US’s Reagan-era economic promises return as Trump’s AI-fueled growth fantasy

Republicans since Ronald Reagan have claimed that tax cuts generate enough growth to pay for themselves, and deficits have grown every time. Analyst Eduardo Porter argues the same pledge is resurfacing, now justified by artificial intelligence, and will fall short again. Treasury Secretary Scott Bessent has promised annual growth of 3%, while President Donald Trump says faster expansion than ever will let the government handle $40 trillion in federal debt over time, according to The Guardian.

Bond investors disagree. The 10-year Treasury yield recently reached its highest level in nearly a quarter century, over a full percentage point above where it stood when the Iran war began. Inflation from that conflict is one driver. Ballooning deficits are another, along with reduced buying by foreign central banks and competition from AI firms borrowing for datacenters. Interest costs now take 3. 3% of GDP, compared with a 50-year average of 2. 1%.

According to the Committee for a Responsible Federal Budget, cutting the deficit to 3% of GDP by 2036 would need 4. 4% yearly growth, and balancing the budget would need 7. 2%.

Summarized by PolitiKool from The Guardian’s reporting. Read the full story at The Guardian →