Can America grow its way out of $40 trillion of debt? Why Washington’s bet is already reaching Kent

US Treasury Secretary Scott Bessent says 3% growth will “bend the curve” on a $40 trillion debt and wants the rest of the world to follow. The record of the past nine years shows what growth and inflation have done to the debt before, what it cost, and why the bond market’s verdict reaches Kent mortgages, pensions and council budgets.

The United States government owes more than $40 trillion, and the man in charge of its finances says the way out is not to pay the debt down but to outgrow it.

Treasury Secretary Scott Bessent has spent six weeks making that case at home and abroad: hold spending, grow the economy by 3% a year, and the debt will shrink relative to the size of the economy. He says other heavily indebted countries should do the same. President Trump has gone further, telling TIME magazine that growth and “certain levels of inflation” would pay the debt off “very rapidly”.

Rather than ask forecasters, this article looks at what the official figures show happened the last three times Washington chose a path, under Mr Trump from 2017, under Joe Biden from 2021 and under Mr Trump again since January 2025, and what the same choice has done in Britain. The bond market has already given its verdict, and because Britain’s borrowing costs move with America’s, it is landing on Kent households, pension savers and councils.

What Washington is saying

Mr Bessent set out the argument to the world’s finance ministers at the G20 meeting in Asheville, North Carolina, on 31 August. “The world is awash in debt post GFC, post COVID, and the only way for us to get out of this is to grow our way out of this,” he said, adding: “I’m confident that a lot of the leaders are very receptive to this.”

At Southern Methodist University in Dallas on 8 September he put a number on it. “We don’t have a revenue problem. We have a spending problem,” he said, arguing that if spending is contained alongside 3% growth, the US can “grow our way out of this”. He said he was working with the White House budget director, Russ Vought, on a fiscal consolidation plan.

On Thursday 8 October, at the Newsmax Policy Summit in Washington, he told the broadcaster Greta Van Susteren when that plan would appear: “I think we’re going to unveil that right after the midterm.” The midterm elections are on 3 November. He gave no spending cuts, revenue measures or deficit targets, but repeated the growth claim: “I think we probably grew more than 3% this quarter. I think we can keep doing that. And if we grow at 3%, the curve will start bending then.” Of the US central bank, which raised rates last month, he said: “What worries me a little is some of the interpretation by some of the people at the Fed, and that they don’t want to look through a supply-side energy shock.”

The President’s version is blunter. Interviewed by TIME at the White House on 28 September, in a transcript published on 1 October, Mr Trump was asked about the debt passing $40 trillion. “But the one thing that you can do is pay it off through growth, and we’ve never had growth like this,” he said. The debt could also be paid “through other means”, which he declined to specify, and he added: “Certain levels of inflation will also pay off that debt very rapidly.” On the Federal Reserve he said: “Well, The Fed is raising the rates. It’s supposed to be an independent board. I’m not happy about it.” Asked on Bloomberg Television whether the White House planned to “inflate our way out of debt”, his National Economic Council director Kevin Hassett replied: “No, absolutely not.”

The numbers behind the claim

The US Treasury’s own ledger put total federal debt at $40.3 trillion on 8 October, of which $32.5 trillion is owed to outside investors. The Congressional Budget Office estimated on 8 October that the deficit for the financial year that ended on 30 September was $2.0 trillion, 6.2% of national output, with spending of $7.4 trillion against receipts of $5.4 trillion. Interest on the debt rose by 11% and is now the second-largest item of federal spending after Social Security. Customs duties fell by 11% after the Supreme Court struck down most of last year’s tariffs and the government refunded them.

The economy grew at an annualised 2.2% in the second quarter and 2.3% across 2025, according to the Bureau of Economic Analysis; the third-quarter estimate Mr Bessent says will top 3% is due on 29 October. On 16 September the Federal Reserve, under its new chairman Kevin Warsh, raised its benchmark rate to 3.75% to 4%, its first increase since 2023, with consumer prices up 3.4% on a year earlier. The yield on the 10-year US Treasury bond touched 5.35% on 7 October, its highest since 2002, and closed the week at 5.24%; a year ago it was 4.13%. Britain has a direct stake: US Treasury figures for July show investors based in the United Kingdom held $998 billion of American government debt, second only to Japan.

What happened the last three times

The figures below are from the Bureau of Economic Analysis, the Bureau of Labor Statistics, the Census Bureau and the US Treasury, as published by the Federal Reserve Bank of St Louis. Inflation is December on December. Debt is federal debt held by the public as a share of national output.

