America’s US$40tr debt gamble is getting harder to ignore, economists say after ‘grow’ goal

The United States has reached a staggering national debt of over US$40 trillion, prompting growing concerns among economists about the long-term sustainability of such a massive debt pile. Treasury Secretary Scott Bessent defended the trajectory, stating that much of the spending had gone towards investments in factories and equipment, and that the country would "grow our way out" of the debt.

However, many economists remain skeptical, arguing that growth alone cannot overcome the structural barriers of high government spending, growing debt-servicing costs, and tax cuts.

According to Alicia Garcia-Herrero, chief economist for the Asia-Pacific region at Natixis, the US has no chance of growing out of its debt problem through growth alone. The country added US$10 trillion to its debt since 2022, while public expenditure remained high. Under the current spending trajectory, the real economic growth rate would need to average around 4.31 percent annually to eliminate the deficit in the next decade, a pace more than twice the Congressional Budget Office's projection of 1.8 percent per year through 2036.

Experts suggest that structural changes in expenditures and revenues, such as reforming the healthcare system to lower related costs, could help reduce expenditure. AI productivity gains have not materialized at the macro level, and specific policy choices, including tax cuts and reduced government revenues, have contributed to the growing deficit. The 2017 "Tax Cuts and Jobs Act" and last year's "One Big Beautiful Bill Act" are cited as examples of measures that have negatively impacted government revenues.

Inflation, the ongoing Iran war, and concerns over the expanding national debt are already affecting financial markets. Investors are increasingly selling the dollar and US Treasuries and moving money into alternative assets like crypto and gold. Billionaire investor Ray Dalio has warned that if the debt crisis is not addressed now, it could lead to "great trauma" and urged investors to underweight debt assets and increase allocations in gold and bitcoin.