The Fiscal Lab found that spending reductions, which would decrease deficits, would lower the growth rate required to eliminate the deficit. For example, an immediate 20 percent reduction in mandatory spending would lower the required growth rate to 2.70 percent per year. A more gradual approach, slowing mandatory spending growth by 2 percent annually, would require real GDP growth of 3.06 percent per year.

Notably, the Fiscal Lab's estimates are based on the law and fiscal trajectory prior to the enactment of the One Big Beautiful Bill Act, which is projected to add $4.1 trillion in debt over the 2026 to 2036 period. That legislation pushed the required growth rate even higher, making an already steep target harder to achieve.

Could Artificial Intelligence Change the Equation?

Proponents of the growth argument increasingly point to artificial intelligence as a potential source of productivity growth that could grow the economy out of the current fiscal situation. A 2026 National Bureau of Economic Research survey found that a majority of economists, AI industry professionals, and policy researchers expect substantial advances in AI capabilities by 2030. However, even with advances in AI capabilities, the median GDP growth forecast from those groups in both the medium- (2025–2029) and long-term (2045–2049) remains close to historical economic growth rates of 2.5 percent annually. That figure falls well short of the 4.31 percent growth necessary to close deficits before the One Big Beautiful Bill Act, let alone today's higher borrowing levels.

Pro-Growth Policies Can Help, But Cannot Do It Alone

A paper by economists Douglas Elmendorf, Glenn Hubbard, and Zachary Liscow finds that no combination of pro-growth policy changes can stabilize federal debt on its own, but a well-designed set of such policies can reduce the magnitude of the spending cuts and tax increases that will ultimately be needed.

Their analysis outlines seven policy areas where changes could boost economic growth while helping to stabilize the deficit.

1. High-Skilled Immigration — Expanding visas for workers with advanced science, technology, engineering and math degrees could boost productivity by increasing innovation and expanding the tax base. Additionally, high-skilled immigrants contribute more in federal taxes than they draw in benefits, making it a policy that could simultaneously strengthen growth and improve the nation's fiscal outlook.
2. Housing Regulation — Some zoning and land use rules slow construction, raise housing costs, and prevent workers from moving to more productive areas. Relaxing those restrictions could raise GDP and improve worker mobility, and federal incentives for state-level reform could achieve this at little direct cost to the budget.
3. Safety Net Programs — Certain government benefits for low-income families, particularly health care and education for children, increase recipients' future earnings and productivity. Those long-term gains could generate additional tax revenues to partially or fully offset the upfront cost of the programs.
4. Electricity Transmission — Upgrading the electrical grid and expanding long-distance transmission capacity could significantly reduce energy costs and boost economic output. Achieving that would likely require a combination of reforms, including empowering federal regulators to streamline siting approval, changing utility incentives, and easing permitting requirements.
5. Federal Research and Development Support — Government investment in research and development has historically generated strong economic returns, often matching or exceeding those of privately funded research without crowding it out. The research paper “Estimating the Economic and Budgetary Effects of Research Investments” suggests the resulting growth could partially or fully offset the upfront investment, making this a potentially fiscally responsible path to long-term prosperity.
6. Business Investment Tax Incentives — Well-designed tax policies that lower the cost of capital, such as reduced corporate tax rates or accelerated depreciation, can encourage business investment, grow the capital stock, and raise wages over time. However, even the most growth-oriented tax cuts have historically recovered only a fraction of their direct revenue costs through economic growth alone, making thoughtful design essential.
7. Permitting Reform — Streamlining the federal permitting process under the National Environmental Policy Act (NEPA) and related laws could accelerate infrastructure construction and reduce project costs. Federally subsidized projects often attract significant private co-investment, so eased permitting rules could have a positive impact on overall economic activity.

Conclusion

Faster economic growth would improve the nation's fiscal outlook, and policymakers should pursue pro-growth reforms. However, the evidence is clear that feasible levels of growth alone cannot close the deficit. The gap between what economic growth can realistically deliver and what fiscal sustainability requires is too large to bridge without also addressing the structural imbalance between federal spending and revenues. Putting the nation on a sustainable fiscal path will require both.

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