Most state governments in the United States operate under constitutional provisions that severely restrict expenditures financed by borrowing
Suppose this were to change, so that state governments' access to credit markets was no different from the federal government. What consequences would you predict for the nation's aggregate debt burden?
The aggregate debt burden would probably increase, but not by much, and would be distributed more efficiently. The discipline of credit markets (cost of borrowing) would encourage all state governments to borrow and spend wisely. This discipline is lacking with federal grants in aid, and somewhat lacking for the U.S. Treasury, because of the presumed zero risk of default. Decentralization of entitlement spending would allow streamlining of the federal budget and reduced federal borrowing.
You might also like to view...
How does a perfect market influence output?
(A) Different firms each strive to make more goods and capture more of the market. (B) Different firms make different amounts of goods, but some make a profit and others do not. (C) Each firm makes its output as large as possible even though some goods are not sold. (D) Each firm adjusts its output so that its costs, including profit, are covered.
The labor force consists of:
a. people more than 20 years old and who are looking for work. b. people more than 16 years of age and older working or looking for work. c. all adults above 18 years of age with job skills. d. all working adults employed for more than forty hours a week.