US debt crosses $40 trillion, growth alone won't solve crisis, economists warn

The United States has little prospect of relying solely on economic expansion to escape its mounting fiscal crisis, economists warn, even as the national debt crosses US$40 trillion and Treasury officials pledge growth will solve the problem.

Treasury Secretary Scott Bessent told CNBC last week that Washington would "grow our way out of" the record debt level, arguing much of the spending had funded investments in factories and equipment. The milestone was reached last week, marking a doubling of the debt pile in just ten years.

Structural barriers block growth strategy

Economists dispute the viability of that approach, citing obstacles that expansion cannot overcome alone. "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.

Elevated government spending, rising debt-servicing costs and tax cuts form structural barriers that undermine the growth strategy, analysts warn. Recent experience supports that scepticism: despite high nominal growth rates boosted by inflation in recent years, the US has added US$10 trillion to its debt since 2022 as public expenditure remained elevated, Garcia-Herrero noted.

Why the debt trajectory matters

The rapid accumulation amplifies concerns about long-term sustainability of managing such a massive debt load. High spending and rising interest costs threaten to impede Washington's efforts to reduce the burden through economic growth, economists say. The combination of persistent fiscal deficits and growing debt-servicing obligations creates a compounding challenge that growth alone may not address.

Source: South China Morning Post