Trump plans to grow his way out of $40 trillion debt crisis—it’s a ‘fantastic story’ but virtually impossible, says top budget economist

The U.S. national debt has reached $40 trillion, prompting questions about the Trump administration's budget plans. However, the administration believes that the American economy will grow its way out of any fiscal crisis. Treasury Secretary Scott Bessent stated that the debt can be managed through growth. Economists agree that the debt's value, while significant, doesn't carry much weight.

The key metric is the debt-to-GDP ratio, which currently stands at 122%. To reduce this ratio, the U.S. could either cut borrowing or increase growth. The White House has proposed policies such as tariffs and a "golden visa" program. However, top budget economist Kent Smetters from the Wharton School says that the growth plan is not feasible.

He explained that growth doesn't necessarily lead to a decrease in debt, but rather the opposite. The unique makeup of the healthcare labor market and the potential impact of AI on productivity further complicate the situation. While some in the government are lobbying for deficit cuts, the administration has not ruled out other options.

The credibility of U.S. policymakers will be crucial in addressing the debt question ahead of the midterm elections.