Trump, the $39 trillion national debt, rosy growth assumptions, and the question of ‘a sustainable path’

President Trump’s fiscal year 2027 budget is built on a single, load-bearing bet: that the U.S. economy can grow at 3% annually for the next decade. The White House says that growth will flood federal coffers with new tax revenue and eventually bend the national debt, now sitting at over $39 trillion, onto a downward path. It is an optimistic vision. It is also, Federal Reserve Chair Jerome Powell suggested last month, the kind of optimism that has repeatedly failed to reckon with what he called an “unsustainable” fiscal trajectory that “will not end well.” A leading budget economist explained to Fortune why the sustainability picture isn’t getting better, even if you accept the White House’s growth numbers at face value. The growth assumption driving everything Kent Smetters, faculty director of the Penn Wharton Budget Model, ran the numbers on what an extra percentage point of real GDP growth—the gap between OMB’s 3.0% projection and the lower percentage seen by CBO, the Federal Reserve, and PWBM itself—actually delivers to the federal balance sheet. The answer, on first glance, is impressive: roughly $2.5 trillion in additional federal revenue and $1.5 trillion in reduced deficits over 10 years. But Smetters didn’t stop at the headline figure. “Because interest rates and growth tend to track each other in the shorter run, government payments on debt could also increase by $750 billion,” he told Fortune. In other words, faster growth drives up borrowing costs—and at over $39 trillion in outstanding debt, even a modest rate uptick would compound into the hundreds of billions. The $1.5 trillion deficit gain and the $750 billion interest cost would hit simultaneously, leaving a true net fiscal benefit of roughly $750 billion—less than half the number the administration’s framing implies. Smetters said the administration is essentially pairing the “more aggressive growth rate being assumed by OMB” without the higher interest rates and spending that would naturally follow. Zooming out historically, Smetters said the idea of cutting costs by a certain percent per year basically comes down to “one president saying that they are hoping that the next president will do it. And the next president comes in and hopes that the next president will do it.” Significant bipartisan reform is the only time you typically see such big changes, he added, absent a windfall that comes from sheer luck, such as the surprise one-time revenue recorded during the Clinton administration, resulting in a budget surplus. In testimony to Congress in 1998, then-Fed Chair Alan Greenspan remarked on the surprise surplus, attributing it to “the taxes paid on huge realized capital gains and other incomes related to stock market advances, coupled with taxes on markedly higher corporate profits, [which] have joined with restraint on spending to produce a unified budget surplus for the first time in nearly three decades.” Smetters said a more sustainable fix to get finances on a sustainable path would be something like the 1986 Tax Reform Act. “Today we need the Tax Reform Act times two.” These calculations come before another offset that Smetters flagged: Social Security initial benefits are tied to wage growth, which rises with GDP, and health care costs track economic output. A faster-growing economy, he noted, is also a more expensive one to govern. This also doesn’t touch on the costs of the ongoing war in Iran, which Smetters previously estimated as costing as much as $210 billion, although he allowed there was more risk to the upside in case of a long conflict. Watchdogs are skeptical The Smetters analysis lands against a backdrop that Powell made explicit last month. The Fed chair, in remarks that rippled across financial markets, described the national debt trajectory as unsustainable and warned it would not end well—a typically blunt assessment from the central banker, on the question of the debt. His concern wasn’t abstract: It was precisely the dynamic Smetters is now quantifying. When you carry $39 trillion in debt, the relationship between growth, rates, and interest payments stops being theoretical and starts being arithmetic. The White House’s own projections show the debt-to-GDP ratio peaking at 103% in 2029 before declining—a trajectory that depends almost entirely on the 3% growth assumption holding for a full decade. The Congressional Budget Office, projecting 1.8% growth, sees no such decline. The Committee for a Responsible Federal Budget (CRFB) reached a similarly skeptical conclusion. CRFB estimated that if you replace OMB’s growth assumptions with CBO’s more conservative projections—and account for the Supreme Court ruling striking down IEEPA-based tariffs—the national debt would reach 120% of GDP by 2036, compared to the administration’s projected 94%. “Unfortunately, this budget provides little guidance on how policymakers should put the national debt on a sustainable path,” the CRFB concluded. None of this has diminished the ambition of the budget’s spending side. The centerpiece is a $1.5 trillion defense funding request for FY 2027, combining a $251 billion increase in base defense discretionary spending with $350 billion in new reconciliation resources. To partially offset those costs, the budget proposes cutting nondefense discretionary spending by 10% in FY 2027, followed by a “two-penny plan” reducing those accounts by 2% annually thereafter—a path CRFB estimates would trim $2.5 trillion in nondefense spending over 10 years. Whether the growth bet pays off or not, the interest rate math embedded in it may be the number Congress pays closest attention to. At $39 trillion in debt, even a quarter-point move in borrowing costs adds tens of billions to the annual tab. A full percentage point of unexpected rate pressure—the kind that could plausibly accompany a genuine growth surge—is a risk that no budget model can fully insure against.