THE
SCENARIOS.

The starting position, anchored to FY2024 actuals. Unemployment near full employment, post-2022 inflation drifting toward target, and a weighted-average rate on debt held by the public of ~3.3%. Static debt service consumes 21.3% of federal receipts — inside the sustainable band but approaching the 0.30 threshold. Over three years of conditions persisting, the ratio drifts up to 0.26 from baseline structural deficit alone, without any coupling shock. The system has headroom; it does not have much.

A partial coupling fires. AI-driven displacement raises unemployment by 2.5 points above the natural rate; inflation drifts up modestly; the rollover stack reprices to a 4.5% weighted average. Static debt service consumes 31.3% of federal receipts — across the IMF stress line. Three years of these conditions push the ratio to 0.40, with the cyclical addition to deficit growth ($0.5T/yr) compounding the structural baseline. The conventional response options narrow but do not vanish.

Recession-level unemployment combines with stubborn inflation as the Fed faces the trap: hike to tame prices and accelerate fiscal compression; cut to ease debt service and let inflation run. The weighted-average rate climbs to 5.5%. Static debt service consumes 40.8% of federal receipts; three years of these conditions push the ratio past 0.50 as the deficit grows by $2.8T per year. Non-mandatory spending becomes the adjustment variable; there is no plausible Congressional path that closes a gap of this scale without monetary accommodation, restructuring, or both.

Great-Recession-level unemployment with inflation that refuses to normalize. The weighted-average rate has climbed to 6.5% as the rollover stack reprices through a stress cycle. Static debt service consumes more than half of every federal dollar collected; after three years of these conditions, the ratio approaches 0.70, with debt growing by $3.2T per year. Non-mandatory spending is crowded out; rollover risk dominates the policy conversation. The conventional fiscal response cannot close the gap.

Every variable pushed to a level worse than anything since the early 1980s. AI displacement, persistent inflation, and a credibility event on Treasuries push the weighted-average rate to 8%. The bounded revenue function does its job: receipts approach the structural floor smoothly, settling at $3.24T. Static debt service consumes 69.9% of available receipts; three years of these conditions push the ratio to 0.966 — borrowing finances borrowing. The model has not broken; the system has. This is the boundary of the regime where conventional fiscal policy applies.