U.S. Economy in Recession: Similarities To
and Differences From the Past
Marc Labonte
Specialist in Macroeconomic Policy
November 10, 2009
Congressional Research Service
7-5700
www.crs.gov
R40198
CRS Report for Congress
P
repared for Members and Committees of Congress
U.S. Economy in Recession: Similarities To and Differences From the Past
Summary
According to the National Bureau of Economic Research (NBER), the U.S. economy entered a
recession in December 2007. It is now the longest recession of the post-World War II era. The
recession can be separated into two distinct phases. During the first phase, which lasted for the
first half of 2008, the recession was not deep as measured by the decline in gross domestic
product (GDP) or the rise in unemployment. It then deepened from the third quarter of 2008 to
the first quarter of 2009. The economy continued to contract slightly in the second quarter of
2009, before beginning to grow in the third quarter. This recession features the largest decline in
output, consumption, and investment, and the largest increase in unemployment, of any post-war
recession.
Previously, the longest and deepest of the post-war recessions were those beginning in 1973 and
1981. Both of those recessions took place in a context of high inflation that made the Federal
Reserve (Fed) hesitant to aggressively reduce interest rates to stimulate economic activity. The
Fed has not shown a similar reluctance in the current recession, bringing short-term rates down to
zero. Although inflation exceeded the Fed’s “comfort zone” in 2007 and 2008, it was not nearly
as high as it was in the 1970s or 1980s recessions, and it began decelerating in the second half of
2008. Economists are divided over whether inflation or deflation (falling prices) is a bigger threat
going forward.
Both the 1973 and 1981 recessions also featured large spikes in oil prices near the beginning of
the recession—as did the current one. Oil markets’ disruptions and recessions have gone hand in
hand throughout the post-war period.
The previous two recessions (beginning in 1991 and 2001) were unusually mild and brief, but
subsequently featured long “jobless recoveries” where growth was sluggish and unemployment
continued to rise. Since this recession has been neither brief nor mild (since the third quarter of
2008), it is unclear whether another jobless recovery should be expected.
A decline in residential investment (house building) during a recession is not unusual, and it is not
uncommon for residential investment to decline more sharply than business investment and to
begin declining before the recession. The current contraction in residential investment is
unusually severe, however, as indicated by the atypical decline in national house prices.
One unique characteristic of the current recession is the severe disruption to financial markets.
Financial conditions began to deteriorate in August 2007, but became more severe in September
2008. While financial downturns commonly accompany economic downturns, financial markets
have continued to function smoothly in previous recessions. This difference has led some
commentators to instead compare the current recession to the Great Depression. While the onset
of both crises bear some similarities, to date, the effects on the broader economy have little in
common. In the first year of the Great Depression, GDP fell by almost 9%, prices fell by 2.5%,
and unemployment rose from 3.2% to 8.7% (eventually peaking at 24.9%). The change in GDP,
prices, and unemployment in the current recession to date has not been significantly different
from other deeper post-war recessions. Most economists blame the severity of the Great
Depression on policy errors—notably, the decision to allow the money supply to contract and
thousands of banks to fail. By contrast, policymakers have aggressively intervened to ease
monetary policy and provide direct assistance to the financial sector in the current recession.
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U.S. Economy in Recession: Similarities To and Differences From the Past
Contents
Introduction ................................................................................................................................ 1
The Length and Depth of Recessions........................................................................................... 1
Unemployment in Recessions...................................................................................................... 3
Consumption and Investment in Recessions ................................................................................ 5
Recessions and Oil Prices............................................................................................................ 6
Recessions and the World Economy ............................................................................................ 6
Recessions and the Financial Sector ............................................................................................ 6
Comparisons Between the Current Recession and the Great Depression ...................................... 7
Tables
Table 1. Economic Indicators During Post-War Recessions ......................................................... 2
Table 2. The Unemployment Rate at a Recession’s End and at the Rate’s Peak ............................ 4
Contacts
Author Contact Information ........................................................................................................ 8
Congressional Research Service
U.S. Economy in Recession: Similarities To and Differences From the Past
Introduction
The U.S. economy officially entered a recession in December 2007. To determine what type of
policy intervention, if any, might be needed to mitigate the recession, Congress is concerned with
how long and deep the recession would be without additional intervention. This report provides
information on the patterns found across past recessions since World War II and analyzes whether
and how this recession might be different.
