The United States debt situation has surged to alarming levels, putting it on track to outpace the economy.
Specifically, the U.S. debt-to-GDP ratio now stands at 121%, the highest rate since 2021, according to data shared by the finance commentary platform The Kobeissi Letter on November 30.
This ratio is concerning because the last time the U.S. came close to this level was during World War II, when it peaked at 119%.
Picks for you
Indeed, during the two periods, the debt situation was driven by different factors. Back then, government spending was dominated by the war.
Currently, the debt has surged to crisis levels due to massive spending increases, compounded by slow economic growth.
Slowing economic growth
Since 2008, federal debt has increased by $26.6 trillion—nearly tripling in size—while the economy has grown by only $14.6 trillion over the same period, reflecting a $12 trillion gap. To this end, most analysts believe the rising debt situation will likely become unsustainable in the coming years.
Looking ahead, the Congressional Budget Office (CBO) projects that if the U.S. avoids a recession, the ratio will climb to 131% by 2034.
Measures to curb increasing debt
Indeed, the debt situation was a major political topic in the recently concluded U.S. elections. To curb excessive spending, the incoming Donald Trump administration has proposed the Department of Government Efficiency (D.O.G.E), headed by Tesla (NASDAQ: TSLA) CEO Elon Musk.
Over the years, Musk has been vocal about the debt situation, warning that the U.S. is heading in a dangerous direction. To this end, Musk has issued a grim forecast, suggesting that the country is heading for bankruptcy due to the “terrifying” level of debt.
In a Wall Street Journal op-ed, Musk outlined plans for D.O.G.E to reduce federal regulations and implement significant administrative changes.
He emphasized that D.O.G.E members are entrepreneurs, not politicians, and would serve as volunteers rather than federal officials.
Market players, such as author Robert Kiyosaki, have warned that the U.S. could face a major economic crash if the debt is unsustainable. To this end, proposals have been made for the country to invest in Bitcoin (BTC). Trump’s election promises included making Bitcoin part of the strategic reserve.
Overall, with U.S. debt seemingly out of control, policymakers are being urged to intervene and address the situation.
Featured image via Shutterstock
