According to Capital Economics, US federal debt remains in unstable equilibrium, threatening to escalate into a full-fledged fiscal crisis. Moreover, the growing government debt obligations could fuel inflation and damage the US economy, analysts at the research company warn.

The US Treasury reports that the national debt currently stands at $36.22 trillion, a figure Capital Economics analysts estimate now nears 100% of gross domestic product.

If the US budget deficit remains at 6% of GDP in the near term, the overall debt-to-GDP ratio could soar to a staggering 120% within the next decade. "Concerns about ballooning supply have driven up the term premium component of Treasury yields further this year and there is a risk of a vicious cycle developing -- with fears about the long-term sustainability of the federal debt raising borrowing costs, which add to the deficit and make the debt path even more unsustainable," Capital Economics emphasizes.

Experts suggest the US government could avoid bankruptcy by printing its own currency, but such measures risk triggering inflation and crowding out private investment. In the long run, this could have a negative impact on the country’s economic performance.

The debate emerges as President Donald Trump and his Republican allies in Congress prepare to approve a massive fiscal package featuring significant tax cuts alongside increased defense and border security spending.

At the same time, policymakers remain divided between spending cuts and increased borrowing to finance both tax breaks and expanded expenditures. The fiercest battles center on proposed federal cuts to Medicaid funding, a program for low-income Americans, as well as energy sector tax incentives.

The US House of Representatives has already passed its version of the multi-trillion-dollar legislation, with Republicans barely overcoming intra-party resistance and Democratic opposition. If the Senate approves its variation, the House would need to reconcile differences before sending final legislation to the president's desk.

The Congressional Budget Office and other economists previously warned that Donald Trump's plan would swell the national debt. Yet the head of the White House and some Congressional Republicans dismiss these concerns.