Kent Smetters, director of the Penn Wharton Budget Model (PWBM), said President Donald Trump and Treasury Secretary Scott Bessent’s growth-focused strategy cannot by itself resolve the nation’s mounting fiscal challenges as U.S. debt surpasses $40 trillion.
Trump Backs Growth to Cut Debt
Last week, Trump argued that stronger economic growth could help the U.S. manage its massive debt burden.
He said, “The way you take care of debt is with growth, and we have tremendous growth. We’ve never had growth like we have right now.”
Bessent similarly said, “There’s nothing magic about the 40-trillion number,” adding that the U.S. can “grow our way out of that.”
The U.S. national debt reached $40 trillion, with the Conference Board warning that rising government borrowing could increase household costs and reduce future retirement benefits.
The CBO projected the debt held by the public would reach 120% of GDP by 2036.
Smetters Rejects Growth-Only Fix
Smetters called the strategy a “fantastic story” but said it is “pretty clearly” not feasible, Fortune reported on Tuesday.
“People often get the causality kind of opposite,” he said.
He added, “They think more growth, less of a debt problem, and in reality, it’s just the opposite.”
He argued that policymakers should address the debt problem to support economic growth rather than expect growth alone to resolve the fiscal crisis.
Smetters also questioned whether the artificial intelligence boom could make a meaningful difference.
“Even if we double the impact of, say, AI on productivity, it barely moves the balance because the initial benefits go up,” he said.
Smetters said the current AI investment boom could last “three to five-ish years” but would not come “remotely close” to solving the debt problem.
“Credibility is really important,” Smetters said, warning that markets could lose confidence if policymakers promise growth will reduce debt but the numbers fail to improve.
Debt Raises Inflation Fears
Economist Peter Schiff warned the Federal Reserve could print more money to buy Treasuries, potentially driving consumer prices higher.
Former U.N. Ambassador Nikki Haley said the debt equated to more than $300,000 per household, while investor Anthony Pompliano called the milestone “insane.”
U.S. interest expenses also reached a record $1.4 trillion over the past 12 months and were projected to rise to $1.7 trillion by November 2028, potentially surpassing Social Security as the government’s largest expense.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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