A finance expert has issued a stark warning, cautioning that America’s staggering $34 trillion debt could disrupt the global economy as early as next year if the next administration pursues costly policies.
Joao Gomes, a professor at Wharton Business School, described the current public debt level as a pivotal moment in history, suggesting that it could potentially derail the upcoming administration if not addressed promptly.
Gomes elaborated on the potential risks, highlighting the possibility of market backlash and interest rate spikes in response to large-scale fiscal initiatives such as tax cuts or additional stimulus packages. He emphasized that such a crisis scenario could materialize as soon as 2025.
Projections indicate that if the debt continues on its current trajectory, the debt-to-GDP ratio could soar to 190 percent by 2050, according to experts.
The recent accumulation of deficits, attributed in part to the economic fallout from the COVID-19 pandemic, has resulted in the largest deficit levels seen since the Great Depression era of the 1930s, noted Bank of America’s Research Flow Show team in February.
Despite the magnitude of the issue, Gomes expressed skepticism that either political party would prioritize addressing it, suggesting that it may be sidelined by competing interests.
The national debt reached a historic high of $34 trillion by the end of 2023, as reported by the Treasury Department. This figure, equivalent to approximately $101,233 in federal debt per person in the U.S., underscores the gravity of the situation.
The ballooning deficit has raised concerns about its implications for the economy, with experts warning of potential inflationary pressures, higher interest rates, and adverse impacts on programs like Social Security and Medicare.
Maya MacGuineas, president of the Committee for a Responsible Federal Budget, labeled the level of debt as ‘dangerous’ for both economic stability and national security. She characterized the record figure as a disheartening milestone.
Grim forecasts indicate that interest payments on the national debt will surpass defense spending this year, highlighting the growing burden of servicing the debt. These payments are projected to become the second largest government expenditure by the end of 2024, trailing only Social Security.
The trajectory of net interest payments has been alarming, nearly doubling from $352 billion in 2021 to $659 billion in 2023. The Congressional Budget Office predicts that interest payments will continue to escalate, exceeding $1 trillion annually by 2026.
Last June, lawmakers in Washington took steps to temporarily lift the nation’s debt limit, averting a potential historic default that could have had severe repercussions.
