Top economists are raising alarms about a possible US debt crisis in the near future, highlighting risks tied to rising government debt and recent tax policies. Goldman Sachs interviewed three leading experts—Ray Dalio, Ken Rogoff, and Niall Ferguson—who all expressed serious concerns about America’s fiscal path.
Ray Dalio, founder of Bridgewater Associates, outlined three key factors that could trigger a crisis: rising interest payments that limit government spending, the government needing to sell more debt than investors demand (pushing interest rates higher), and the Federal Reserve printing money to buy debt, which could increase inflation and weaken the dollar.
Dalio warned this could lead to a “debt-induced economic heart attack” if not addressed. He suggested reducing the budget deficit to 3% of GDP to lower interest rates and stimulate growth.
Harvard professor Ken Rogoff expects a debt crisis within four to five years, accelerated by President Trump’s tax and spending policies. He dismissed the idea that debt is a “free lunch,” saying growing deficits on top of high debt levels will force painful economic adjustments.
Rogoff sees two possible outcomes: a sharp inflation spike causing economic shock or the government keeping interest rates artificially low, which would slow growth and act as a tax on savers. He also warned that higher interest rates are likely here to stay, ending the decade-long low-rate environment.
Historian Niall Ferguson highlighted a fiscal danger he calls “Ferguson’s Law”: when a country spends more on debt interest than on defense, it risks losing its global power status.
In 2024, the US paid $1.1 trillion in interest—more than the $883.7 billion spent on defense. Ferguson said this unsustainable trend opens the US to challenges and noted that investors are already moving away from US Treasurys and dollar assets, signaling reduced confidence.
The Congressional Budget Office projects US federal debt will rise from 100% of GDP in 2025 to 156% by 2055, far exceeding historical averages. Deficits are expected to grow to 7.3% of GDP, the highest outside crisis periods.
Rising debt threatens economic growth by crowding out investment, increasing vulnerability to interest rate hikes, and raising risks of a fiscal crisis. If tax cuts are extended, debt could exceed 200% of GDP, worsening these risks.
Despite recent investor calm, experts warn the US is far from out of danger. The growing debt burden, combined with rising interest rates and fiscal policies, could lead to a severe economic downturn or crisis within the next few years.
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