NO, THE US CANNOT GROW ITS WAY OUT OF ITS DEBT PROBLEMS Over the past couple of weeks we have heard US Treasury Secretary Scott Bessent say again and again that the plan is to raise US GDP growth, and that this will solve the country's debt problems. US President Trump has said the same thing repeatedly for the past year and a half. But is it actually possible? I have run the numbers. The chart below shows the NOMINAL US GDP growth required to stabilise federal public debt as a share of GDP, given the total stock of debt, the level of interest rates and the public deficit. The red line is the "required" nominal GDP growth if debt is to be stabilised as a share of GDP. When actual nominal GDP growth (the green line) falls below the red line, debt rises as a share of GDP. We can see that over the past 25 years the "required" growth rate has been almost permanently above actual nominal GDP growth. Right now the calculations show that if Bessent is to stabilise the debt, we need nominal GDP growth of 7.2%. And if the Federal Reserve is to hold inflation below 2% at the same time, we need real growth above 5% PERMANENTLY to keep the debt stable. It ought to be obvious to anyone that this is completely impossible. But there is of course an alternative, which is to raise nominal GDP growth through higher inflation, because from a debt perspective it makes no difference whether growth comes from inflation or from real growth. It would simply mean that the Fed would have to abandon its 2% target and accept markedly higher inflation. The Congressional Budget Office estimates potential real GDP growth in the US at around 2.2%, so to reach nominal GDP growth of 7.2% we would need permanent US inflation of 5%. That is of course an option - the Fed just has to print some more money. The problem is that when nominal GDP growth rises, interest rates tend over time to follow nominal GDP growth quite closely. And worse still: if markets grow nervous that an attempt is being made to inflate away the debt problems, market rates will shoot up immediately and only make the problem worse. So the answer is quite clear. The US cannot grow its way out of its debt problems. There is no other route - taxes have to go up and/or public spending has to come down. The question is whether the US as a nation is capable of making those choices today. I am personally becoming more and more doubtful.