Treasury Secretary Scott Bessent is promising annual economic growth of 3% by relying on an AI-powered economy, while Donald Trump has suggested rapid growth will allow the government to address 40 trillion dollars in federal debt. However, the financial markets are unconvinced. The yield on the 10-year Treasury bond recently surged to its highest level in almost 25 years, driven by concerns over the US's unbalanced finances and the cost of servicing existing debt.
For American savers and borrowers, rising bond yields mean higher costs for mortgages, loans and other borrowing, while returns on savings may improve. Businesses face more expensive financing for expansion plans. The Committee for a Responsible Federal Budget calculated that stabilising the federal debt would require average productivity growth of 2.5% annually over the next decade - a level the US has only achieved once since 1959.
Trump's fiscal policies are complicating the picture. His One Big Beautiful Bill Act is estimated to add 4.7 trillion dollars to federal debt through 2035. Interest payments on federal debt alone now consume 3.3% of GDP, up from an average of 2.1% over the previous 50 years. The budget deficit has already reached 6% of GDP, with the Congressional Budget Office projecting it will approach 7% by 2033.
Even optimistic scenarios for AI growth face obstacles. Stanford economist Hanno Lustig estimated that datacenter owners would need revenue to grow 45% annually for seven years just to break even on their investments. A separate analysis suggested the nation's six largest technology companies would need additional revenues of 13.1 to 18.7 trillion dollars over ten years simply to finance their AI buildout - roughly equal to their entire revenue over the past decade.