WASHINGTON, Aug. 24 (Xinhua) -- The U.S. government has racked up 40 trillion dollars in debt, raising concerns that the mounting burden could trigger a major economic crisis if left unaddressed.
U.S. government debt has surged from 19.4 trillion dollars a decade ago, nearly doubling after massive COVID-era spending and years of deficits.
In July, the most recent month for which figures are available, the U.S. Treasury Department reported a monthly budget deficit of 432.3 billion dollars, the highest level since March 2021.
Critics have voiced growing concern that, if left unchecked, the country's mounting debt could eventually trigger a major debt crisis.
U.S. federal debt currently stands at about 123 percent of GDP. However, the debt-to-GDP ratio that the U.S. economy can sustain is about 210 percent of GDP, according to a study released in June by the University of Pennsylvania's Wharton Business School.
"Above this level, there is no feasible future additional tax on broad-based labor income that can finance the interest payments at the returns demanded by financial markets," the study said.
A national debt crisis would be "an event somewhere between the Great Recession of 2008-09 and the Great Depression of the 1930s," according to Clay Ramsay, a researcher at the Center for International and Security Studies at the University of Maryland.
The economic collapse of nearly two decades ago led to the loss of millions of jobs and widespread financial hardship. Millions of Americans lost their homes, pensions and life savings, while the stock market took roughly six years to return to its pre-recession level. The downturn was surpassed in severity only by the Great Depression.
Experts said a debt crisis could trigger damage that would take years to repair.
"Even after the economy stopped contracting, it would take years for it to rebuild," Ramsay told Xinhua.
Such an event could also have far-reaching political repercussions.
"Politically, such a crisis would make the argument over income taxes and wealth taxes much more intense than the one we have today," Ramsay said.
"Currently the top 10 percent of households own 64 percent of the national wealth. If trends continue, this imbalance would be far greater at the time of a national debt crisis," he said.
One model from Wharton Business School suggests that, if current trends continue, U.S. debt could become unsustainable by 2048, Ramsay noted.
This model does not take into account a major shock, such as the bursting of an artificial intelligence bubble, that could accelerate the process, he added.
"In practice, debt always looks sustainable up to the point that bond investors collectively decide that the government cannot make needed adjustments. If bond investors believed the government can't reform, things would unravel quickly," Ramsay said.
Some have argued that the economy's resilience and future growth could help ease the debt burden.
Treasury Secretary Scott Bessent recently downplayed concerns over the 40 trillion-dollar debt level in an interview with CNBC, saying that "there's nothing magic about the 40 trillion number" and that the country could "grow our way out of that."
Bessent added that President Donald Trump's administration plans to rely on global economic growth and future fiscal consolidation efforts to tackle the debt burden.
Meanwhile, some experts said the issue has received relatively little attention in the run-up to the November midterm elections.
"The heavy debt level has not been an issue in the campaign so far. It is such a large number it is hard for people to grasp or see it as having any effect on their lives," Darrell West, a senior fellow at the Brookings Institution, told Xinhua. ■
