How are federal budget surpluses and deficits affected by the business cycle?

During recessions, there is an increase in government spending because the number of people who qualify for certain programs (ie unemployment benefits and medicaid) increase. Additionally, the government also spends more money to help stimulate the economy during these periods. Additionally, revenue decreases because employment levels are lower during recessions, so less money is being collected through income taxes. If the government is running a surplus, the surplus will be eroded and possibly turn to a deficit. If the government is already running a deficit, however, it will be increased as the gap between spending and revenue gets larger.

During expansionary periods, on the other hand, there will be decreases in spending and increases in revenue. This will cause deficits to be reduced and surpluses (if one exists) to become larger.