U.S. Faces Potential $5 Trillion Deficit Amid Recession Risks

U.S. tax revenue has remained around 16–17% of GDP, while federal spending has increased to 22–23% of GDP.
This discrepancy results in a 7% budget deficit, which could worsen during a recession.
Economic contraction typically leads to a 20% drop in government revenue, reducing it from $5 trillion to approximately $3.9 trillion.
Automatic spending programs may increase spending from $7.1 trillion to over $9 trillion during a downturn.
The potential deficit could reach over $5 trillion, or nearly 18% of GDP—unprecedented in U.S. history.
Debt's contribution to GDP has decreased significantly, with each new dollar of debt now generating only $0.37 of GDP.
Increasing debt during a recession could hinder growth and elevate bond yields and interest costs.
A 1% rise in yields could add $370 billion in annual interest expenses, pushing deficits towards $7 trillion.
This scenario may lead to falling GDP, reduced tax revenue, and increased borrowing costs, creating a negative cycle.
If confidence in U.S. debt wanes, the dollar might weaken, prompting the Federal Reserve to engage in excessive money-printing, risking inflation and global financial instability.