There is no simple rule-of-thumb to determine when recessions begin or end. Recessions are
officially declared by the National Bureau of Economic Research (NBER), a non-profit research
organization.1 The NBER defines a recession as a “significant decline in economic activity spread
across the economy, lasting more than a few months” based on a number of economic indicators,
with an emphasis on trends in employment and income.2 It is unlikely that all of those indicators
will begin declining or rising simultaneously. Thus, when comparing historical episodes, some of
the symptoms associated with a recession may occur before or after the recession has officially
begun or ended. In the current episode, gross domestic product (GDP) began to fall (in the fourth
quarter of 2007) before employment (in January 2008), and both deteriorated significantly in the
third quarter of 2008. The economy began to grow again in the third quarter of 2009, but
employment has continued to fall.
The NBER does not declare the beginning or end of the recession until after the fact. Thus, the
length of the recession will not be known until after the fact. At some point in the future, the
NBER may decide that the recession has already ended.
The Length and Depth of Recessions
Recessions are not uncommon—2008 marked the 11th since World War II. In recent years,
recessions have been less frequent—from 1982 to 2001, there were only two recessions—but the
length between the current one and the prior one, 73 months, was comparable to the frequency of
recessions from 1945 to 1981.
As can be seen from Table 1, the current recession is the longest of the post-war period.3 The
median length of post-war recessions is 9.5 months. Recessions end because of monetary and
fiscal stimulus—both have already been employed in the current episode4—and because markets
automatically adjust. Although unique circumstances caused the current recession, the unusual
length of the recession to date and the return to economic growth in the third quarter suggests that
1 The NBER announced in December 2008 that the current recession began in December 2007. For more information,
see CRS Report R40052, What is a Recession and Who Decided When It Started?, by Brian W. Cashell.
2 National Bureau of Economic Research, Determination of the December 2007 Peak in Economic Activity, January 7,
2008, http://www.nber.org/cycles/dec2008.html.
3 Another possibility is that the NBER could have dated the beginning of the recession later in 2008, once
unemployment began rising more quickly. If it had, then the recession to date would have been shorter, and perhaps
further from its conclusion.
4 For a review of policy steps already taken and current policy proposals, see CRS Report R40104, Economic Stimulus:
Issues and Policies, by Jane G. Gravelle, Thomas L. Hungerford, and Marc Labonte.
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U.S. Economy in Recession: Similarities To and Differences From the Past
the recession may be coming to an end. Forecasters predict that the economy will continue to
grow in the next few quarters.5
Table 1. Economic Indicators During Post-War Recessions
Cumulative Percent Change
Duration
Dates
(months)
GDP Consumption
Investment
Nov. 1948 - Oct. 1949
11
-1.6%
3.4%
-10.2%
July 1953 - May 1954
10
-2.6
-0.5
-3.4
Aug. 1957 - April 1958
8
-3.7
-1.3
-8.0
April 1960 - Feb. 1961
10
-1.6
1.0
-5.1
Dec. 1969 - Nov. 1970
11
-0.6
2.5
-2.6
Nov. 1973 - March 1975
16
-2.8
-0.7
-18.4
Jan. 1980 - July 1980
6
-2.2
-1.2
-8.1
July 1981 - Nov. 1982
16
-2.7
0.1
-9.3
July 1990 - Mar. 1991
8
-1.4
-0.7
-7.2
March 2001 - Nov. 2001
8
0
1.2
-3.2
Dec. 2007 – n/a
n/a
-3.7a -1.9a -21.0a
Source: National Bureau of Economic Research; CRS calculations based on data from Bureau of Labor Statistics,
Bureau of Economic Analysis.
Notes: Table measures changes in economic indicators from peak to trough, which do not always correspond
with NBER business cycle dates. Investment growth excludes changes in inventories.
a. End of current recession has not yet been announced. Data measured from GDP peak in 2007:4 to GDP
trough in 2009:2.
Recessions affect economic well-being by their length and depth. When considering depth, the
current recession can be separated into two distinct phases. During the first phase, which lasted
for the first two quarters of 2008, the recession was not deep as measured by the gross domestic
product (GDP) or unemployment. It deepened in the third quarter of 2008, however, and
remained deep through the first quarter of 2009. After a slight further decline in the second
quarter, the economy began to grow again in the third quarter of 2009.
