Can the US grow its way out of debt? Don't bet on it: McGeever
TLT•AI-driven growth may boost US productivity and revenues, but the tax structure, limited job growth and falling federal revenues make it unlikely to resolve the country’s debt burden, the columnist argues. US national debt has crossed $40 trillion, and the CBO estimates net federal revenues will fall by almost $5 trillion from 2026 to 2035.
1. Growth meets tax limits
Treasury Secretary Scott Bessent has said the US will have to grow its way out of debt, with an AI-fueled boom appearing central to that approach. Real growth in the third quarter is estimated at an annualized 5.0%, while second-quarter corporate earnings rose 35%, but the columnist argues those gains may not translate into enough tax revenue.
2. Revenue and jobs
The statutory corporate tax rate is 21%, its lowest since 1940, and corporate taxes now account for 9% of federal receipts, down from 10% to 12% in the 1990s. The CBO estimates net federal revenues will fall by almost $5 trillion over 2026-2035. Average monthly payroll growth was 41,000 over the last year, compared with more than 200,000 monthly in the mid-to-late 1990s.
3. AI’s fiscal limits
The columnist says AI could increase output without adding jobs, potentially limiting income and payroll tax receipts. Standard Chartered estimates the AI boom could generate additional revenue equivalent to 0.6% of GDP relative to the CBO baseline, while rising interest rates are expected to make it harder to contain debt-to-GDP growth.
