Treasury Secretary Scott Bessent is targeting 3% annual growth to address federal debt, but analysts warn that AI-fueled projections may not offset rising deficits and borrowing costs.
Key facts
- •The US federal deficit is currently 6% of GDP, double the level previously cited by Treasury Secretary Scott Bessent.
- •Interest payments on federal debt now account for 3.3% of GDP.
- •Trump's 'One Big Beautiful Bill Act' is estimated to increase federal debt by $4.7 trillion through 2035.
- •Foreign central banks have reduced their exposure to US government debt, forcing the Treasury to rely more on private investors.
- •AI-driven growth may shift economic gains from labor to capital, which is taxed at lower rates than labor income.
US Treasury Secretary Scott Bessent is aiming for 3% annual economic growth, partially relying on artificial intelligence to help manage the nation's $40 trillion federal debt. However, financial markets have shown skepticism, with 10-year treasury bond yields recently reaching their highest levels in nearly 25 years. Analysts and fiscal experts suggest that current growth projections may be insufficient to address the country's growing budget deficit.
By the numbers
Fiscal Challenges and Debt Projections
The federal deficit has reached 6% of GDP, with the Congressional Budget Office projecting it could approach 7% by 2033. Interest payments on federal debt now consume 3.3% of GDP, compared to a 50-year average of 2.1%. According to the Committee for a Responsible Federal Budget, balancing the budget by 2036 would require an annual economic growth rate of 7.2%, while stabilizing the debt would necessitate a 2.5% annual increase in total factor productivity—a rate achieved only once since 1959.
AI Investment and Market Risks
The US government is increasingly competing with private AI "superscalers" for capital as these companies borrow heavily to fund data center construction. Stanford economist Hanno Lustig estimates that to break even on this year's $1.43 trillion AI investment, companies would need revenue to grow by 45% annually for seven years. Further analysis by Jared Bernstein and Ryan Cummings suggests that six major firms—Google, Meta, Microsoft, Oracle, SpaceX, and Amazon—would require $13.1 trillion to $18.7 trillion in additional revenue over the next decade to justify their current AI spending.
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This article was independently rewritten by ManyPress editorial AI from reporting originally published by Guardian AI.
