The difference between state governments and the federal government is that state governments have balanced budget requirements and the federal government doesn’t.
There is no reason at all why state governments should have to spend a dime on Hurricane Sandy clean-up – that is, divert tax dollars away from education or Medicaid or anything else – at a time when investors are willing to pay us for the privilege of holding 20-year Treasuries. Yes, right now 20-year Treasury yields are negative.
It is currently more fiscally conservative to pay for the Hurricane clean-up with new borrowing than it is to pay for it out of current taxes.
Or here is an even better suggestion from Cate Long – the Federal Reserve should purchase infrastructure bonds with freshly printed money to fund the clean-up.