The US government cannot afford a recession:
In previous economic cycles, the US budget deficit widened by ~4% of GDP on average during recessions.
This would imply a ~$1.3 trillion deterioration of US government finances if a recession hits in 2025.
That said, if the US enters a recession, long-term interest rates will likely go down.
A 2-percentage-point decrease in interest rates would save ~$568 billion in annual interest payments.
However, this means government finances would worsen by more than DOUBLE the amount saved in interest due to a recession.
An economic downturn would be incredibly costly for the US government.
The US government cannot afford a recession:
In previous economic cycles, the US budget deficit widened by ~4% of GDP on average during recessions.
This would imply a ~$1.3 trillion deterioration of US government finances if a recession hits in 2025.
That said, if the US… pic.twitter.com/1odXG22ep6
— The Kobeissi Letter (@KobeissiLetter) May 14, 2025