Just found this Vox EU site, started by some excellent economists. Inman is very reputable. This piece touches on some of the issues we discussed last night re: states are or are not like small open economies.
LINK (ADDED): http://www.voxeu.org/index.php?q=node/5512
Using states for macroeconomic fiscal policy
Robert P Inman
15 September 2010
What can we learn from US President Obama’s fiscal stimulus? This column argues that channelling the stimulus package through state governments exposed it to agency costs, free-riding problem, and political expediency. As a result, the stimulus has failed to meet its objectives at the state level. The lesson is that fiscal stimulus should be conducted centrally.