Trump's "explosive" economic growth claims fall short against the $36 trillion debt
The upcoming president may encounter even more formidable obstacles than those faced by previous leaders if he remains committed to his promises regarding tax and tariff policies.
TroibNews 
Prominent figures such as Jeff Bezos, Larry Fink, and Donald Trump’s Treasury nominee Scott Bessent share the belief that boosting economic growth is essential for tackling the U.S.'s staggering $36 trillion debt. However, historical precedents do not favor this outlook.
Bessent describes the current situation as the country's “last chance” to escape record debt without transitioning to a “European-style socialist democracy.” Fink, CEO of the world’s largest asset manager BlackRock, emphasized in an op-ed on Election Day the need for the new administration to focus on artificial intelligence and infrastructure investments as means to foster economic growth and reduce the deficit. Bezos articulated at the recent DealBook Summit that the only viable solution involves growing the economy by 3 to 5 percent per year while also cutting annual deficits. “If you can do that, this is a very manageable problem,” he stated.
Achieving this level of sustained growth is a formidable challenge, one that has eluded many contemporary presidents. Bill Clinton recorded budget surpluses while the economy thrived with growth surpassing 4 percent in the late 1990s. Ronald Reagan succeeded in reducing deficits during certain years but otherwise contributed to increased national debt. Should Trump pursue his proposed tax and tariff reforms, forecasts predict an increase in debt ranging from $4.1 trillion to $15.6 trillion over the next decade.
During his campaign, Trump asserted that a combination of lower taxes, heightened energy production, reduced regulations, and imposing tariffs would lead to “explosive” growth necessary to address the national debt. He claimed this would lead to federal budgets shrinking by “trillions,” with figures like Elon Musk and Vivek Ramaswamy addressing government inefficiencies.
Nevertheless, Trump has committed to avoiding cuts to entitlement programs such as Social Security and Medicare, which are primary contributors to the national debt and are expected to face insolvency by the mid-2030s. The potential for tariffs to incite retaliation poses further risks to economic growth, and many economists maintain that only a historic economic surge could significantly alleviate the nation’s fiscal issues. “You can't improve this with growth,” stated Tom Porcelli, chief U.S. economist at PGIM Fixed Income. “You'd have to have 5 percent growth for a pretty decent amount of time to have any real notable impact.”
Supporters of Trump assert that it is feasible. They believe that lowering taxes, deregulating key sectors, ramping up domestic oil production, and cutting unnecessary government programs will enhance the business environment, thus fostering investment. Joseph LaVorgna, a former Trump administration economist now with SMBC Nikko Securities America, suggested that Musk and Ramaswamy’s proposed Department of Government Efficiency could eradicate a significant amount of fraudulent federal spending, potentially enhancing confidence in fiscal management and reducing interest rates.
According to LaVorgna, the stock market's upswing reflects optimism that the Trump administration will streamline government operations, thereby stimulating economic activity. “Don't get caught up in the bean counting in the very short term,” he advised skeptics, “because I don't think it means a whole lot.”
However, fiscal watchdogs and credit-rating agencies have long raised alarms regarding the increasing national debt, which results from ongoing budget deficits. As the population ages and spending on mandatory entitlement programs rises, these deficits threaten to escalate, potentially contributing to inflation and higher interest rates. Even significant cuts to discretionary federal programs would not sufficiently address the debt without major structural reforms.
The Penn Wharton Budget Model recently published a report analyzing potential impacts of substantial tax code, immigration, and health care policy reforms. Although the suggestions—such as raising the age for Social Security and eliminating preferential tax rates on investment income—touch on politically sensitive issues, the report asserts these changes could hypothetically diminish federal deficits by 38 percent while fostering economic and wage growth.
Kent Smetters, faculty director of the Penn Wharton Budget Model and a former Treasury official, noted the difficulty of solving the deficit through growth alone without addressing underlying spending drivers. He explained that “almost all spending in the government is already tied to growth,” citing that as Social Security benefits adjust for inflation over time and Medicare reimbursement rates adapt to rising healthcare costs, any productivity gains from advancements like artificial intelligence might streamline certain processes but could also lead to new, costly medical innovations requiring funding through entitlement programs, he argued.
The notion of growing out of debt is a source of frustration for economists specializing in budgetary policy, as Smetters highlighted, stating, “the causality is just the opposite. The way you grow the economy is by fixing the fiscal problems.”
Opponents of this viewpoint argue that allowing elements of Trump’s 2017 Tax Cuts and Jobs Act to lapse could provide a partial solution. While extending existing individual tax cuts could cost $4 trillion and potentially weaken short-term growth, the Congressional Budget Office estimated that permitting these cuts to end might lead to quicker economic expansion over the long run through increased revenue and reduced deficits.
Trump’s supporters, including Michael Faulkender, his deputy Treasury secretary pick, and former economist Aaron Hedlund, contend that letting these tax cuts expire would reduce wages and raise taxes on families, which could be detrimental in light of an aging workforce.
While many of Trump’s growth-oriented and waste-reductive initiatives are credible, there is considerable doubt about their capability to resolve large-scale fiscal challenges that demand more than incremental changes—especially if the anticipated growth does not materialize. Mark Zandi, an economist at Moody’s Analytics, stated that, although enhancing government efficiency “might be a bit of a headwind in the very near term, very quickly it becomes a positive.” He acknowledged, “all the things that the Trump administration and others are talking about on regulation and government efficiency and energy production — it’s all good, but it's small ball. You're not going to move the macroeconomic dial.”
