A Wharton professor predicts that the 2025 financial crisis, with $34 trillion in debt, will “derail the next administration”

The United States’ $34 trillion debt will disrupt the global economy as early as next year if the next president pursues costly policies, a finance expert has warned.

Professor Joao Gomes of Wharton Business School has said the mountain of public debt marks a “moment in history” and could “derail the next administration.”

“Towards the latter part of the decade we will have to deal with this,” he said. Fortune. ‘He Frankly, it could derail the next administration.

“If they come up with plans for big tax cuts or another big fiscal stimulus, markets could rebel, interest rates could skyrocket right there and we would have a crisis in 2025.

‘It is very possible that it will happen. “I am very confident that at the end of the decade, one way or another, we will be there.”

Currently, experts predict that the staggering debt-to-GDP ratio will reach 190 percent by 2050 if it remains on its current trajectory.

The last two administrations, led by Biden and Trump, oversaw the largest accumulations of deficits since Franklin D. Roosevelt during the Great Depression in the 1930s, according to Bank of America’s Research Flow Show team in February.

This was due in part to the impact of the coronavirus pandemic on the US and global economy.

But Gomes warned that he does not believe it is considered an important issue by either the Republican or Democratic parties.

“It’s a really obvious moment in history for us to say, ‘Okay, what are our options? What can we feasibly do? Who has the best plan?'” he told Fortune.

“I suspect neither side is interested in that and could sweep it all under the rug.”

Gomes is senior vice dean for Research, Centers and Academic Initiatives at Wharton Business School, part of the University of Pennsylvania.

US National Debt reached a record $34 trillion by the end of 2023. Data released by the Treasury Department showed that outstanding federal debt soared to a staggering figure on December 29.

The staggering figure, which is a major point of contention between Republicans and Democrats, is equivalent to $101,233 in federal debt for every person in the United States, according to the Peter G. Peterson Foundation.

The growing deficit means the U.S. government spends more than $1.8 billion a day on interest payments alone, the bipartisan group concluded, 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 raising the cost of household borrowing. It could also affect important programs, including Social Security and Medicare.

Maya MacGuineas, chairwoman of the Committee for a Responsible Federal Budget, a fiscal watchdog, said the level of debt is “dangerous to both our economy and national security.”

in a statementHe called the record figure “a truly depressing ‘achievement’.”

Grim projections made last month show that interest payments on the national debt will eclipse defense spending this year.

Interest payments on this debt are now the fastest-growing part of the federal budget, according to the nonpartisan report. Congressional Budget Office.

They jumped over Medicaid last year and will overtake Defense and Medicare later this year. The first is health coverage for people with limited income and the second is mostly for people over 65 years of age.

This means that by the end of 2024, interest payments will be the second largest public expense. Only Social Security will involve a higher cost.

Net interest has skyrocketed in recent years, with payments nearly doubling from $352 billion in 2021 to $659 billion in 2023.

In 2024, the federal agency predicts interest will total $870 billion and will exceed $1 trillion annually by 2026.

Lawmakers in Washington agreed in June of last year to temporarily lift the nation’s debt limit, avoiding what would have been a historic default.