Corporate Profit Recovery Uniquely Robust After 2008 Meltdown

The following graph (from Real World Economic Review) shows how various sectors of the economy have recovered after the 2008 meltdown, compared to earlier postwar recoveries. Notice especially the bars for government spending in the current recovery (significantly down compared to earlier recoveries) and for corporate  profits (significantly up).

Layman’s questions: Is there a cause and effect relationship between weaker government action in a recovery and higher corporate profits? To what extent do corporate profits derive from taxpayer bailouts (which, of course, are a form of government action)?

Source: Bureau of Economic Analysis and Bureau of Labor Statistics, via Haver Analytics Chart shows change in each indicator from trough of business cycle to following peak. Numbers for current recovery refer to the change from the business cycle trough in June 2009 to the most recent month or quarter for which data are available. Categories measured in dollars are adjusted for inflation. Corporate profits were adjusted using the gross domestic product implicit price deflator.

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