Alejandro Jose Martinez for TROIB News
Bessent describes the current situation as the country's “last chance” to escape record debt without transitioning to a “European-style socialist democracy.” Fink, CEO of the world’s largest asset manager BlackRock, emphasized in an op-ed on Election Day the need for the new administration to focus on artificial intelligence and infrastructure investments as means to foster economic growth and reduce the deficit. Bezos articulated at the recent DealBook Summit that the only viable solution involves growing the economy by 3 to 5 percent per year while also cutting annual deficits. “If you can do that, this is a very manageable problem,” he stated.
Achieving this level of sustained growth is a formidable challenge, one that has eluded many contemporary presidents. Bill Clinton recorded budget surpluses while the economy thrived with growth surpassing 4 percent in the late 1990s. Ronald Reagan succeeded in reducing deficits during certain years but otherwise contributed to increased national debt. Should Trump pursue his proposed tax and tariff reforms, forecasts predict an increase in debt ranging from $4.1 trillion to $15.6 trillion over the next decade.
During his campaign, Trump asserted that a combination of lower taxes, heightened energy production, reduced regulations, and imposing tariffs would lead to “explosive” growth necessary to address the national debt. He claimed this would lead to federal budgets shrinking by “trillions,” with figures like Elon Musk and Vivek Ramaswamy addressing government inefficiencies.
Nevertheless, Trump has committed to avoiding cuts to entitlement programs such as Social Security and Medicare, which are primary contributors to the national debt and are expected to face insolvency by the mid-2030s. The potential for tariffs to incite retaliation poses further risks to economic growth, and many economists maintain that only a historic economic surge could significantly alleviate the nation’s fiscal issues. “You can't improve this with growth,” stated Tom Porcelli, chief U.S. economist at PGIM Fixed Income. “You'd have to have 5 percent growth for a pretty decent amount of time to have any real notable impact.”
Supporters of Trump assert that it is feasible. They believe that lowering taxes, deregulating key sectors, ramping up domestic oil production, and cutting unnecessary government programs will enhance the business environment, thus fostering investment. Joseph LaVorgna, a former Trump administration economist now with SMBC Nikko Securities America, suggested that Musk and Ramaswamy’s proposed Department of Government Efficiency could eradicate a significant amount of fraudulent federal spending, potentially enhancing confidence in fiscal management and reducing interest rates.
According to LaVorgna, the stock market's upswing reflects optimism that the Trump administration will streamline government operations, thereby stimulating economic activity. “Don't get caught up in the bean counting in the very short term,” he advised skeptics, “because I don't think it means a whole lot.”
However, fiscal watchdogs and credit-rating agencies have long raised alarms regarding the increasing national debt, which results from ongoing budget deficits. As the population ages and spending on mandatory entitlement programs rises, these deficits threaten to escalate, potentially contributing to inflation and higher interest rates. Even significant cuts to discretionary federal programs would not sufficiently address the debt without major structural reforms.
The Penn Wharton Budget Model recently published a report analyzing potential impacts of substantial tax code, immigration, and health care policy reforms. Although the suggestions—such as raising the age for Social Security and eliminating preferential tax rates on investment income—touch on politically sensitive issues, the report asserts these changes could hypothetically diminish federal deficits by 38 percent while fostering economic and wage growth.
Kent Smetters, faculty director of the Penn Wharton Budget Model and a former Treasury official, noted the difficulty of solving the deficit through growth alone without addressing underlying spending drivers. He explained that “almost all spending in the government is already tied to growth,” citing that as Social Security benefits adjust for inflation over time and Medicare reimbursement rates adapt to rising healthcare costs, any productivity gains from advancements like artificial intelligence might streamline certain processes but could also lead to new, costly medical innovations requiring funding through entitlement programs, he argued.
The notion of growing out of debt is a source of frustration for economists specializing in budgetary policy, as Smetters highlighted, stating, “the causality is just the opposite. The way you grow the economy is by fixing the fiscal problems.”
Opponents of this viewpoint argue that allowing elements of Trump’s 2017 Tax Cuts and Jobs Act to lapse could provide a partial solution. While extending existing individual tax cuts could cost $4 trillion and potentially weaken short-term growth, the Congressional Budget Office estimated that permitting these cuts to end might lead to quicker economic expansion over the long run through increased revenue and reduced deficits.
Trump’s supporters, including Michael Faulkender, his deputy Treasury secretary pick, and former economist Aaron Hedlund, contend that letting these tax cuts expire would reduce wages and raise taxes on families, which could be detrimental in light of an aging workforce.
While many of Trump’s growth-oriented and waste-reductive initiatives are credible, there is considerable doubt about their capability to resolve large-scale fiscal challenges that demand more than incremental changes—especially if the anticipated growth does not materialize. Mark Zandi, an economist at Moody’s Analytics, stated that, although enhancing government efficiency “might be a bit of a headwind in the very near term, very quickly it becomes a positive.” He acknowledged, “all the things that the Trump administration and others are talking about on regulation and government efficiency and energy production — it’s all good, but it's small ball. You're not going to move the macroeconomic dial.”
Alejandro Jose Martinez for TROIB News
