From Q4-2006, it was a fast downhill ride (until Q2-2009), as net federal borrowing (deficit) / lending (surplus) showed a massive increase in quarterly deficits. Since Q2-2009, while quarterly deficits remain high, they are steadily shrinking.
If the economy was slowing down or recessionary, the line would be headed downward; if the economy was improving, the line would be headed upward. In other words, the stimulus plan worked in stopping the US economy's contraction.
Full second Bush term through Q3 of Obama's first term, net fed borrowing / lending. |
Except for Q4-2006, the rate of spending increases for all of 2007, was in line with Q1-3 2006. What I think you can discern is that income flattened, and was a big reason why the line in the first chart (above), began to drop from its peak in Q4-2006.
It's worth noting that both Republicans and Democrats supported the 2008 Economic Stimulus Act which gave Americans tax rebates, in an effort to stave off a recession. It was a very modest boost -- see Q3-2008 -- and its effects were extremely short-lived. At $150B, it barely altered the trajectory of the US economy, as seen by continued declining federal receipts.
So what happens when the economy doesn't just start to lose steam, but actually shrinks? Safety net program spending naturally increases as people losing their jobs and qualify for various benefits.
As the economic recovery continues to gather steam, the federal deficit will continue to shrink, as more people are paying income taxes and spending for safety net programs shrinks naturally from less people claiming unemployment. Letting the Bush top marginal tax bracket cuts expire, is meant to speed up this shrinking of the deficit, without jeopardizing economic growth. After all, the higher your income, the greater your savings rate, and therefore less money is in circulation in the economy.
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