US Budget Deficit hits 8.1% of GDP

The only previous times budget deficits have been this high have been during severe crises - the World Wars and the Covid pandemic when the economy was shut down. Here is the graph from the Federal Reserve's public statistics:

source

The reason this is so horrifying - and terrifying - is that the US economy is still growing, it's not in recession.

When the inevitable recession comes, tax revenues will plunge, and more people will claim welfare, and the deficit will blow out further. Will markets and international investors continue to lend in those circumstances?

It's worth remembering that the trigger for the French revolution was unsustainable debt. Louis XVI borrowed vast sums of money to finance the American revolutionaries. There was no financial payoff as the newly independent Americans were offered an extremely beneficial trade deal by the wily British, freezing the French out.

Meanwhile Louis had to pay off the debt. He tried introducing taxes on aristocrats; they rebelled, he caved. So he increased taxes even further on peasants, which resulted in such poverty that the revolution was triggered. Louis XVI ended up minus his head.

The next US President , whoever they are, will need to find a sensible way to resolve the budget crisis if they want to avoid Louis XVI's fate.