The situation with state budgets really has been remarkable. I mean, it’s not difficult at all to imagine a situation where states were needing to make drastic budget cuts more in line with what we saw during other recessions and budget cuts that would have really, in a lot of ways, compounded the hardships that we saw during the pandemic.
Instead, what we saw was the federal government intervene with a very robust policy response, thinking here not just about direct aid to states and localities, but the economic impact payments and the enhanced unemployment benefits. What things like those did was raise incomes, raise sales for purposes of the sales tax, and you ended up with a stronger economy than almost anyone expected because of that.
