Can the US Pay Back Its Debt by Growing the Economy?
Sometimes you hear the following line of thought about the growing U.S. national debt: “We don’t need to raise taxes or cut spending. We just need to make the economy grow faster and the debt will take care of itself.”
It’s an appealing idea. And there’s a grain of truth in it. But can we actually pay down the national debt just by growing the economy?
The short answer is “no.”
Let’s unpack why.
The logic of the argument goes like this: If the economy grows faster than the national debt, the debt becomes smaller relative to GDP. That’s true-and that’s what economists mean when they talk about a falling debt-to-GDP ratio.
But right now, the opposite is happening. Since the early 2000s, the debt has been, on average, growing faster than the economy. In 2024, the federal deficit was $1.8 trillion. And unless major changes are made, projections show similar or larger deficits going forward. So even with healthy economic growth, we’re adding debt at a pace that outstrips it.
In this context, economic growth can slow the rate at which the debt burden increases, but it can’t stop or reverse it — especially if deficits remain large. And even if we stopped adding new debt altogether, the existing debt burden would shrink only slowly over time, and only if the economy continued to grow steadily for many years.
Here’s another problem: substantially increasing long-run economic growth is extremely difficult. Growth depends on things like productivity, innovation, and labor force participation-factors that aren’t easy to influence through policy. And the policy tool that is most often associated with boosting growth-cutting taxes-works directly against the goal of lowering the debt.
So relying on faster growth alone is not only insufficient — it’s also unrealistic. Even if the economy grows faster than expected, the benefits would be limited unless we also make smart fiscal decisions-like reducing spending, raising taxes, or both.
So can growth help? Yes.
Can it solve the debt problem by itself? No.
At best, growth buys us time. But without changes to fiscal policy, we’re not on a path to pay off the debt — or even stabilize it.
Originally published at https://mytwocentsandcounting.substack.com.