Giving Compass' Take:

• Two examples of how state and local governments can respond to the looming coronavirus recession are through utility regulation changes and easing construction zoning rules, among others.  

• How can donors work with local governments to best support regulation changes or offer other services?

• Read about the U.S. cities that are most vulnerable to COVID-19. 


U.S. economy is infected by the coronavirus pandemic, and a deep recession is practically inevitable. Congress and the Federal Reserve will lead the effort to fix the economy with fiscal and monetary stimulus, but state and local governments, too, have an important role to play.

Even the massive $2.2 trillion stimulus package passed by Congress last week is unlikely to offset the imminent collapse in spending across the country by consumers and businesses alike. Although states and localities cannot run deficits due to balanced budget requirements, they still control many policy levers that influence spending.

Here are two detailed examples of how state and local governments can stimulate spending by promptly changing how utilities are regulated and how building construction is restricted, followed by three more short examples.

  1. Implement countercyclical utility regulation States can lower the financial burden that utilities—gas, electricity, and water companies—impose on consumers during the recession. States guarantee utility companies a nearly fixed profit, no matter how gloomy the economic situation.
  2. Support construction by easing zoning rules States and local governments—not the national government—dominate zoning rules, and sensible, temporary changes to those regulations could improve state and local economies and, in turn, the overall U.S. economy.

Read the full article about coronavirus recession by Yair Listokin at Equitable Growth.