Wharton professor predicts 2025 financial meltdown with $34 trillion debt set to ‘derail the next administration’

America’s $34 trillion debt will disrupt the global economy as soon as next year if the next president implements costly policies, a financial expert has warned.

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

“We’re going to have to deal with this by the end of the decade,” he said Fortune. ‘It frankly, the next administration could be derailed.

“If they come up with plans for big tax cuts or some other big fiscal stimulus, the markets could revolt, interest rates could suddenly rise there and we’ll have a crisis in 2025.

‘It could very well happen. I am confident that we will get there one way or another by the end of this decade.”

The US debt of $34 trillion will disrupt the global economy as early as next year if the next president implements expensive policies, Gomes warned.

Experts currently predict that the eye-watering debt-to-GDP ratio will reach 190 percent by 2050 if it stays on its current trajectory.

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

This was partly due to the impact of the coronavirus pandemic on the US economy and globally.

But Gomes cautioned that he doesn’t think it will be seen as a major problem by the Republican or Democratic parties.

“It’s a very clear moment in history for us to say, ‘Okay, what are our choices, what can we feasibly do, who has the better plan?’ he said to Fortune.

“I suspect neither side is interested in it and it’s all being swept under the carpet.”

Gomes is senior vice dean for research, centers and academic initiatives at the Wharton Business School, part of the University of Pennsylvania.

American citizen The debt reached a record high of $34 trillion at the end of 2023. Facts A Treasury Department release showed that outstanding federal loans rose to an eye-watering figure as of 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 America, according to the Peter G. Peterson Foundation.

The rising deficit means the US government is spending more than $1.8 billion a day on interest payments alone, the bipartisan group found, which it says threatens America’s economic future.

Experts warn that higher debt levels could put upward pressure on inflation, keeping interest rates higher and raising the cost of borrowing for households. It could also affect major programs, including Social Security and Medicare.

According to the Peter G. Peterson Foundation, the $34 trillion deficit is equivalent to $101,233 in federal debt for every person in America.

Interest payments on US government debt will eclipse defense spending by 2024, grim new projections show

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

In a rackshe called the record figure “a truly depressing ‘achievement’.”

Gloomy forecasts last month showed that interest payments on the national debt will overshadow defense spending this year.

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

They jumped above Medicaid last year and will jump above Defense and Medicare later this year. The first is health insurance for people with a limited income, the latter is mainly for people over 65.

It means that interest payments will be the second largest government expenditure by the end of 2024. Only social security will be a larger cost item.

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

The federal agency predicts that interest will total $870 billion by 2024 – and rise above $1 trillion annually by 2026.

Lawmakers in Washington agreed last June to temporarily lift the country’s debt limit to avoid a historic default.