State Policy Network
Policy Menu: Three solutions to revitalize state economies in the aftermath of the coronavirus pandemic
America needs a plan to jumpstart the economy, and states must drive local economic growth.

We are living through the most swift and severe economic contraction in American history. What began as a public health crisis quickly expanded into an economic crisis, as consumers retreated and public officials shuttered businesses. Nearly 17 million Americans had filed new initial unemployment claims in just the three weeks ending April 4, 2020—that’s one in ten of those Americans who are engaged in the work force. The unemployment rate threatens to quickly reach 20 percent, a degree of joblessness America has seen only once in the last century. By comparison, unemployment peaked at 10 percent during the Great Recession.

When this crisis ends, tens of millions of Americans will flood back into the workforce. America needs a plan to jumpstart the economy, and states must drive local economic growth. As policymakers look for ways to reopen businesses and resume normal commerce, they can accelerate the recovery by embracing policy innovations that establish the certainty that businesses and workers need to start up quickly, innovate freely, and operate efficiently.

Creating economic certainty in uncertain times relies upon three pillars:

  1. Keeping state budgets funded, balanced, and able to provide core services by reprioritizing government spending to focus on crisis response.
  2. Giving American families and businesses financial peace of mind through tax relief.
  3. Boosting job creation and innovation by cutting red tape.

For decades, state think tanks have worked to create policies that foster an economic environment where people can prosper. The following reforms represent decades of practical state solutions that provide a roadmap that all states can use to support existing businesses, as well as jumpstart business growth and job creation when economies re-open.

Solution 1: Keep state budgets funded, balanced, and able to provide core services by reprioritizing government spending to focus on crisis response.

States will experience increased deficits as healthcare and social welfare outlays surge and revenues decline. Tax hikes will only threaten an economic recovery when they are imposed on American families and businesses struggling to make ends meet. Instead, policymakers can use the following solutions to produce balanced budgets during this time of financial stress in order to seed the ground for future entrepreneurship, job creation, and economic growth.

Specific budget options for states:

Think tank solutions:

Solution 2: Give American families and businesses financial peace of mind through tax relief.

Burdensome taxes challenge families and businesses in good times. They put jobs and business survival at risk in bad times. State think tanks are driving solutions to ensure that businesses and families experience tax relief, and that the tax code get fixed to maximize short-run business liquidity while making state codes more competitive.

Specific tax reform options for states:

Think tank solutions:

Solution 3: Boost job creation and innovation by cutting red tape.

Entrepreneurs suffocate under red tape. Millions of Americans will soon need to find new jobs, and state leaders can grease the wheels of innovation and job-creation by removing red tape that leads to uncertainty and increased costs of doing business.

Specific regulatory reform options for states:

Think tank solutions:

Appropriate policy responses will vary by state, and policy innovation is undoubtedly needed going forward to create more solutions. State leaders can best support business, entrepeneurs, and workers through actions that minimize the pain of this economic contraction and maximize opportunity when the economy begins to recover. Policy leaders within SPN’s 50-state Network will continue to light the way for state governments by offering recommendations focused on restructuring budgets, reforming taxes, and reducing the friction involved in starting and operating a business.

Contact SPN

For more information on these policy ideas, contact Michael Lucci, SPN’s Senior Policy Advisor, at lucci@spn.org.

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Organization: State Policy Network