America can’t grow its way out of its debt problem

The US economy is staring down the barrel of $40 trillion in debt, bond yields on the cusp of a 19-year high and a costly war driving inflation higher. The Trump administration has a novel solution: We'll just grow our way out of the problem.

It's a refrain President Donald Trump and Treasury Secretary Scott Bessent have used frequently in recent weeks. It's an effort to calm a market that has grown increasingly nervous about the war in Iran and Washington's lack of a coherent plan to get its fiscal house in order.

The administration's theory is grounded in a degree of real economic theory : If the US economy grows at a significantly faster rate, its debt would eventually become relatively sustainable.

But to accomplish that, America's economy would need to grow at a faster rate for many years. That's not something any administration can control. And the idea assumes we won't keep adding massively to our debt, a theory belied by populist economic policies supported by politicians on both sides of the aisle.

That's why the market isn't buying it. The math just doesn't math. Inflation is making a comeback , spending is out of control, and Washington has no political will to fix either problem.

America's debt crossing the $40 trillion mark last month sounded a number of alarm bells. But the most pressing question is whether – and how long – we can keep running massive deficits.

When economists try to determine whether the government's debt is sustainable, a common metric they look to is the difference between "g" (the economy's growth rate, or GDP) and "r" (the rate of interest on the debt, or 10-year Treasury yields).

When g is bigger than r , the debt becomes relatively insignificant compared to economic growth. When r is bigger than g , the debt can grow at an unsustainable pace.

That seems self-evident: If you keep getting a raise year after year and you're able to pay the interest on your debt today, you'll be able to pay it in the future, too – and it'll become easier to pay it down as your paycheck grows.

Economies don't function quite like consumers or businesses, and economists debate what "sustainable" debt looks like. But right now, r is around 5%, and g is around 2%. That, at the very least, raises the risk that America's debt is on an unsustainable path.

But that's not the only metric flashing a warning about America's debt burden. The primary deficit – the difference between an economy's spending and tax revenue, minus interest payments – is also a concern.