Through the second quarter of 2009, the fall in GDP during the current recession, a cumulative
3.7%, matched the recession beginning in 1957 as the deepest of the post-war period. The decline
in output after the second quarter of 2008 was even larger. Most of the decline occurred from the
third quarter of 2008 to the first quarter of 2009. The 1981 recession was the last recession to
feature consecutive quarters of steep declines in GDP.
The 1973 and 1981 recessions were also unusually long and deep, in terms of lost output. During
the recession beginning in 1973, gross domestic product (GDP) fell by a cumulative 3%. During
5 See, for example, Blue Chip Economic Indicators, vol. 34, no. 10, October 10, 2009.
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U.S. Economy in Recession: Similarities To and Differences From the Past
the recession beginning in 1981, GDP fell by a cumulative 2.9%, and this recession came on the
heels of a 2.2% decline in GDP in a separate recession one year earlier.
Economists often attribute the unusual length and depth of the 1973 and 1981 recessions in part to
the Federal Reserve’s decision to keep interest rates high. The federal funds rate peaked at 12.9%
in July 1974 and 19% in July 1981. (After adjusting for inflation, these rates were not nearly as
high as they appear because inflation was so much higher at the time.) The Fed had raised rates
that high in order to reduce inflation, which, as measured in the GDP accounts, peaked at an
annualized rate of 12.8% in the third quarter of 1974 and 11.1% in the fourth quarter of 1980. For
that reason, some economists have described these recessions as “made in Washington”—had the
Fed not raised rates so high, they argue, the recessions would presumably have been shorter and
milder (although inflationary problems might have worsened).
This dynamic has not been important in the current recession, as the federal funds rate’s recent
peak was 5.25%. Rising inflation was initially a concern in the current episode, but has never
come close to the rates of the 1970s and 1980s—it peaked at 4.2% in the first quarter of 2007.
Rising energy and commodity prices were temporarily pushing inflation up in the first half of
2008; since then, declines in those prices have temporarily pushed inflation to very low rates.
Going forward, views are divided on the outlook for inflation. Some commentators point to a
federal funds rate of zero and the unprecedented scale of the Fed’s intervention in financial
markets as policies that will ultimately push inflation higher. Through direct lending and asset
purchases, the Fed’s outstanding support to the financial sector has, at times, exceeded $1 trillion,
compared to less than $1 billion before the financial crisis began.6 In normal times, such interest
rate and lending policies would be expected to be highly inflationary. But as the recession drives
down aggregate demand, it puts downward pressure on inflation. Other commentators fear that
the recession will be severe enough that avoiding deflation (falling prices) should be a greater
priority than inflation. They argue that the Fed’s intervention in financial markets is necessary to
avoid a “liquidity trap,” where lower interest rates no longer stimulate interest-sensitive spending.
Although the Fed has brought the federal funds rate down to near zero, since it was only 5.25%
when the Fed began reducing rates, the Fed’s scope for easing monetary policy through
traditional methods was somewhat limited. By contrast, the federal funds rate, although high, was
reduced (peak to trough) by 6.8 percentage points in the 1973 recession and by 10.5 percentage
points in the 1981 recession.
Unemployment in Recessions
Table 2 shows the rise in unemployment in previous post-war recessions. Unsurprisingly, the
recessions with the deepest decline in output also featured the largest increases in unemployment.
From low to post-recession high, the 1973 recession saw an increase in the unemployment rate of
4.4 percentage points, and the 1981 recession saw an increase of 3.6 percentage points (or 4.8
percentage points compared to the expansion that ended in 1980). As of October 2009, the
unemployment rate has risen 5.3 percentage points, and many forecasters are predicting that
