Excessive debt played a major role in the Great Recession, from December 2007 to June 2009. In the seven years since the recession ended, home prices have rebounded, and households have significantly reduced their debt load. Only recently have households begun to increase their overall debt, which has inched up just 2 percent from when the recession began. Debt growth for corporate and small businesses has been more significant, rising 36.5 percent and 29 percent, respectively.
However, neither household nor business debt has grown as much as debt issued by government. Debt growth for state and local government has ballooned 56.1 percent since the end of 2007, while federal government debt is up a whopping 123.1 percent (Chart 1). Given the severity of the recession, some deficit spending is understandable, as a spur to economic growth. However, the torrid pace of debt growth by the federal government may become a significant risk to the economy in the not-too-distant future.