The United States is facing a potential financial meltdown and disruption of the next administration if the federal debt reaches $34 trillion, warns a finance professor. The national debt reached a record high of $34 trillion at the end of 2023, with the federal government’s total debt increasing by $2.65 trillion. Joao Gomes, a senior vice dean for research and academic initiatives at Wharton Business School, believes that if more isn’t done to curb spending, the growing debt burden could trigger a meltdown as early as next year.
Gomes predicts that the United States’ growing debt could upset global financial markets in 2025 if the next president announces expensive policies following an election win in 2024. He expresses concern over the lack of concern shown by the media and politicians regarding the federal debt. While current levels may be manageable, the projected increases over the next few decades are alarming and need to be addressed.
In an interview with Fortune, Gomes highlights the potential consequences of the spiraling debt. If the next administration proposes plans for large tax cuts or another fiscal stimulus, the markets could rebel, interest rates could spike, and a crisis could ensue in 2025. Gomes is confident that by the end of the decade, the United States will face a debt crisis one way or another.
The U.S. national debt reaching $34 trillion at the end of 2023 is staggering. It took over 200 years for the country to cross the $1 trillion mark in October 1981. The Peter G. Peterson Foundation, a non-partisan organization, reveals that the federal government currently spends over $1.8 billion a day on interest payments alone.
Despite the gravity of the situation, Gomes believes that neither party is interested in making the debt a significant issue. He emphasizes that political policies should be considered in terms of affordability going forward. However, he suspects that both parties will push the issue under the rug.
Republicans have been calling for spending cuts amidst a battle over the debt limit. The debt ceiling, imposed by Congress, restricts the total amount of debt the government can hold. In the past, Congress usually raised the cap when nearing the debt ceiling. Regardless of who is responsible for the debt, Gomes asserts that one party will need to take action because dealing with the debt will become inevitable in the latter part of the decade.
Gomes has been sounding the alarm over the federal debt since at least February. He expresses greater concern about the U.S. debt compared to his professional colleagues. He believes that voters should be questioning politicians who are not taking trillions in debt seriously.
In conclusion, the United States is facing a potential meltdown and disruption of the next administration if the federal debt reaches $34 trillion. Finance professor Joao Gomes warns that if more isn’t done to curb spending, the growing debt burden could trigger a crisis as early as next year. It is crucial for politicians and voters alike to address this issue and prioritize fiscal responsibility to prevent dire consequences in the future.
