America can’t grow its way out of its debt problem

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The US economy is staring down the barrel of $40 trillion in debt, bond yields on the cusp of a 19-year high and a costly war driving inflation higher. The Trump administration has a novel solution: We’ll just grow our way out of the problem.

It’s a refrain President Donald Trump and Treasury Secretary Scott Bessent have used frequently in recent weeks. It’s an effort to calm a market that has grown increasingly nervous about the war in Iran and Washington’s lack of a coherent plan to get its fiscal house in order.

The administration’s theory is grounded in a degree of real economic theory : If the US economy grows at a significantly faster rate, its debt would eventually become relatively sustainable.

But to accomplish that, America’s economy would need to grow at a faster rate for many years. That’s not something any administration can control. And the idea assumes we won’t keep adding massively to our debt, a theory belied by populist economic policies supported by politicians on both sides of the aisle.

That’s why the market isn’t buying it. The math just doesn’t math. Inflation is making a comeback , spending is out of control, and Washington has no political will to fix either problem.

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The national debt just hit $40 trillion. But just how big is $40 trillion?

America’s debt crossing the $40 trillion mark last month sounded a number of alarm bells. But the most pressing question is whether – and how long – we can keep running massive deficits.

When economists try to determine whether the government’s debt is sustainable, a common metric they look to is the difference between “g” (the economy’s growth rate, or GDP) and “r” (the rate of interest on the debt, or 10-year Treasury yields).

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When g is bigger than r , the debt becomes relatively insignificant compared to economic growth. When r is bigger than g , the debt can grow at an unsustainable pace.

That seems self-evident: If you keep getting a raise year after year and you’re able to pay the interest on your debt today, you’ll be able to pay it in the future, too – and it’ll become easier to pay it down as your paycheck grows.

Economies don’t function quite like consumers or businesses, and economists debate what “sustainable” debt looks like. But right now, r is around 5%, and g is around 2%. That, at the very least, raises the risk that America’s debt is on an unsustainable path.

But that’s not the only metric flashing a warning about America’s debt burden. The primary deficit – the difference between an economy’s spending and tax revenue, minus interest payments – is also a concern.

When you compare the US primary deficit to its GDP, it has a ratio of 3%, according to the nonpartisan Congressional Budget Office — and that’s way above target. To be sustainable, a country’s primary deficit needs to have a ratio of zero or a negative number.

“That’s how bad the fiscal situation is,” said Mark Zandi, chief economist at Moody’s Analytics.

So how much would the economy need to grow to ensure America’s debt doesn’t become unsustainable?

GDP would have to grow 6% a year over the course of the rest of Trump’s term. We’re not off to a great start: The economy grew at a 2.1% annual pace in the first quarter and a 1.5% pace in the second quarter.

In other words, we’d have to see growth triple tomorrow.

If we want to get that done in 10 years, the economy would need to grow between 3% and 4% every year for a decade, according to Joe Brusuelas, chief economist at RSM US.

The last time the US economy sustained that kind of growth was in the 1990s, coincidentally the last time the country had a budget surplus.

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But the United States would also have to stop accruing no massive new debt. That means the end of the Iran war, no economic shocks and no big spending initiatives like the $5,000 dividend checks that Trump proposed Wednesday, which would add $1 trillion to the debt.

Increasing growth would also lead to significant inflation – around 5% to 6% a year – a byproduct of an overheating economy, Brusuelas noted. The Federal Reserve would send interest rates higher in response, slowing the economy down.

“That math simply isn’t there to grow one’s way out of a $40 trillion debt,” Brusuelas said.

Zandi argued that kind of growth could be accomplished by resetting America’s immigration policy and allowing more than 1 million immigrants each year into the country. But he acknowledged that’s not a politically viable option, given the Trump administration’s crackdown on immigration .

Absent the political will to enact comprehensive immigration reform, Zandi said there’s no way to get growth high enough to put America’s debt on a sustainable path.

The fiscally responsible way, then, to ensure debt sustainability is to increase tax revenue and lower spending. That has about as much support on both sides of the aisle as immigration reform.

Meanwhile, the war with Iran has escalated yet again, raising fears that it will become another costly, long-lasting war that will continue to put the energy market in a chokehold. Oil has moved firmly above $100 a barrel, diesel is at a record, and gas prices are shooting higher again.

Know your bonds: A quick guide to Treasuries

Bond investors aren’t taking it lying down. The benchmark 10-year Treasury yield is within sneezing distance of hitting 5% for the first time since October 2023 – and just a bit further off from reaching its highest rate since July 2007.

Bond traders are demanding more yield. They’re worried inflation will devalue their investment over time and America will need to keep borrowing to maintain its spending, adding ever more supply of Treasuries to the market.

The world’s most important financial market is sending a message: Pie-in-the-sky theories on growth and inflationary policies are unacceptable. In the meantime, expect rates tied to bond yields – including mortgages and auto loans – to keep rising.

