MIAMI -- There is one "really huge problem on the horizon" for the U.S. economy that could undermine its health, long-term, said Vanguard Group chief executive F. William McNabb III Monday.

The federal debt is "rising at a very unsustainable rate,'' he told attendees of the National Investment Company Service Association 29th Annual Conference & Expo at an afternoon keynote.

Expenditures are running at 22% of gross domestic product, he said, while tax intake is 14 percent.

Much of this is generated by unending wars in the Middle East, as well as the bailouts and economic stimulus spawned by the credit crisis spawned by the financial services industry.

But the combination has caused the amount of U.S. debt to rise to 60 percent of gross domestic product now, from 40 percent in 2008, when the crisis exploded.

And, citing Congressional Budget Office projections, the percentage is going to keep surging.

By 2020, it's projecte to hit 100 percent and by 2035, 185 percent. European countries got in trouble and needed rescuing at roughly 125 percent, he said.

Compounding the problem, CBO projections are "probably optimistic,'' he said, on the rate of economic growth and intake of revenues that will result.

This a big overhang over the economic recovery that has been taking place, he said.

Vanguard keeps an economic dashboard, he said, of 70 different variables that is now showing the most green indicators that it has in the last four years. One such indicator: credit card receipts from interstate truckers. When that goes up, it's a clear indicator that goods are moving across the country again.

There's still "a lot of yellow" or caution signals, he said, in the dasbhoard.

But he expects "new powerful businesses" to emerge out of this recession.

Historically, he noted, 80 percent of the companies in the Standard & Poor's 500 Index were started in the midst of a recession or immediately thereafter.

On the plus side, the U.S. economy is still three times the size of China's and output per capita is eight times.

China and emerging markets still ""offer an incredible opportunity" to U.S. companies for growth.

But, if there's a bubble still to come, it could be in investment in such emerging markets.

Returns on investments on China, India and other emerging economies have been running more than 14% a year, he said.

"It's hard to imagine that those kind of returns are sustainable,'' he said.

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