The Government Has Not Grown During Recovery

Posted: Updated:
Treasury Department
Treasury Department

The government is the second largest component of the U.S. economy, making up one-fifth of all economic activity.

But federal, state and local governments have not created any new economic growth since the end of the recession because of budget cuts, the government revealed in a recent report.

Economic output from the government hasn't grown at all since June 2009, when the recession officially ended, according to the a report from the Treasury Department released at the end of February. The lack of growth has effectively held back the overall economy.

Every major industry except for the government has added jobs since August 2010, according to the Economic Policy Institute. The government has slashed 598,000 jobs since the beginning of 2009--with nearly half of the cuts coming in the past year alone.

While Republicans generally see layoffs as a necessary evil to prevent a government debt crisis, many economists warn that such austerity measures could hobble the still-recovering economy.

For its part, the Obama administration focused its $787 billion fiscal stimulus, passed in 2009, on tax cuts, transfer payments, and aid to state and local governments.

Though the stimulus saved or created at least 2.5 million jobs according to government estimates, some economists assert that large public works programs would have been -- and still would be -- more effective by directly adding jobs to the economy.

Around the Web

US Wage Gains Signal Boost to Spending

Canada 4th Quarter Growth Slows Amid U.S. Rebound: Economy

Housing in U.S. Lays Foundation for Recovery as Economy Coaxes Buyers Back

Why US economic growth is weaker than it looks

Bernanke Pessimism Drives Easy Credit With Forced Government Spending Cuts

Treasuries Advance as Euro-Area Growth Concern Increases Demand for Safety

Why America's Taxes Are Too Low