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美国经济正面临着高达40万亿美元的债务危机，债券收益率即将创下19年来的新高，而代价高昂的战争也推高了通货膨胀。特朗普政府提出了一个新颖的解决方案：我们只需通过经济增长就能摆脱困境。

近几周来，唐纳德·特朗普总统和财政部长斯科特·贝森特频繁使用这句话。此举旨在安抚市场，因为市场对伊朗战争以及华盛顿缺乏整顿财政的连贯计划日益感到不安。

政府的理论有一定的现实经济理论依据：如果美国经济以更快的速度增长，其债务最终将变得相对可持续。

但要实现这一目标，美国经济需要在未来多年保持更快的增长速度。这并非任何一届政府能够掌控的。而且，这一设想的前提是我们不会继续大幅增加债务，而两党政客所支持的民粹主义经济政策恰恰否定了这一理论。

这就是市场不买账的原因。从经济角度来看，这根本行不通。通货膨胀卷土重来，支出失控，而华盛顿却没有解决这两个问题的政治意愿。

穆罕默德·埃瑟/阿纳多卢/盖蒂图片社）

美国国债刚刚突破40万亿美元。但40万亿美元究竟有多大呢？

美国债务上个月突破40万亿美元大关，敲响了诸多警钟。但最紧迫的问题是，我们能否——以及能持续多久——维持巨额赤字。

当经济学家试图确定政府债务是否可持续时，他们通常会参考“g”（经济增长率，即GDP）与“r”（债务利率，即10年期国债收益率）之间的差异。

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当g大于r时，债务相对于经济增长而言就显得微不足道。当r大于g时，债务可能会以不可持续的速度增长。

这似乎是不言而喻的：如果你年复一年地获得加薪，并且今天能够支付债务利息，那么将来你也能支付债务利息——而且随着你的工资增长，偿还债务也会变得更加容易。

经济体的运作方式与消费者或企业并不完全相同，经济学家们也一直在争论“可持续”债务的定义。但就目前而言，利率约为5%，经济增长率约为2%。至少，这增加了美国债务走上不可持续道路的风险。

但这并非唯一一个警示美国债务负担的指标。基本赤字——即经济体支出与税收收入之差减去利息支出——也令人担忧。

根据无党派的国会预算办公室的数据，美国的基本财政赤字占其GDP的比例为3%，远高于目标水平。一个国家的基本财政赤字要实现可持续发展，其比例必须为零或负数。

穆迪分析公司首席经济学家马克·赞迪表示：“财政状况就是这么糟糕。”

那么，美国经济需要增长多少才能确保美国的债务不会变得不可持续？

特朗普剩余任期内，GDP必须每年增长6%。但目前形势并不乐观：第一季度经济年化增长率为2.1%，第二季度仅为1.5%。

换句话说，我们明天就得看到增长率翻三倍。

RSM US首席经济学家乔·布鲁苏拉斯表示，如果我们想在10年内完成这项目标，经济需要连续十年每年增长3%至4%。

美国经济上一次保持这种增长势头是在上世纪90年代，巧合的是，那也是美国上一次出现预算盈余的时候。

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但美国也必须停止累积巨额新债务。这意味着结束伊朗战争，避免经济冲击，并停止诸如特朗普周三提议的5000美元分红支票之类的大规模支出计划——该计划将使债务增加1万亿美元。

布鲁苏拉斯指出，经济增长加速也会导致严重的通货膨胀——每年约5%至6%——这是经济过热的副产品。美联储会因此提高利率，从而减缓经济增长。

布鲁苏拉斯说：“从数学角度来看，靠经济增长根本无法摆脱 40 万亿美元的债务。”

赞迪认为，可以通过调整美国的移民政策，每年允许超过100万移民进入美国，来实现这种增长。但他承认，鉴于特朗普政府对移民的严厉打击，这在政治上并非一个可行的选择。

赞迪表示，如果没有政治意愿来推行全面的移民改革，就没有办法实现足够高的经济增长，从而使美国的债务走上可持续发展的道路。

因此，确保债务可持续性的负责任的财政方式是增加税收和减少支出。但这种做法在两党的支持率与移民改革一样低。

与此同时，与伊朗的战争再次升级，令人担忧这场战争将演变成另一场代价高昂、旷日持久的战争，并继续扼杀能源市场。原油价格已稳居每桶100美元以上，柴油价格创下历史新高，汽油价格也再次飙升。

了解债券：美国国债快速指南

债券投资者们并没有坐以待毙。基准10年期美国国债收益率距离2023年10月以来的首次5%仅一步之遥，距离2007年7月以来的最高水平也仅略有差距。

债券交易员要求更高的收益率。他们担心通货膨胀会随着时间的推移降低他们的投资价值，而美国为了维持支出将需要不断借贷，从而导致市场上国债供应量不断增加。

全球最重要的金融市场正在发出明确的信号：关于增长和通胀政策的不切实际的幻想是不可接受的。与此同时，预计与债券收益率挂钩的利率——包括抵押贷款和汽车贷款利率——将继续攀升。