Opinion

To Fight the Coronavirus Budget Crisis, Act Like Alexander Hamilton

Marti Subrahmanyam

By Patrick Augustin, Valeri Sokolovski, Marti Subrahmanyam, and Davide Tomio

By Patrick Augustin, Valeri Sokolovski, Marti Subrahmanyam, and Davide Tomio

Some U.S. states are facing disproportionate financial challenges due to the pandemic. Plunging tax revenue, unemployment, and rising healthcare expenses, coupled with high levels of existing state debt have driven some states into acute financial distress - threatening the nation’s unity.

This is not the first time the U.S. has confronted a common, disparately borne struggle. In 1790, Alexander Hamilton spurred the federal government to take over the debt accumulated by states in the fight for independence. It was the “price of liberty.” The agreement caused controversy, particularly among the states asked to contribute more. In the event, unity prevailed, and the nation strengthened.

Today, a similar act of solidarity is needed. To be clear, we are not suggesting indebted states be bailed out, but they should not be made to pay for their pandemic-induced financial strain. Instead, the incrementalcosts states incur during recovery should be considered the “price of unity” and shared at a national level, as they were over 200 years ago.

Read the full Fortune article.

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Marti Subrahmanyam is the Charles E. Merrill Professor of Finance, Economics and International Business