Impact of the Economy on Taxes and Spending

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Already under pressure from excessive promises and growing welfare payments, the governments of the US faced a severe shortfall in tax revenue during the Great Recession, as they have during every other recession before that.  To make the budgetary pain even worse, the policymakers decided that the best way to end the recession was to pump a massive amount of money into the economy by way of the TARP stimulus package.  The economy is fundamentally linked to government budgetary decisions – when times are good, governments face less fiscal pressure, but when things go bad governments abruptly have to start paying for a great deal with meager tax revenues.


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