Apollo economist warns rising federal deficits may prevent traditional fiscal stimulus during a potential downturn.
The U.S. faces heightened financial vulnerability as swelling federal deficits constrain Washington’s ability to deploy fiscal stimulus in a recession, according to Apollo Global Management’s chief economist. Torsten Slok argues that traditional policy tools may fail to cushion economic shocks amid limited fiscal flexibility.
Historically, the U.S. government has relied on deficit spending to stabilize growth during downturns. However, with debt levels rising and interest costs consuming a larger share of revenue, the scope for additional borrowing has narrowed. Comparable periods of fiscal strain, such as the post-2008 era, saw prolonged recovery timelines despite aggressive stimulus.
The warning comes as markets assess the Federal Reserve’s policy path and the sustainability of current deficit trajectories. No immediate market reaction was specified in the analysis.