Trump, 2017 to 2020: tax cuts, deregulation, tariffs, then Covid. Growth ran at 2.5%, 3.0% and 2.6% before the pandemic, averaging 2.7%, with inflation of 2.0% to 2.3%. Unemployment fell to 3.6% in December 2019 and 6.4 million jobs were added in three years. Real median household income rose from $78,600 in 2017 to $85,320 in 2019, in today’s money. The 2017 tax cut lowered federal receipts from 16.9% of output to 16.1%, and the deficit widened from 3.4% to 4.6% before Covid; debt held by the public edged up from 74% to 78%. In the pandemic year Congress passed about $2.8 trillion of relief under Mr Trump, the CARES Act in March 2020 and a second package in December, taking the deficit to 14.5% and the debt ratio to 98%. Gross federal debt rose from $20.2 trillion to $26.9 trillion over the four fiscal years.

Biden, 2021 to 2024: stimulus, rebound, inflation. The Biden years ran on two things inherited from the Trump years: the 2017 tax cuts, which stayed in force throughout, and the largest peacetime stimulus on record. Roughly $2.8 trillion of pandemic relief had been enacted under Mr Trump in 2020, and Mr Biden added the $1.9 trillion American Rescue Plan in March 2021, with the Federal Reserve holding rates near zero until March 2022. Growth was 6.3% in the rebound year, then 2.4%, 2.9% and 3.0%. Inflation reached 7.2% in 2021 and 6.4% in 2022, peaking at 9.1% in June 2022, before easing to 3.3% and 2.9%. Unemployment stayed between 3.5% and 4.1% from 2022 and payrolls regained the Covid losses, adding 15.4 million jobs over four years. Federal receipts averaged 17.2% of output, against 16.3% in the previous term, with no broad federal tax rise legislated: the 2022 spike to 18.8% came from capital gains and inflation lifting incomes into higher bands under the Trump tax rates. Deficits were 11.7%, 5.3%, 6.1% and 6.2% of output. The debt ratio fell from 98% to 91% by early 2023, then climbed back to 97% by the end of 2024, and gross debt rose from $26.9 trillion to $35.2 trillion. The cost showed up in pay packets: real median weekly earnings fell from $373 in early 2021 to $363 a year later, in constant dollars, and did not regain the 2021 level until 2025; real median household income fell from $83,590 in 2020 to $81,460 in 2022 before recovering to $85,210 in 2024, roughly its 2019 level.

Trump, 2025 to date: a second tax law, tariffs, a war and an energy shock. Growth was 2.3% in 2025, swinging between 0.1% and 4.0% quarter by quarter, then 2.5% and 2.2% in the first half of 2026. Inflation ended 2025 at 2.7%, rose to 4.2% in May as oil prices climbed after the conflict with Iran began, and was 3.4% in August. Unemployment is 4.2% and 0.8 million jobs have been added since January 2025. Real median household income reached a record $87,460 in 2025 and real weekly earnings are at a record high. Receipts were 17.0% of output in the 2025 fiscal year; the deficit was 5.8% in 2025 and 6.2% in 2026. Debt held by the public has risen from 97% to 99% of output, and gross debt from $35.2 trillion to $40.3 trillion.

Britain and the euro area grew more slowly and borrowed almost as heavily. UK output grew 0.3% in 2023, 1.0% in 2024 and 1.3% in 2025, with inflation peaking at 10.5% in December 2022; the euro area grew 0.4%, 1.2% and 1.2%, with inflation peaking at 8.4% in 2022. UK net debt, excluding the Bank of England, went from 84% of output before Covid to 98% in 2020, fell to 93% in the inflation year of 2022, and has sat near 94% since.

Does growth with inflation actually cut the debt?

The record gives a two-part answer. In dollars, no. Gross federal debt has risen in every one of the past nine years, under both presidents, in boom, pandemic and recovery alike. As a share of the economy, yes, and the Biden years are the proof. Between the end of 2020 and the start of 2023 the debt ratio fell by seven points, from 98% to 91%, while deficits ran at 11.7% and 5.3% of output, because the economy grew at 6.3% and 2.4% with inflation of 7.2% and 6.4% on top. Nominal output, which is what the debt is measured against, grew by around 10% a year. That surge was not organic: it followed some $4.7 trillion of pandemic relief enacted within twelve months under both presidents, on top of the Trump tax cuts and near-zero interest rates.

The rule the figures follow is simple. With debt close to 100% of output, the ratio falls when growth plus inflation exceeds the deficit as a share of output, and rises when it does not. In 2018, 3% growth with 2% inflation beat a 3.8% deficit only narrowly, and the ratio was flat. In 2024 and 2026, growth plus inflation of about 5% has fallen short of deficits above 6%, and the ratio has climbed by about a point a year. Mr Bessent’s 3% growth with inflation back near 2.5% would add up to 5.5%, still short of a 6.2% deficit, which is why he pairs growth with spending restraint. Mr Trump’s point about inflation is also borne out by the numbers: at the inflation rates of 2021 and 2022 the ratio would fall by several points a year.

