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

Bank of America CEO Brian Moynihan's warning about U.S. debt may be falling on deaf ears, but that won't stop the Bank of America CEO from sounding the alarm.

The U.S. national debt has surpassed $35.7 trillion, meaning that the burden per American now exceeds $105,000.

Like JP Morgan CEO Jamie Dimon, Moynihan urges policymakers to prioritize plans to restore the ratio of national debt to GDP.

Unfortunately, neither of the two U.S. presidential candidates have paid much attention to his warning. In fact, both Trump and Harris' plans would increase the U.S. public debt by billions of dollars.

Moynihan believes that if the U.S. does not balance its spending with economic growth, there will be regrets. If this issue is not addressed, the U.S. 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 been concerned about debt growing 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, "The last administration and this administration have done well. Now (the pandemic) is over. We have to ask, just as we do after every war ends: 'How do we pay the bill?'"

According to data from the Committee for a Responsible Federal Budget, the net increase in debt during President Trump's term was $8.4 trillion: $4.8 trillion was non-COVID-related borrowing, and $3.6 trillion was for the CARES Act and COVID relief. Biden has increased debt by $4.3 trillion, with $2.2 trillion being non-COVID borrowing and $2.1 trillion for relief programs.

Economists are not worried about the U.S. government's borrowing, in fact, it is necessary for maintaining the crucial bond market. What they are concerned about is the ratio of debt to GDP. If this ratio is imbalanced, it indicates that the U.S. economy's growth is insufficient to repay existing debts and cannot obtain more loans needed for future fiscal policies.

A report from the Congressional Budget Office in March estimated that by 2054, U.S. debt will account for 166% of GDP, reaching $141.1 trillion.

Moynihan said that some tough decisions lie ahead: "This will require all parties to strictly adhere to discipline, and now is the time for us to take action."

Moynihan added, "This doesn't require any major steps, just the recognition that ultimately we are spending more than we earn. We need to narrow this gap. But we have to spend on defense, we have to spend on social service programs, invest in infrastructure, there are many things to do, but ultimately, we need to start adjusting our perspective and determination."

To balance debt-GDP, decision-makers have two choices: cut spending or increase GDP. Mohamed El-Erian said, "You can achieve it in different ways. You can achieve it through growth, through controlling expenses, you can achieve it by increasing taxes, you can create more investment by reducing taxes. But I tell you, around the world, this economy is envied by everyone, if we cannot manage debt well, the future may not be so enviable."

Some experts believe that the US Treasury bonds do not pose a problem because recent spending is aimed at increasing productivity.

Brett House, a professor at Columbia University, said in April this year, "If US debt is invested in measures that ensure increased productivity, economic growth is sufficient to repay the debt, then the debt is reasonable."

He added that although a debt-to-GDP ratio of over 100% is a problem for most countries, "the United States is not like most countries."

Professor House further stated, "All US debt is issued in US dollars, and when we see the world in political or financial crises, funds flow into the US Treasury market as a safe haven of value. Because all US debt is issued in US dollars, there is always the possibility of finding additional buyers."

Many experts disagree with this view, believing that one day the market will question whether the US can repay its debt.

Mohamed El-Erian clearly believes that if the US debt problem is not controlled, it will become an issue, but he did not set a deadline in the short term: "This is not a problem that can be addressed in the first week of a new government, nor is it a problem for the old government to continue in power— this is a discipline issue that spans time."