- Wharton Business School professor João Gomez said the debt mountain represents a “moment in history” and could “derail the next administration.”
- Experts currently expect the debt-to-GDP ratio to reach 190% by 2050 if it remains on its current path.
- The last two administrations – led by Biden and Trump – have overseen the largest deficit accumulations since Franklin Roosevelt during the Great Depression.
America's $34 trillion debt will cripple the global economy as early as next year if the next president pursues expensive policies, a financial expert has warned.
The mountain of public debt represents a “moment in history” — and could “derail the next administration,” said João Gomez, a professor at the Wharton School of Business.
“In the latter part of the decade, we're going to have to deal with this,” he said. luck. 'He. She Frankly, it could derail the next administration.
“If they come up with plans for big tax cuts or other big fiscal stimulus, the markets may rebel, interest rates there may rise, and we will face a crisis in 2025.”
“It could very well happen.” “I'm very confident that by the end of the decade, one way or another, we'll be there.”
Experts currently expect the debt-to-GDP ratio to reach 190% by 2050 if it remains on its current path.
The last two administrations — led by Biden and Trump — oversaw the largest deficit accumulations since Franklin Roosevelt during the Great Depression of the 1930s, according to Bank of America's Research Stream Presentation team in February.
This is partly due to the impact of the coronavirus pandemic on the US economy and the world.
But Gomez cautioned that he does not think this issue will be considered a major issue by either the Republican or Democratic parties.
“It's a really clear moment in history for us to say, 'Okay, what are our options, what can we feasibly do, and who has the best plan?'” he told Fortune.
“I suspect neither party is interested in that and it might be pushed under the rug.”
Gomez is senior vice dean for research, academic centers and initiatives at the Wharton School of Business, part of the University of Pennsylvania.
US citizen Debt reached a record high of $34 trillion at the end of 2023. Data published by the Treasury Department showed that outstanding federal borrowing rose to a staggering number on December 29.
This staggering number constitutes a major point of contention between Republicans and… Democrats, that's $101,233 in federal debt for every person in America, according to a report Peter J. Peterson Foundation.
The bipartisan group found that the ballooning deficit means the US government is spending more than $1.8 billion a day on interest payments alone, which it said threatens America's economic future.
Experts warn that a higher debt burden could put upward pressure on inflation, keeping interest rates higher and causing households to borrow more expensive. It could also affect key programs including Social Security and Medicare.
Maya McGuinius, chair of the Committee for a Responsible Federal Budget, a financial watchdog, said the level of debt is “a risk to our economy and national security.”
in statementShe called the record a really disappointing “achievement.”
Gloomy forecasts released last month show interest payments on the national debt will exceed defense spending this year.
Interest payments on that debt are now the fastest-growing portion of the federal budget, according to the nonpartisan report Congressional Budget Office.
They leapfrogged Medicaid last year, and will overtake Defense and Medicare later this year. The first is health coverage for low-income people, and the second is mostly for those over 65 years old.
This means that by the end of 2024, interest payments will be the second largest government expenditure. Only Social Security would have a greater cost.
Net benefits have been rising over the past few years, with payments nearly doubling from $352 billion in 2021 to $659 billion in 2023.
In 2024, the federal agency expects the total benefit to reach $870 billion, and exceed $1 trillion annually by 2026.
Lawmakers in Washington agreed in June last year to temporarily raise the country's debt limit, preventing what would have been a historic default.
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