The same tables show what that route cost. Real weekly earnings fell for a year and took four years to recover. The Federal Reserve raised rates from near zero to above 5% to bring inflation down, and lenders began charging more: the 10-year Treasury yield was below 1% at the start of 2021 and is 5.2% now. Because interest is now the second-largest federal expense, higher yields feed straight back into the deficit that growth is supposed to outrun. Britain’s experience was sharper: inflation cut its debt ratio by four points in 2022, but the interest bill on its debt, part of which rises automatically with prices, went from £39 billion in 2019-20 to £106 billion in 2024-25, according to the Office for Budget Responsibility.

The President’s own money, and Berkshire’s bigger bet

Where Mr Trump puts his own money offers one clue to how the people around him read the outlook. His periodic transaction report, released on 22 August, showed a reshuffle in June involving more than 1,000 trades. On 18 June he bought shares in Berkshire Hathaway for the first time, in the $1 million to $5 million band, alongside similar-sized purchases of Cintas, Visa and Mastercard, while selling Meta and Motorola. Mr Trump has said a third-party manager makes the individual decisions.

Berkshire, the conglomerate built by Warren Buffett, who handed the chief executive’s job to Greg Abel at the start of this year, is one of the US government’s largest private creditors: its quarterly report for the three months to 30 June shows $324.9 billion in short-term US Treasury bills, about 1% of all the US debt held by investors. Its cash and Treasury pile fell from a record $397.4 billion at the end of March to $365.5 billion at the end of June as Mr Abel began to spend. His first letter to shareholders, dated 28 February, set the direction: “Our cash and U.S. Treasury holdings now exceed $370 billion. While some of this capital is required to support our insurance operations and protect Berkshire against extreme scenarios, it also constitutes our dry powder.” And: “We will always aim for ownership of productive businesses over U.S. Treasuries.”

The spending since then points at American housing and technology rather than government bonds: the homebuilder Taylor Morrison for about $6.8 billion, completed on 24 July; $39.4 billion of shares bought and $27.8 billion sold in the first half; $4.5 billion of buybacks; 48.1 million Alphabet shares added, now its third-largest holding; and a stake in another homebuilder, Lennar, topped up on 1 and 2 October. Its quarterly report warns that results “may be affected in future periods by the impacts of ongoing macroeconomic and geopolitical conflicts and events, including wars, developing international trade policies and tariffs”. Third-quarter figures are due in early November.

Britain has the same problem with less growth

Public sector net debt stood at £2,985.5 billion at the end of August, 93.8% of national output, according to the Office for National Statistics. The government borrowed £18.3 billion in August alone, a fifth more than a year earlier, and £77.3 billion in the first five months of the financial year, £8.1 billion more than the Office for Budget Responsibility had forecast. Debt interest cost £8.8 billion in August, the highest for that month since records began in 1997. Kent Local News reported the August figures on 22 September.

On the arithmetic above, Britain’s problem is growth rather than the size of its deficit: with output growing at 1% and inflation at 3%, nominal growth of about 4% cannot outrun borrowing of 4% to 5% of output, so the ratio does not fall. That is the growth argument in reverse, and it is why the Treasury’s cushion is thin. The 30-year gilt yield reached 6.036% on 7 October, its highest since January 1998, and the 10-year gilt hit 5.51% the next day, its highest since July 2007; they ended the week at 5.94% and 5.42%. The Bank of England held Bank Rate at 3.75% on 17 September, with three of nine members voting for 4%, and decides again on 5 November. UK inflation was 3.1% in August.

All of this lands on Chancellor John Healey’s desk on 28 October, when he delivers his first Budget alongside a new OBR forecast. The accountancy firm EY estimated on 5 October that the government’s headroom against its main fiscal rule had fallen from £23.6 billion in March to £11.3 billion, with higher gilt yields the largest single cause. The IMF publishes its new World Economic Outlook on Tuesday; its July update pencilled in UK growth of 1.0% this year and 1.3% next.

What it means in Kent

The link from a debate in Washington to a household in Kent runs through the bond market. Fixed-rate mortgages are priced off gilt and swap rates, not Bank Rate alone, so when investors demand more to lend to governments, lenders demand more from borrowers. Moneyfacts puts the average two-year fixed mortgage at 5.93%, the highest since July 2024. The average Kent home sold for £346,904 in July, according to HM Land Registry, against £293,000 across England, and Kent first-time buyers paid an average of £284,956. Kent Local News reported on 10 October that a buyer borrowing 90% of that first-time buyer figure over 25 years would pay about £1,640 a month at the two-year average, against about £1,420 at the 4.45% rate that applied to new loans in July.

