Second quarter GDP (April to June) plummeted by -31.4 percent on an annualized basis, but then bounced back (driven by significant federal spending), increasing by 33.4 percent in the third quarter. Federal spending is largely responsible for preventing an ongoing disaster. But politicians are reluctant to raise taxes, so most are hoping for increased federal aid. As I wrote recently, a one-time injection of funds won’t solve their long-term revenue problems, but anti-tax politics make federal aid more preferable. But if Washington—in reality, the Republican Party—blocks adequate federal aid to cities and states, they’ll have to consider tax increases.

Source: Forbes January 22, 2021 11:00 UTC