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 early as next year if the next president pursues expensive policies, a finance expert has warned. 

Wharton Business School Professor Joao Gomes has said the public debt mountain marks a 'moment in history' - and it could 'derail the next administration'.

'Toward the latter part of the decade we will have to deal with this,' he told Fortune. 'It could derail the next administration, frankly. 

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

'It could very well happen. I'm very confident by the end of the decade one way or another, we will be there.'

Wharton Business School Professor Joao Gomes has predicted that the current public debt mountain marks a 'moment in history' and could 'derail the next administration'

America's $34 trillion debt will disrupt the global economy as early as next year if the next president pursues expensive policies, Gomes warned 

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

The last two administrations - run by Biden and Trump - oversaw the largest deficit accumulations 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 partly due to the impact of the coronavirus pandemic on America's economy and worldwide. 

But Gomes warned he doesn't think it will be considered a big issue by either the Republican or Democrat parties.

'It's a really obvious moment in history for us to say: "OK, what are our choices, what can we feasibly do, who has the better plan?"' he told Fortune. 

'I suspect neither party is interested in that and it might all be pushed under the rug.' 

Gomes is the 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 high of $34 trillion at the end of 2023. Data published by the Treasury Department showed that outstanding federal borrowing soared to eye-watering figure on December 29. 

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

The ballooning deficit means the US government spends more than $1.8 billion a day on interest payments alone, the bipartisan group found, which it said threatens America's economic future.

Experts warn that a higher debt load could put upward pressure on inflation, keeping interest rates higher and pushing up the cost of household borrowing. It could also impact major programs including Social Security and Medicare.

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

Interest payments on the US national debt are set to eclipse defense spending in 2024, grim new projections show

Maya MacGuineas, president of the Committee for a Responsible Federal Budget, a fiscal watchdog, said that the level of debt is 'dangerous for both our economy and for national security.'

In a statement, she 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 Congressional Budget Office. 

They jumped above Medicaid last year, and will rise above defense and Medicare later this year. The former is health coverage for people with limited income, and the latter is mostly for over-65s.

It means by the end of 2024, interest payments will be the second largest government expenditure. Only Social Security will be a bigger cost.

Net interest has been exploding over the past few 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 surge past $1 trillion annually by 2026. 

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