For savers nearing retirement the same yields cut the other way. Annuity providers buy gilts to fund the incomes they promise, and on 1 October the best single-life level annuity for a 65-year-old with a £100,000 pension pot paid £8,186 a year, a rate of 8.19%, according to the broker Retirement Line. Whether any of that suits an individual depends on their circumstances, and this article is not financial advice.

Kent’s councils borrow at rates set by the Public Works Loan Board, which the Debt Management Office says are “based on gilt yields”. Medway Council, balancing its 2026-27 budget with around £10 million of exceptional financial support from the government for the third year running, told councillors in February that “around 64% of the Council’s existing capital programme of £229.722million is funded through borrowing and interest rates continue to be higher than previously projected resulting in a budget pressure”, and that “PWLB rates remain elevated as yields from Government Bonds have increased”. Kent County Council’s £1,648 million budget includes no new borrowing, and the council says its debt “should reduce over time as existing debt matures and is not replaced”.

Growth, or the lack of it, shows up in the jobs figures. Kent County Council’s analysts counted 33,450 people claiming unemployment benefits in Kent in August, 3.4% of the working-age population against 3.9% nationally, up 560 on the month and 6% on the year. Medway’s rate was 4.2%, Thanet’s 5.4% was the county’s highest and Sevenoaks’s 2.3% the lowest. Youth unemployment in Kent was 6.6%, above the national 6.0%, with Thanet’s 12.2% the highest in the South East. September’s figures are due on 20 October.

What to watch

Tuesday 13 October: IMF World Economic Outlook, published in Bangkok at 03:00 UK time.
Tuesday 20 and Wednesday 21 October: ONS labour market figures (including Kent’s claimant count), September public finances and inflation, the last data before the Budget.
Wednesday 28 October: Budget and OBR forecast.
Thursday 29 October: first estimate of US growth for July to September.
Tuesday 3 November: US midterm elections, after which Mr Bessent says the debt plan will be published.
Thursday 5 November: Bank of England interest rate decision; early November: Berkshire Hathaway third-quarter results.

Key information

US federal debt, 8 October 2026: $40.3 trillion ($32.5 trillion held by investors); deficit for the year to 30 September: $2.0 trillion, 6.2% of output
US growth: 2.7% a year average 2017-19; 3.6% average 2021-24 including the rebound year; 2.3% in 2025
US inflation: 2.0% to 2.3% in 2017-19; 7.2% in 2021 and 6.4% in 2022; 3.4% in August 2026
US debt held by the public: 74% of output in 2017, 98% at the end of 2020, 91% in early 2023, 99% in early 2026
UK public sector net debt, end August 2026: £2,985.5 billion, 93.8% of output; UK growth 1.3% in 2025; Budget 28 October
Average two-year fixed mortgage 5.93% (Moneyfacts); average Kent house price £346,904 (July); Kent claimant count 33,450 (3.4%)

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Can America grow its way out of $40 trillion of debt? Why Washington's bet is already reaching Kent Quiz

5 questions

Sources

Source documents: US Treasury Fiscal Data, Congressional Budget Office, BEA, BLS, Census Bureau and Treasury series via FRED, TIME interview transcript, Berkshire Hathaway filings, Office for National Statistics, Eurostat, Kent Analytics and Medway and Kent County Council budget papers, linked above.

Image: AI-generated illustration by Kent Local News (Aegis Lumina)

Published: 12 October 2026

US growth, inflation, employment, income, deficit and debt figures are official series from the Bureau of Economic Analysis, Bureau of Labor Statistics, Census Bureau, Office of Management and Budget and US Treasury, as published by the Federal Reserve Bank of St Louis on 11 October 2026 and subject to revision; the deficit for the 2026 fiscal year is the Congressional Budget Office’s estimate. UK and euro-area figures are from the ONS, OBR and Eurostat. Quotations from Scott Bessent, President Trump and Kevin Hassett are reported verbatim from the transcripts and reports linked in the sources. Berkshire Hathaway figures are from its own filings and shareholder letter; the size of President Trump’s holding is a band from his public disclosure, not an exact figure. The relationship between growth, inflation, deficits and the debt ratio described here is an arithmetic observation from the published figures, not a forecast. Mortgage and annuity figures are illustrations drawn from published averages and are not a quote, a recommendation or financial advice. If you believe anything here is inaccurate, contact editor@kentlocalnews.co.uk — see our corrections policy.