Faced with inflation, the possibility of recession, and related uncertainties for the upcoming fiscal year, legislators in New York State are debating cuts in state expenditures and raising taxes. They hire you as a consultant. What advice would you provide to legislators regarding the best approach for dealing with this complex fiscal situation? Be as specific as you can. If you could obtain additional information before providing this advice, what would you want to know?

 Given the current economic situation, what recommendations would you provide to a Congressional committee(s) determining whether to increase or decrease the federal income tax and whether to increase or decrease federal spending and where?  What are the major factors that might result in a different recommendation at the federal level compared to what you suggested in part A?

Readings and resources:

• CBO, "The 2022 Long-Term Budget Outlook," Congressional Budget Office, July, 2022.  (Lots of neat charts/tables on deficits, debt, spending and revenues)
• Wessell, David, "How Worried Should You Be About the Federal Deficit and Debt?" Brookings Institution, October 2019.
• Belz, Sage and Louise Sheiner, "How Will the Corona Virus Affect State and Local Government Budgets?" Brookings Institution, 2020 updated regularly.
• CBO. "The Budget and Economic Outlook: 2020-2030," Congressional Budget Office, January, 2020.
• National Council of State Legislatures, "Coronavirus (COVID-19): Revised State Revenue Projections," January. 2021.
• Peter G. Peterson Foundation, "The Current Federal Deficit and Debt," Peter G. Peterson Foundation, July, 2023.