Federal Help Wanted: Municipalities Face Fiscal Uncertainties

Municipal bond markets have largely recovered from the sharp, liquidity‑driven sell‑off that occurred at the height of the market’s response to coronavirus‑induced economic damage. However, the magnitude of the potential revenue shortfalls that state and local governments will suffer, while still uncertain in many instances, could set the stage for meaningful spending cuts in government employment, education budgets, and other services. These austerity measures would weigh on the U.S. economic recovery.