unemployment will continue to rise until 2010.7
6 See CRS Report RL34427, Financial Turmoil: Federal Reserve Policy Responses, by Marc Labonte.
7 See, for example, Blue Chip Economic Indicators, vol. 34, no. 10, October 10, 2009.
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U.S. Economy in Recession: Similarities To and Differences From the Past
Table 2. The Unemployment Rate at a Recession’s End and at the Rate’s Peak
Dates of Business
Unemployment
Unemployment
Peak Unemployment Rate
Cycle Peak and
Rate at
Rate at Recession
Trough
Expansion Peak
Trough Level Date
Nov. 1948 - Oct. 1949
3.8%
7.9%
7.9%
Oct. 1949
July 1953 - May 1954
2.6%
5.9%
6.1%
Sept. 1954
Aug. 1957 - Apr. 1958
4.1%
7.4%
7.5%
July 1958
Apr. 1960 - Feb. 1961
5.2%
6.9%
7.1%
May 1961
Dec. 1969 - Nov. 1970
3.5%
5.9%
6.1%
Aug. 1971
Nov. 1973 - Mar. 1975
4.8%
8.6%
9.0%
May 1975
Jan. 1980 - July 1980
6.3%
7.8%
7.8%
July 1980
July 1981 - Nov. 1982
7.2%
10.8%
10.8%
Nov. 1982
July 1990 - Mar. 1991
5.5%
6.8%
7.8%
June 1992
Mar. 2001 - Nov. 2001
4.3%
5.5%
6.3%
July 2003
Source: CRS Report R40798, Unemployment and Employment Trends Before and After the End of Recessions, based
on data from the Bureau of Labor Statistics.
Most of the increase in unemployment in the current recession occurred after the first six months
of the recession, underlining the initial mildness of the recession. The rise in the unemployment
rate during this recession was comparable to the recessions since 1960 for the first 10 months
following the recession’s onset. Beginning in the 11th month, however, it followed a pattern
similar but even more severe than the two “deep and long” recessions of 1973 and 1980.
(Unemployment leveled off after about a year in the other four recessions since 1960.) The
current recession eventually featured the largest increase in unemployment in the post-war period.
Unemployment has been rising for 22 months and counting, as of October 2009. The 1973 and
1981 recession were the only other two in the post-war period where unemployment continued to
rise after about a year; in the 1973 recession, it rose for 19 months.
The previous two recessions, in 1991 and 2001, were mild and brief as measured by the decline in
GDP. Further, the increases in unemployment during both recessions were among the smallest in
the post-war period. This is not the whole story, however, because, in both cases, unemployment
continued to rise for over a year after the recession had ended. (In every other post-war recession,
with the exception of the one beginning in November 1970, unemployment began falling within
six months of the recession’s end.) These two episodes have been called “jobless recoveries.” If
the rise in unemployment in the jobless recovery were included, the episode beginning in 1991
would have featured an above average rise in unemployment; but the episode beginning in 2001
would still remain below average. It is unclear whether the economy has changed in some
fundamental way that makes jobless recoveries likely from now on, or if it was simply a
coincidence that the last two recessions ended in this way. Since this recession has been neither
brief nor mild, another jobless recovery should not necessarily be expected. All of the recessions
followed by jobless recoveries featured a mild decline in GDP growth during the recession and
weak GDP growth during the jobless recovery period. So whether there is a jobless recovery
following the current recession is likely to depend on how strong economic growth is in the initial
recovery period. The deep decline in output since the fourth quarter of 2008 makes rapid growth
possible but not inevitable. One potential barrier to rapid growth would be continuing disruption
in financial markets (see “Recessions and the Financial Sector” below).
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U.S. Economy in Recession: Similarities To and Differences From the Past
Consumption and Investment in Recessions
The current recession has also featured the largest decrease in consumption and private fixed
investment spending. There are a few commonalities found across all previous post-war
recessions. First, in all cases, consumption spending did not weaken as much as GDP, as shown in
Table 1. In fact, in five out of 10 recessions, consumption continued to grow while GDP fell. To
the extent that households can adjust their saving and borrowing levels, they are thought to
generally prefer to “smooth” consumption over time, avoiding sudden increases and decreases. In
the current recession, consumption declined relatively rapidly in the third and fourth quarters of
2008, with small positive and negative changes in the other quarters. Consistent with the
historical pattern, consumption has fallen by proportionately less than output cumulatively for the
recession so far.
Second, in all recessions, fixed investment spending fell more sharply than GDP. This evidence
casts doubt on the popular explanation that recessions are caused by declines in consumption. It
suggests that the primary driver of the business cycle is cyclical changes in investment demand.
Investment demand can be separated into two categories—business investment (in plant and
equipment) and residential investment (home building). Cyclical changes in business investment
could be driven by changes in business conditions, confidence, or credit conditions. Residential
investment is driven by changes in housing demand and credit conditions. Changes in credit
conditions are heavily influenced by monetary policy.
