Key Takeaways: The US national debt crossed $40 trillion, and the administration's answer is growth — a bet that hinges on the economy expanding faster than it borrows.
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Vance Says Growth Plan to Outpace $40 Trillion Debt
The US national debt crossed $40 trillion, and Vice President JD Vance said the administration has a plan to make economic growth outpace borrowing, a bet Treasury Secretary Scott Bessent says can be won without austerity.
"Even though the debt is too high, even though we inherited this debt bomb from the Biden administration, we actually do have a plan to get the economy growing faster than the debt," Vance told Newsmax on Thursday.
The milestone lands as the Committee for a Responsible Federal Budget, a Washington think tank, estimated Trump approved $8.4 trillion of new ten-year borrowing during his full first term, or $4.8 trillion excluding COVID relief, while Biden approved $4.3 trillion in his first three years, or $2.2 trillion excluding the American Rescue Plan. The CRFB said the debt is on course to reach a record share of the economy under the next presidential administration.
The growth-over-debt strategy carries direct consequences for the Treasury market, where the $40 trillion stock of federal debt must be financed. Bessent said Thursday there is "nothing magic about the $40 trillion number" and the US can "grow our way out of that," while acknowledging "a lot of misinformation" about the deficit and the deficit-to-GDP ratio.
Debt Crosses $40 Trillion After Years of Deficit Spending
The $40 trillion mark reflects a decade of widening budget gaps. The CRFB's estimates show both parties contributed: Trump's $8.4 trillion of ten-year borrowing during his term and Biden's $4.3 trillion over his first three years combined to push the debt to a record share of gross domestic product. The think tank warned the trajectory would continue under the next administration absent policy changes.
The political framing matters as much as the arithmetic. Vance's decision to pin the milestone on the Biden administration, rather than acknowledge the bipartisan accumulation, sets up the debt as a campaign issue while the current administration claims credit for a plan to fix it. The CRFB's numbers undercut that framing, showing Trump's term added more to the ten-year borrowing outlook than Biden's first three years.
Growth Bet Faces a Skeptical Bond Market
The administration's reliance on growth rather than spending cuts is being tested in the bond market. Analysts said the recent rise in Treasury yields partly reflected investor expectations that AI-driven growth could push the Federal Reserve to raise rates, according to the New York Times. Higher yields raise the cost of servicing the $40 trillion debt, complicating the arithmetic behind the growth-outpaces-debt plan.
Bessent is simultaneously reshaping how the government engages the world's most important bond market, according to the New York Times, a shift that gives the Treasury more tools to manage the debt load. The strategy assumes productivity gains from AI and deregulation can lift potential growth above the pace of debt accumulation implied by current deficits.
The dynamic differs from the pandemic era, when the debt surged but Treasury yields fell as the Fed slashed rates to near zero. Today, yields are rising even as the debt climbs, a sign investors are pricing in stronger growth rather than flight to safety.
The stakes extend beyond the bond market. If the growth plan is credible, it supports risk assets by keeping the debt burden manageable without the tax increases or spending cuts that would slow the economy. If investors conclude the debt is on an unsustainable path, the Treasury market would lead a repricing that hits equities and the dollar.
If the economy expands faster than the debt, the debt-to-GDP ratio falls even as the nominal total climbs — the outcome Bessent is betting on. If growth disappoints, the ratio worsens and borrowing costs rise further, a spiral that would force the administration to choose between deeper cuts and higher deficits. The next quarterly refunding announcement and monthly budget statements will show whether the plan is working.
This article is for informational purposes only and does not constitute investment advice.
