The Impact of State Fiscal Policy on States’ Resilience During the Great Recession

This study examines policies and conditions in the United States that impacted the length and depth of the Great Recession at the state level. In general, we found that the states’ fiscal-policy decisions leading up to the Great Recession had little or no effect on its duration, but that the relative magnitude and mix of fiscal policy instruments the states employed did affect that recession’s depth for each state. Furthermore, our results suggest that states can have a meaningful impact on recession length and depth by engaging in certain types of long-term structural planning. These findings help explain the states’ differing ability to navigate economic shocks, like the Great Recession, and that knowledge may aid state governments when they confront future recessionary events.