ABSTRACT
To understand government behavior in relation to economic crises, as well as its relationship to inequality, one must first understand the political and economic structure within which the government operates. The chapter explores the truth about economic myths about government, and offers a more realistic view of the facts. The extreme and increasing economic inequality in America undermines the democratic form. Democracy may be applied not only to the political sphere, but also to the economic sphere. Some progressive economists would say there is a danger of America becoming a political dictatorship of the plutocracy. The difference between federal spending and federal taxes is far more dramatic in the recession or depression. As government taxes and revenue rise faster than government spending, less money is flowing from the government into the economy. Federal spending and revenue can be compared at each of the four phases of the business cycle: Recovery, Prosperity, Crisis, and Recession.
