|Quarterly change at seasonally adjusted annual rate. |
Source: NYTimes. Data source: Bureau of Economic Analysis
You can have your own correlation and causation debate here: shrinking government returned the private sector to growth or held overall growth down hurting the private sector. I am in the latter camp: in a time of recession the severe austerity imposed at the state and local levels have had a big role in suppressing growth.
Update: Here is Krugman posting on the same thing.