Both business investment and residential investment fell in each of the post-war recessions. In
eight out of 10 recessions, there was a larger percentage decline in residential investment than in
business investment.8 To date, the percentage decline in residential investment has been much
larger in the current recession—business investment did not begin to fall until the third quarter of
2008. (Since then, it has fallen sharply.) Further, in nine out of 10 past recessions, the decline in
residential investment preceded the decline in GDP growth.9 This pattern held in the current
recession as well. Many economists have argued that the housing crash was the root cause of the
current recession. The fact that the decline in residential investment preceded the decline in GDP
is not necessarily evidence that housing crashes have also caused other post-war recessions. It
may be that recessions are caused by a tightening in credit conditions, and residential investment
is the sector that is first and most affected by tighter credit conditions. For example, the deep
decline in residential investment in the early 1980s is usually attributed to the Fed’s decision to
push the federal funds rate as high as 19%. While residential investment has fallen in all other
post-war recessions, national house prices have not since the major data series were first
collected, until now.10 National house prices fell 12% peak to trough,11 and residential investment
fell by about half from peak to trough. These data indicate that the current housing crash has been
more severe than others. Unlike many other post-war recessions, housing may be a cause, rather
than a symptom, of the current recession.
8 Since business investment accounts for a larger share of GDP than residential investment, the decline in dollar terms
was not always larger.
9 Economist Edward Leamer estimates that residential investment is responsible for 26% of the weakening in the
economy before the average recession, and 11% of the weakness during the recession. Edward Leamer, “Housing is the
Business Cycle,” National Bureau of Economic Research working paper, no. 13428 (September 2007).
10 Prices may have fallen during the Great Depression and previous recessions for which official data are not available.
11 Based on the Federal Housing Finance Administration’s Purchase-Only House Price Index, a national measure of
single-family houses with conforming mortgages based on resale data.
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Recessions and Oil Prices
Another commonality between this recession and past recessions is the behavior of oil prices. The
recessions of 1973 and the early 1980s are remembered for their oil shocks, and this pattern is not
uncommon. In a famous article, economist James Hamilton identified disruptions to oil supply
before all but one of the post-war recessions—a pattern that has continued in every recession
since his article was published, including the latest.12 Crude oil prices rose from $51 per barrel in
January 2007 to a peak of $129 per barrel in July 2008. By the end of 2008, prices had fallen by
half, which should eventually offset much of the contractionary effects of the previous price
increase on GDP. Evidence against attributing the economic downturn to rising oil prices would
be the fact that oil prices rose significantly in the previous expansion without any noticeable
effect on GDP growth. For example, prices rose from $37 per barrel in December 2004 to $69 per
barrel in July 2006.
Recessions and the World Economy
As a result of the current global nature of the financial turmoil, economists are projecting that
there will be a global recession as well.13 In 2009, the International Monetary Fund (IMF)
projects that world GDP growth will be -3.4% in developed economies, contracting in all of the
G-7 economies,14 and -1.1% in the world overall.15 A widespread recession would not be unusual.
For example, between 1980 and 1982, all of the G-7 countries except France and Japan
experienced a contraction in GDP for at least one year (and growth was close to zero in France in
1981). Likewise, between 1991 and 1993, all of the G-7 countries except Japan experienced a
contraction in GDP for at least one year (and growth was close to zero in Japan in 1992 and
1993). The global nature of the recession could potentially prolong and deepen it because there
would be less demand abroad for a country’s exports. In a study of historical recessions in
industrial countries, the IMF found that recessions that were highly synchronized internationally
lasted an average of four months longer and GDP fell an average of 1% more than other
recessions.16
Recessions and the Financial Sector
As noted above, the data available indicate an initially mild recession that historical patterns
suggest might not persist much longer. Evidence in favor of predicting a longer and deeper
recession is the severity of the financial downturn that began in August 2007 and worsened in
September 2008. In the fourth quarter, the decline in GDP accelerated markedly. While a
12 James Hamilton, “Oil and the Macroeconomy Since World War II,” Journal of Political Economy, vol. 91, no. 2,
1983, p. 228.
13 See CRS Report RL34742, The Global Financial Crisis: Analysis and Policy Implications, coordinated by Dick K.
Nanto.
