity of state tax revenues to economic conditions. For the states, revenues thus have become more unreliable, while spending has been relatively unaffected by changing economic conditions.

Keywords: national economy, state governments, local governments, GDP, expenditures, revenues

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