Can Growth Alone Shrink a 40 Trillion Dollar Debt? A Top Economist Says No

America's national debt crossed 40 trillion dollars this month, pushing the debt to GDP ratio to roughly 122 percent. Rather than treat the milestone as an alarm bell, the Trump administration has settled on a different message. Treasury Secretary Scott Bessent has argued the country can expand its way out of the burden, telling reporters the economy can grow enough that a 40 trillion dollar figure stops looking like a crisis at all.

The pitch: outgrow the problem

Bessent has framed rapid growth, much of it tied to the current boom in artificial intelligence investment, as the centerpiece of the administration's debt strategy. He has separately claimed that the federal budget deficit has already peaked under this presidency. Vice President JD Vance has echoed the optimism, describing Bessent as holding what he called a very discreet plan for shrinking the debt over time. The pitch is straightforward: keep the economy expanding briskly enough and the debt shrinks relative to the size of the country's output, even if the dollar figure itself keeps climbing.

The bond market is not fully convinced

Investors have been sending a more skeptical signal. The risk premium demanded to hold 30 year Treasury bonds climbed above 5.3 percent in recent weeks, a sign that buyers want extra compensation for the risk of lending to Washington for three decades. That pressure pushed Bessent to deploy more than 4 billion dollars in unscheduled bond buybacks in an effort to steady the market, a reminder that the growth story is being told at the same moment the government is actively working to keep long term borrowing costs from spiraling higher.

Why one top economist calls it a fantastic story

Kent Smetters, an economics and public policy professor at the Wharton School who directs the Penn Wharton Budget Model, has been blunt about the plan's chances. He called it a fantastic story, then added that it is pretty clearly not something the numbers support. His central objection is about causality. People tend to assume that more growth automatically means less of a debt problem, Smetters has said, when in his reading of the data the relationship often runs the other way.

The mechanics working against the growth pitch

Part of the trouble is baked into how entitlement programs are calculated. Social Security, Medicare and Medicaid benefits are partly indexed to wage and productivity growth, so a stronger economy tends to raise future government obligations at the same time it raises tax revenue, blunting much of the fiscal relief growth is supposed to deliver. A hotter labor market creates a second problem for healthcare specifically. When private sector pay rises, medical professionals have more incentive to move away from government programs toward higher paying private roles, pushing up the cost of running Medicare and Medicaid just as the economy accelerates.

There is also a timing problem. Economists broadly expect the current investment boom tied to artificial intelligence to run for something like three to five years, not permanently, which makes it a shaky foundation for a debt strategy that needs to work for decades.

Growth can make a debt problem easier to manage. It rarely makes the problem disappear on its own, and pretending otherwise tends to cost credibility exactly when a government needs it most.

A debt the public is watching

The politics around the debt are not neutral either. Polling shows only about 10 percent of voters say the national debt will have no bearing on how they vote in the coming midterms, meaning the issue is likely to stay near the center of the campaign regardless of which side of the growth debate turns out to be right. Economists who doubt the growth only approach have pointed instead toward more direct measures, including bringing the deficit down to roughly 3 percent of GDP and forming dedicated committees to examine the budget line by line, options that involve real political costs the administration has so far avoided naming out loud.