States and cities are always the hardest hit in economic downturns as they have no authority to create the currency. Many can float bond debt for a time, but many are legislatively restricted from doing so and must rely upon tax revenue. That revenue drops off sharply during recessions and all but disappears during depressions when the demand for services is at a peak.
At the heart of this problem is America's infatuation with business and anything corporate. The massive disparity between federal economic relief for workers and Wall St banks and firms in the latest stimulus points out this love affair quite well.
This was further driven home very clearly when McConnell suggested that states should consider bankruptcy because further federal aid wasn't to be expected. Given that Congress is the sole authorized source of US dollars and is Constitutionally mandated to create them "for the general welfare". This makes McConnell's statement borderline treason.
The federal government has the power to create any amount of dollars it chooses and is not restrained by revenue as states are. This is the difference between a currency "issuer" and a currency "user", and it is a big one.
The problem facing Congress in bailing out states is that doing so will make moot decades of propaganda surrounding the deficit and national debt that has served its donor class the massive transfer of wealth now crippling the working middle class. Admitting that the federal government doesn't need revenue from any source to spend/create dollars would be tantamount to a revolution and threaten the existing power structures.
That revolution is inevitable and is quietly making its way through the financial world currently. It won't be much longer before it busts out and finds its way into the halls of Congress with progressive representatives such as AOC who understand the process by which America funds itself and much of the world's economies.
I would strongly suggest reading one of the New York Times' latest best selling books authored by Bernie's econ advisor, Dr. Stephanie Kelton. It will change how one looks at money and government. It exposes the irrational fear of deficits and debt at the federal level and explains why deficits are almost always necessary, but especially when our government is facing crisis situations.
