Question

A number of states, California and Illinois for example, have recently experienced fiscal problems because tax revenue has not kept up with expenses. States and cities have defaulted on debt in the past. Give an argument for and against the idea of the federal government bailing out the cities and states.

Answer 1

The merits or disadvantages of federal grant or bailout for financially troubled states and cities is an ongoing discussion that has witnessed several perspectives.

I feel that the federal government should come to the rescue of the U.S. financially troubled states and cities if these regions have experienced natural disasters. This is important to uphold the value of life and restore economic stability in a particular region.

However, the idea of bailout or providing financial support to any state or city due to mismanagement of its available funds should be avoided. If any state/city is not able to manage its tax revenue due to hefty pension provision or negligent budgetary approvals, it should not be the responsibility of the federal government to reach out and rescue in this situation. This could lead to a moral issue where every state/city would become unreasonable in the management of their funds and this would lead to inefficient budgetary decisions.