Can Trump fix the national debt? Republican senators, many investors and
even Elon Musk have doubts
[June 02, 2025]
By JOSH BOAK
WASHINGTON (AP) — President Donald Trump faces the challenge of
convincing Republican senators, global investors, voters and even Elon
Musk that he won't bury the federal government in debt with his
multitrillion-dollar tax breaks package.
The response so far from financial markets has been skeptical as Trump
seems unable to trim deficits as promised.
“All of this rhetoric about cutting trillions of dollars of spending has
come to nothing — and the tax bill codifies that,” said Michael Strain,
director of economic policy studies at the American Enterprise
Institute, a right-leaning think tank. “There is a level of concern
about the competence of Congress and this administration and that makes
adding a whole bunch of money to the deficit riskier.”
The White House has viciously lashed out at anyone who has voiced
concern about the debt snowballing under Trump, even though it did
exactly that in his first term after his 2017 tax cuts.
White House press secretary Karoline Leavitt opened her briefing
Thursday by saying she wanted “to debunk some false claims" about his
tax cuts.
Leavitt said the "blatantly wrong claim that the ‘One, Big, Beautiful
Bill’ increases the deficit is based on the Congressional Budget Office
and other scorekeepers who use shoddy assumptions and have historically
been terrible at forecasting across Democrat and Republican
administrations alike.”
House Speaker Mike Johnson piled onto Congress' number crunchers on
Sunday, telling NBC's “Meet the Press,” “The CBO sometimes gets
projections correct, but they’re always off, every single time, when
they project economic growth. They always underestimate the growth that
will be brought about by tax cuts and reduction in regulations.”
But Trump himself has suggested that the lack of sufficient spending
cuts to offset his tax reductions came out of the need to hold the
Republican congressional coalition together.
“We have to get a lot of votes,” Trump said last week. “We can’t be
cutting.”
That has left the administration betting on the hope that economic
growth can do the trick, a belief that few outside of Trump's orbit
think is viable.
Most economists consider the non-partisan CBO to be the foundational
standard for assessing policies, though it does not produce cost
estimates for actions taken by the executive branch such as Trump’s
unilateral tariffs.
Tech billionaire Musk, who was until recently part of Trump's inner
sanctum as the leader of the Department of Government Efficiency, told
CBS News: “I was disappointed to see the massive spending bill, frankly,
which increases the budget deficit, not just decreases it, and
undermines the work that the DOGE team is doing."
Federal debt keeps rising
The tax and spending cuts that passed the House last month would add
more than $5 trillion to the national debt in the coming decade if all
of them are allowed to continue, according to the Committee for a
Responsible Financial Budget, a fiscal watchdog group.
To make the bill's price tag appear lower, various parts of the
legislation are set to expire. This same tactic was used with Trump's
2017 tax cuts and it set up this year's dilemma, in which many of the
tax cuts in that earlier package will sunset next year unless Congress
renews them.
But the debt is a much bigger problem now than it was eight years ago.
Investors are demanding the government pay a higher premium to keep
borrowing as the total debt has crossed $36.1 trillion. The interest
rate on a 10-year Treasury Note is around 4.5%, up dramatically from the
roughly 2.5% rate being charged when the 2017 tax cuts became law.
The White House Council of Economic Advisers argues that its policies
will unleash so much rapid growth that the annual budget deficits will
shrink in size relative to the overall economy, putting the U.S.
government on a fiscally sustainable path.
The council argues the economy would expand over the next four years at
an annual average of about 3.2%, instead of the Congressional Budget
Office's expected 1.9%, and as many as 7.4 million jobs would be created
or saved.
Council chair Stephen Miran told reporters that when the growth being
forecast by the White House is coupled with expected revenues from
tariffs, the expected budget deficits will fall. The tax cuts will
increase the supply of money for investment, the supply of workers and
the supply of domestically produced goods — all of which, by Miran’s
logic, would cause faster growth without creating new inflationary
pressures.
“I do want to assure everyone that the deficit is a very significant
concern for this administration,” Miran said.
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In this image from video with the final vote total, the House of
Representatives passed President Donald Trump's big bill of tax
breaks and program cuts after an all-night session at the U.S.
Capitol in Washington, Thursday, May 22, 2025. (House Television via
AP)
White House budget director Russell Vought told reporters the idea
that the bill is “in any way harmful to debt and deficits is
fundamentally untrue.”
Economists doubt Trump's plan can spark enough growth to reduce
deficits
Most outside economists expect additional debt would keep interest
rates higher and slow overall economic growth as the cost of
borrowing for homes, cars, businesses and even college educations
would increase.
“This just adds to the problem future policymakers are going to
face,” said Brendan Duke, a former Biden administration aide now at
the Center on Budget and Policy Priorities, a liberal think tank.
Duke said that with the tax cuts in the bill set to expire in 2028,
lawmakers would be “dealing with Social Security, Medicare and
expiring tax cuts at the same time.”
Kent Smetters, faculty director of the Penn Wharton Budget Model,
said the growth projections from Trump's economic team are “a work
of fiction.” He said the bill would lead some workers to choose to
work fewer hours in order to qualify for Medicaid.
“I don’t know of any serious forecaster that has meaningfully raised
their growth forecast because of this legislation,” said Harvard
University professor Jason Furman, who was the Council of Economic
Advisers chair under the Obama administration. “These are mostly not
growth- and competitiveness-oriented tax cuts. And, in fact, the
higher long-term interest rates will go the other way and hurt
growth.”
The White House's inability so far to calm deficit concerns is
stirring up political blowback for Trump as the tax and spending
cuts approved by the House now move to the Senate. Republican Sens.
Ron Johnson of Wisconsin and Rand Paul of Kentucky have both
expressed concerns about the likely deficit increases, with Paul
saying Sunday there are enough GOP senators to stall the bill until
deficits are addressed.
“I think there are four of us at this point" who would oppose the
legislation “if the bill, at least, is not modified in a good
direction,” Paul said on CBS' “Face the Nation."
“The GOP will own the debt once they vote for this," Paul said.
Four Republican holdouts would be enough to halt the bill in the
Senate, where the party holds a three-seat majority.
Trump banking on tariff revenues to help
The White House is also banking that tariff revenues will help cover
the additional deficits, even though recent court rulings cast doubt
on the legitimacy of Trump declaring an economic emergency to impose
sweeping taxes on imports.
When Trump announced his near-universal tariffs in April, he
specifically said his policies would generate enough new revenues to
start paying down the national debt. His comments dovetailed with
remarks by aides, including Treasury Secretary Scott Bessent, that
yearly budget deficits could be more than halved.
“It’s our turn to prosper and in so doing, use trillions and
trillions of dollars to reduce our taxes and pay down our national
debt, and it’ll all happen very quickly,” Trump said two months ago
as he talked up his import taxes and encouraged lawmakers to pass
the separate tax and spending cuts.
The Trump administration is correct that growth can help reduce
deficit pressures, but it's not enough on its own to accomplish the
task, according to new research by economists Douglas Elmendorf,
Glenn Hubbard and Zachary Liscow.
Ernie Tedeschi, director of economics at the Budget Lab at Yale
University, said additional “growth doesn't even get us close to
where we need to be.”
The government would need $10 trillion of deficit reduction over the
next 10 years just to stabilize the debt, Tedeschi said. And even
though the White House says the tax cuts would add to growth, most
of the cost goes to preserve existing tax breaks, so that's unlikely
to boost the economy meaningfully.
“It's treading water,” Tedeschi said.
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