Imagine, sometime in the next decade, that the governor of Illinois and the mayor of Chicago hold a joint press conference to declare that the state and city can’t pay their bills. Schools close, crime spikes, garbage goes uncollected, and public employees protest proposed job and pension cuts. It’s a mess. What, if anything, should the federal government do?
Yale law professor David Schleicher opens his new book with this scenario and question. In a review of past federal responses to state and local fiscal distress, he finds that the national government has answered with policies ranging from austerity to defaults to bailouts.
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