The phrase from the Treasury Secretary—“we can grow to get rid of the $40 trillion in debt”—is the revealing clue.
It’s the U.S. government admitting the objective function. They’re telling us, clearly, that the preferred solution for the debt burden is nominal growth that exceeds the effective cost of the debt. That sounds harmless until you break down what it requires.
Real growth helps, obviously. Productivity helps. Tariff revenues help at the margin. Fiscal constraint would help enormously.
Therefore, “grow to...” almost inevitably means a mix of: higher nominal GDP,
higher tax revenues, some inflation,
some financial repression, and borrowing costs that don’t rise as fast as nominal growth.
That last part is the battlefield.
Let’s pray!
It’s the U.S. government admitting the objective function. They’re telling us, clearly, that the preferred solution for the debt burden is nominal growth that exceeds the effective cost of the debt. That sounds harmless until you break down what it requires.
Real growth helps, obviously. Productivity helps. Tariff revenues help at the margin. Fiscal constraint would help enormously.
Therefore, “grow to...” almost inevitably means a mix of: higher nominal GDP,
higher tax revenues, some inflation,
some financial repression, and borrowing costs that don’t rise as fast as nominal growth.
That last part is the battlefield.
Let’s pray!