14 The G-7 countries consist of the United States, United Kingdom, France, Italy, Germany, Canada, and Japan.
15 International Monetary Fund, World Economic Outlook, Washington, DC, October 2009.
16 International Monetary Fund, World Economic Outlook, Washington, DC, April 2009, p. 111.
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diminished investor appetite for risk and a stock market decline before or during a recession is
common, this recession has featured a breakdown in activity in certain financial markets, such as
the markets for asset backed securities, commercial paper, and interbank lending, and the failure
(or government rescue to avoid failure) of several large, established financial firms. Since then,
financial conditions have improved but have not returned to normal. Beginning in the fourth
quarter of 2008, disruptions in financial markets resulted in significant declines in business
investment. Given the lag between changes in financial conditions and economic activity, it is
plausible that the recession could continue through 2009, even though the historical pattern would
suggest that, after over a year and a half, a recovery would not be far off. In a study of historical
recessions in industrial countries, the IMF found that recessions associated with financial crises
lasted an average of seven months longer, although the change in GDP was not statistically
significant from other recessions.17
Comparisons Between the Current Recession and
the Great Depression
Some commentators have suggested that the financial crisis makes the Great Depression a more
relevant comparison than the other post-war recessions to present-day conditions. While the
current financial downturn has been the most severe in the post-war period by many measures,
there are many differences between the current situation and the Great Depression. While the
stock market crash of 1929 played a role in setting the economic downturn in motion, there is a
consensus among economists that policy errors caused the downturn to become the Great
Depression.18 Among the most important errors were the Fed’s failure to counteract the
contraction in the money supply, which caused overall prices to fall a cumulative 25%, and bank
runs which caused thousands of banks to fail. (The money supply fell primarily in order to
maintain the gold standard, and the economic growth rate was high after the United States left the
gold standard.)
By contrast, policymakers have responded aggressively and unconventionally to attempt to
contain the current crisis. The Federal Reserve (Fed) has reduced short-term interest rates to
nearly zero. Direct Fed assistance outstanding to the financial system has exceeded $1 trillion,
and Congress has authorized Treasury to provide an additional $700 billion to the financial
system through the Troubled Assets Relief Program.19 Widespread bank runs have not occurred
since the introduction of deposit insurance in the 1930s, and similar runs on money market
mutual funds in 2008 were circumvented when Treasury temporarily guaranteed their principal.
The Federal Deposit Insurance Corporation (FDIC) also temporarily guaranteed certain bank debt
to ensure that banks would not lose access to borrowing markets.
17 International Monetary Fund, World Economic Outlook, Washington, DC, April 2009, p. 111. See also Carmen
Reinhart and Kenneth Rogoff, “The Aftermath of Financial Crises,” National Bureau of Economic Research, working
paper no. 14656 (January 2009).
18 For an overview, see Ben Bernanke, “The Macroeconomics of the Great Depression: A Comparative Approach,”
Journal of Money, Credit, and Banking, vol. 27, no. 1 (February 1995).
19 See CRS Report RL34730, Troubled Asset Relief Program: Legislation and Treasury Implementation, by Baird
Webel and Edward V. Murphy.
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During the Great Depression, policymakers were also reluctant to stimulate the economy through
fiscal expansion (a larger structural budget deficit).20 By contrast, the budget deficit increased as a
share of GDP from 1.2% in 2007 to 10% in 2009. There was also a belief among some
policymakers at the time that recessions were healthy processes that purged the economy of
inefficiently allocated resources—a view that fell out of favor as the Depression worsened, and
was eventually replaced by the view that prudent policy changes could avoid the needless waste
of resources laid idle by recessions.
The Great Depression included two recessions, with the first lasting 3 ½ years and the second,
beginning four years later, lasting another year. The current recession started too recently to
compare it to the entire period, but a comparison of data now and during the first year of the
recession indicate that the current recession so far has much more in common with other post-war
recessions than with the Great Depression. In the first year of the Great Depression, GDP fell
almost 9%, prices fell 2.5%, and unemployment rose from 3.2% to 8.7% (eventually peaking at
24.9%). By contrast, GDP rose 0.4% for 2008 overall, prices rose almost 4%, and the
unemployment rate rose from 4.6% to 5.8%.21
Author Contact Information
Marc Labonte
Specialist in Macroeconomic Policy
mlabonte@crs.loc.gov, 7-0640
20 Much of the increase in the budget deficit during the Great Depression was caused by falling revenues due to the
Depression, rather than the introduction of new policy measures that were deficit-financed. The structural budget
deficit refers to the budget deficit that would occur in the absence of changes in economic conditions.
21 Quarterly data does not exist for the 1920s and 1930s, so this comparison is for annual data in 1930 and 2008.
Percent changes for annual data compare the mid-point of the current year to the mid-point of the previous year.
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