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Stabilizing State and Local Budgets: A Proposal for Tax-base Insurance. Akash Deep, Robert Lawrence, June 1, 2008, Paper. "When the federal government suffers a temporary economic downturn that reduces tax revenue, the optimal response is generally to finance temporarily higher deficits with borrowing. When states and localities suffer a temporary shock, however they generally do not have this option because of their balanced budget rules. Instead they are forced to cut spending or raise taxes immediately. Akash Deep and Robert Lawrence, economists at the Harvard Kennedy School, propose a federal tax-base insurance program to help states get through a sudden reduction in tax revenue..."