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Xinyi Wu

With Washington claiming that the United States can “grow” out of its mounting fiscal burdens, some economists are sceptical that growth alone could absorb the country’s mountain of national debt, which just surpassed US$40 trillion.
The milestone, reached last week, has amplified concerns about the long-term sustainability of maintaining such a massive debt pile – one that has doubled in size from a decade ago.
Treasury Secretary Scott Bessent defended the trajectory last week, telling CNBC that much of the spending had gone towards investments in factories and equipment, and that the country would “grow our way out of” that debt level.
However, some analysts remain doubtful, pointing to elevated government spending, growing debt-servicing costs, and tax cuts as structural barriers that economic growth alone cannot overcome.
“The US has no chance of growing out of its debt problem through growth only,” said Alicia Garcia-Herrero, chief economist for the Asia-Pacific region at French investment bank Natixis.
Despite high nominal growth rates – boosted by inflation – in recent years, the US has continued accumulating debt, adding US$10 trillion since 2022, as public expenditure remained high, she noted.
Under the spending trajectory, the real economic growth rate would have to average around 4.31 per cent annually to eliminate the deficit in the next decade, according to findings published last year by Fiscal Lab on Capitol Hill, an independent research centre.
That pace was more than twice the Congressional Budget Office’s projection of average baseline growth of 1.8 per cent per year through 2036, noted Liang Yan, a professor of economics at Willamette University in the United States.
“What needs to be done are structural changes in expenditures and revenues,” Liang said, adding that reforming the healthcare system to lower related costs, for instance, could help reduce expenditure.
Maybe AI will deliver gains in productivity, but as of yet, they have not materialised at the macro level
David Jacks, economics professor
Spending on social security and health programmes, including Medicare, alongside net interest payments on debt, forms the largest share of US government expenditure, accounting for 65 per cent of total spending, according to Treasury data.
US Treasury bond yields – the cost of government borrowing – have risen to multi-year highs in recent weeks. The yield on the 30-year Treasury touched 5.34 per cent on Tuesday, its highest since 2007, before dropping 0.1 percentage points after the Treasury announced it would at least double its bond buy-back programme.
Yields then began to rebound, with the 30-year Treasury yield closing at 5.27 per cent on Friday, while the 10-year Treasury yield closed at 4.73 per cent, higher than in recent weeks leading up to the Treasury’s intervention.
When asked by reporters on Friday whether Washington might stage further interventions, US President Donald Trump said that they had “many types” of intervention in their toolbox.
“The ultimate intervention is our military,” Trump said. “And if we have to use that, we will.”
Liang added that rate cuts would help ease the fiscal pressure.
“The current monetary policy – keeping interest rates higher for longer – significantly contributes to the rising interest costs on public debt,” she said.
The US Federal Reserve has held rates at between 3.5 and 3.75 per cent in recent quarters and is expected to keep the rates unchanged for the rest of the year, amid mounting inflation and instability from the war in Iran.
David Jacks, an economics professor at the National University of Singapore, added that specific policy choices, including 2017’s “Tax Cuts and Jobs Act” and last year’s “One Big Beautiful Bill Act”, had reduced government revenues and added to the deficit, which stood at 5.8 per cent of gross domestic product last year.
“Maybe AI will deliver gains in productivity, but as of yet, they have not materialised at the macro level,” he said.
If this is not dealt with now, the debts will build up to levels where they can’t be managed without great trauma
Ray Dalio, Bridgewater Associates founder
Liang noted that, even with a productivity boost from artificial intelligence, projected economic growth remains insufficient to lower the debt-to-GDP ratio.
“Much of the tax reforms under Trump’s One Big Beautiful Bill must be rewound,” she said, adding that reforms such as raising the top marginal income tax rate and corporate income tax rate were needed.
Anxieties over the expanding national debt are already showing in the market.
“We’re now in this debasement trade, which means selling the dollar and US Treasuries … and the money is going elsewhere, [such as] to crypto and to gold,” said Garcia-Herrero, though she noted that the process would take time, given the huge size of the market.
The three largest foreign holders of US Treasuries – Japan, the United Kingdom and China – all trimmed their holdings in June, according to the latest available data.
Billionaire investor Ray Dalio, who founded Bridgewater Associates, on Friday called on investors to underweight debt assets such as bonds and increase allocations in gold and bitcoin, predicting that the US was moving towards a debt crisis.
“If this is not dealt with now, the debts will build up to levels where they can’t be managed without great trauma,” he said in a social media post, adding that the government had to lower the budget deficit to around 3 per cent of GDP to ease the pressure.


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Analysts warn that high spending, rising interest costs and tax cuts could impede Washington’s efforts to ‘grow our way out of’ record-high national debt


Analysts warn that high spending, rising interest costs and tax cuts could impede Washington’s efforts to ‘grow our way out of’ record-high national debt.


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

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}Analysts warn that high spending, rising interest costs and tax cuts could impede Washington’s efforts to ‘grow our way out of’ record-high national debt

Analysts warn that high spending, rising interest costs and tax cuts could impede Washington’s efforts to ‘grow our way out of’ record-high national debt