Can state and local governments run budget deficits or print money?

State and local governments do not have the authority to run budget deficits or print money. The ability to print money is reserved for the federal government and specifically managed by the U.S. Department of the Treasury and the Federal Reserve. Each state and local government is required to operate within a balanced budget framework, which means they must align their spending with their revenues, virtually prohibiting them from running deficits in the same way the federal government can.

Moreover, localities and states are subject to various laws and regulations that necessitate fiscal responsibility, thereby enforcing this limitation on their ability to engage in deficit spending. This ensures that they manage their financial resources effectively and sustainably within their jurisdictions. Although they may sometimes borrow funds to cover short-term cash flow issues or to finance projects, this is not equivalent to having the power to engage in widespread deficit spending or to create new currency.