Economic Resilience and Fiscal Sustainability: A Compartive Diagnosis among U.S. States

Dec 21 2024

Economic Resilience and Fiscal Sustainability: A Compartive Diagnosis  among U.S. States

This is an analysis of economic resilience and fiscal sustainability of U.S. states.

Economic resilience is defined as a region's ability to anticipate, withstand, and recover from various shocks, disruptions, or stresses it may encounter.

Fiscal sustainability refers to the capacity to maintain public finances in a credible and serviceable position over the long term.

The analysis involves a comparative evaluation of states during any chosen of two years.

State rankings for the two years reflect a state's position, while the growth or trends in these two periods illustrate its resilience. The use of color-coded ranges for ranking (1-10, 11-20, 21-30, 31-40, and 41-51) facilitates the identification of a state's position.

Economic resilience analysis aligns with the government's fundamental mission: promoting economic growth to create employment opportunities for all citizens and generate sufficient budget revenue for effective governance. A competitive and livable state ensures citizens have access to the desired jobs, and the government has ample resources to serve its people. Achieving these objectives depends on establishing a strong economic foundation, attracting and nurturing businesses, high-skilled labor, and affluent families.

Indicators used to examine a state's economic position and resilience fall into three categories:

(1) Size of the economy
(2) Development level and efficiency
(3) Economic foundations

Fiscal sustainability encompasses four interrelated dimensions:

(1) Solvency: Government's ability to meet its financial obligations.
(2) Growth: Fiscal policy that sustains economic growth.
(3) Stability: The government's capacity to meet future obligations with existing tax burdens.
(4) Fairness: Fiscal policy is considered sustainable when tax burdens and expenditure benefits are equitable across current groups and generations.

Indicators for examining a state's fiscal sustainability are categorized under:

(1) Government revenue
(2) Government expenditure
(3) Burdens
(4) Public debt