Bank of America CEO sounded the alarm: the US economy may lose its special status due to debt problems!

Bank of America CEO Brian Moynihan (Brian Moynihan)'s warning about US debt may have gone unheeded, but that won't stop the Bank of America CEO from sounding the alarm.

America's US debt has surpassed $35.7 trillion, which means that the burden on every American now exceeds $10.5 million.

Like J.P. Morgan CEO Dimon, Moynihan urged the political community to prioritize plans to normalize the country's debt-to-GDP ratio.

Unfortunately, the two US presidential candidates didn't pay much attention to their warning. In fact, both Trump's and Harris' plans would increase America's public debt by hundreds of billions of dollars.

Moynihan believes that if the US does not balance its spending with economic growth, it will regret it. If this problem is not solved, the US may lose its “gold standard” status in the economy.

Moynihan told Fox News: “If you look back over the past 10 to 12 years, people have always been worried that debt has grown too fast. Then we had the COVID-19 pandemic, which required significant government spending to defeat the virus and prevent a severe economic downturn and deep recession.”

Moynihan said, “Both the previous administration and the current administration did a great job. Now (the epidemic) is over. We have to ask, like when every war is over, 'How do we pay our bills? '”

According to data from the Responsible Federal Budget Committee, the net increase in debt during Trump's presidency was $8.4 trillion: $4.8 trillion in non-COVID-related loans, and $3.6 trillion for CARES and COVID-19 relief. Biden added $4.3 trillion in debt, of which $2.2 trillion was in non-COVID-19 loans and $2.1 trillion was spent on bailout programs.

Economists don't worry about US government borrowing; in fact, this is necessary to maintain the country's critical bond market. What they are concerned about is the ratio of national debt to GDP. If this ratio is unbalanced, it means that the US economy is not growing enough to repay its current debt, nor is it able to obtain more loans needed for future fiscal policy.

The March report of the Congressional Budget Office estimates that by 2054, US debt will account for 166% of GDP, reaching 141.1 trillion US dollars.

Some tough decisions lie ahead, Moynihan said: “This will require strict discipline from all parties, and now is the time for us to act.”

Moynihan added, “It doesn't require any major steps; we just need to recognize that in the end we spend more money than we make. We have to close that gap. But we have to spend money on defense, we have to spend money on social service projects, and we have to invest in infrastructure, but at the end of the day, we have to start to adjust our vision and resolve.”

To balance debt-GDP, policymakers have two options: cut spending or increase GDP.

Moynihan said, “You can do it in different ways. You can do it by growing, by controlling expenses, by raising taxes, and by lowering taxes to generate more investment. But I'll tell you that around the world, this economy is the envy of everyone, and if we don't manage our debt well, the future may not be so envied. ”

Some experts believe that the US debt is not a problem because recent spending is aimed at increasing productivity.

Columbia University professor Brett House (Brett House) said in April of this year, “If US debt is invested in measures that ensure increased productivity and the economic growth is sufficient to repay the debt, then debt is reasonable.”

He added that although a debt-to-GDP ratio of over 100% is a problem for most countries, “the US is not the majority.”

Professor House added that “all US debt is issued in dollars, and when we see the world in a political or financial crisis, capital flows into the US debt market as a safe store of value. Since all US debt is issued in US dollars, it is always possible to find additional buyers.”

Many experts disagree, believing that the market will one day question whether the US will be able to repay its debts.

Moynihan clearly believes that the US debt problem will become a problem if it is not brought under control, but he did not set a deadline in the short term: “This is not an issue that the new administration can handle in its first week in office, nor is it an issue where the old administration continues to run -- it is a disciplinary issue that spans time. ”