Why does the government budget deficit increase during a recession, even without countercyclical fiscal policy?

The nation's budget deficit increases during a recession even without an aggressive expansionary fiscal policy. This is because a recession often results to low income and high unemployment rates leading to a lower tax collection and higher spending for the government.

To be more specific, recession leads to lower business activities. This means that businesses are generally not doing as well as before. Fewer business activities mean lower demand, lower output and generally a lower income. A lower income translates to a lower tax collection for the government.

Lower business activities also result to a lot of layoffs and weak job creation. With the government collecting taxes from the income of laborers, a high unemployment rate leads to lower income tax collection. In some countries, unemployment benefits also increase during this period leading to higher government spending and a higher deficit.

Sales tax revenues likewise diminish during recession as a result of a weak demand for goods.