On the surface, America’s economic story in 2025 seems like a tale of resilience and prosperity. Wall Street is hitting new highs, Silicon Valley is abuzz with artificial intelligence breakthroughs, and official figures show steady GDP growth and low unemployment. But beneath these headline numbers, a pair of looming crises—one fiscal, one social—are converging to threaten the foundations of the world’s largest economy.
The first warning comes from the International Monetary Fund (IMF) and the Congressional Budget Office, which have sounded the alarm on America’s mounting debt. According to The Economic Times, the U.S. national debt surpassed $38 trillion in late October 2025, soaring by $2.18 trillion in just the past year. The IMF projects that by 2035, U.S. government gross debt will reach a staggering 143.4% of GDP, up from 123% in 2024. This would put America’s debt burden above that of Italy and Greece—countries long held up as cautionary tales for fiscal excess—for the first time in a century.
“The United States, once a model of fiscal stability, now faces a debt path that economists say is unsustainable without major policy changes,” The Economic Times reports. The annual federal deficit is expected to remain above 7% of GDP through 2035, the highest sustained level among advanced economies. This persistent gap is driven by a potent mix of expensive tax cuts, rising healthcare and Social Security costs, ballooning defense budgets, and, critically, the higher interest payments triggered by the Federal Reserve’s rate hikes.
Interest on the national debt has become one of Washington’s largest expenses, now surpassing federal spending on education and transportation combined. In fact, interest payments have doubled in the last three years. Every 1% increase in average interest rates adds roughly $380 billion to annual borrowing costs—money that can no longer be spent on public programs or investments. The Congressional Budget Office projects that net interest costs could nearly double over the next decade, reaching an eye-watering $1.8 trillion per year by 2035.
America’s fiscal dominance, underpinned by the dollar’s global reserve status, has provided some breathing room. Yet the IMF cautions that such privileges “cannot be taken for granted.” Economists warn that a debt-to-GDP ratio above 140% could limit Washington’s ability to respond to future crises, as more federal revenue is consumed by interest costs, leaving less for social, defense, or infrastructure spending. If growth slows or rates stay high, debt servicing could crowd out key programs and erode investor confidence.
While Italy and Greece have stabilized their debt ratios—Italy’s is forecast to ease to 137% of GDP and Greece’s to about 130% by 2030—the U.S. trajectory is heading sharply higher. The IMF’s projections mark a historic turning point: “The US debt crisis 2025 is no longer a distant risk. It’s here, accelerating faster than any other major economy,” The Economic Times warns.
Compounding the fiscal crisis is a less visible but equally worrying social and economic divide. Billionaire investor Ray Dalio, founder of Bridgewater Associates, sounded this alarm at the Fortune Global Forum in Riyadh on October 27, 2025. “You have to look at everything in terms of the very, very big differences and how those differences are handled,” Dalio said, arguing that the U.S. economy can no longer be viewed “as a whole.”
Dalio points to a stark split: about 1% of Americans—roughly three million people—lead in sectors like AI and technology, with another 5–10% forming the productive core. “The rest—the bottom 60%—are struggling,” Dalio explained, highlighting low literacy and declining productivity as warning signs. He noted, “Consider this, 60% of the American population has below sixth-grade reading level. That’s tough... and because of those things you have a dependency, an extreme dependency.”
His remarks echo new research from Moody’s, which found that 22 U.S. states are in recession, 13 are stagnant, and only 16 are growing. California, Texas, and New York alone are driving most of America’s GDP. Moody’s chief economist Mark Zandi put it bluntly: “The future of the entire US economy is tied to the growth in two states.”
The wealth gap has widened dramatically. Federal Reserve data cited by The Economic Times shows that between 2020 and 2025, the bottom 50% of Americans gained about $2 trillion in wealth. But the top 0.1% nearly doubled their assets, from $12.17 trillion to $22.33 trillion. Consumer spending by the top earners (those in the 96.6% to 100% bracket) has surged to 170 basis points compared to 1999 levels, while low and middle-income Americans are stuck at around 120, barely keeping up with inflation.
Dalio warns this imbalance is not just about inequality, but about dependence. “The US economy is being largely powered by the well-to-do,” Zandi said. “As long as they keep spending, the economy should avoid recession, but if they turn more cautious, for whatever reason, the economy has a big problem.”
For policymakers, the challenge is daunting. Dalio posed the core dilemma: “The question is what do [policymakers] do when you don’t have enough money and you have this big wealth gap?” He cautioned that redistributing wealth is a “very difficult decision” with serious consequences for productivity. “What you have is a choice of who’s gonna pay and how are you going to do this?” he added, urging leaders to treat the issue as mechanical, not ideological.
Experts agree that stabilizing U.S. debt will require tough choices—either cutting spending, raising taxes, or both. The IMF and Congressional Budget Office both warn that without credible fiscal reform, the U.S. risks entering “uncharted territory.” If no action is taken, the U.S. could face a debt crisis worse than any seen since World War II, with global consequences for markets, interest rates, and investor confidence.
Ray Dalio’s career offers some perspective. As founder of Bridgewater, he built one of the world’s most influential investment firms, known for anticipating events like the 2008 financial crisis. Dalio’s management philosophy of “radical transparency” and his warnings about debt cycles and inequality have made him a leading voice on economic risks. In recent years, he’s stepped back from day-to-day management to focus on writing, philanthropy, and mentoring, but his message remains urgent: America’s prosperity is increasingly built on a narrow base, while the fiscal walls close in.
The numbers speak for themselves. With debt-to-GDP set to reach 143.4%, and with the economic engine increasingly reliant on a shrinking elite, the U.S. faces a crossroads. The warning signs are clear, and the stakes could hardly be higher.