Government Sector of U.S. Economy (1)

• At start of period, government was running deficit in range of 5 percent of GDP

• Over 1990s, government moved in direction of running a surplus

  • Clinton Administration thought this was a good thing

    • We'll pay off the national debt!

• Situation did not last

  • Government went back into deficit during 2001 recession

  • Vastly deeper deficit during Great Recession

    • In recessions, tax revenues fall while unemployment payments rise