How to curb the national debt

OPINION:

The U.S. economy performed well in President Trump’s first year back in office.

During the first Trump and Biden administrations, annual gross domestic product growth averaged 2.5%. After a rocky first quarter, the economy regained that pace in the remainder of 2025 despite supply chains upset by average tariffs jumping to 13%, labor markets jarred by artificial intelligence and crackdowns on illegal immigration, a long government shutdown and Mr. Trump’s slashing of federal employment.

Along with a third straight great year for stocks, those headline-grabbers distracted from a remarkable breakout in worker productivity.

CEOs are growing businesses with fewer employees by relying on artificial intelligence.

Whereas private payroll employment rose 1.1% annually from 2016 to 2024, it increased only 0.1% last year. That implies annual labor productivity growth accelerated from about 1.4% to nearly 2.0%.

Employers in agriculture, construction, manufacturing and hospitality are still scrambling to find qualified workers, but about a quarter of unemployed Americans have been seeking work for more than six months. Many are college graduates who have been displaced by AI.

The first Trump-Biden prosperity was instigated by tax cuts and spending. The federal deficit jumped from 2.9% of GDP in 2016 to 5.8% in 2025.

The Congressional Budget Office estimates that the national debt will reach 175% of GDP by 2056. However, the debt could be stabilized at about 113% if annual productivity and GDP growth were permanently increased 0.5%.

More foreign investment would help.

Mr. Trump boasts that he secured $21 trillion in new commitments to invest in the United States through his recently negotiated trade agreements. However, White House documents list projects totaling less than half that amount.

Independent analyses from Bloomberg and CBS suggest that only about $7 trillion were genuine investment projects and many were already in the works during the Biden presidency.

It is unclear how much of that will happen now that the Supreme Court has struck down about half of Mr. Trump’s tariffs, and the administration is scrambling to reimpose them under existing trade laws.

The CBO study on the escalating U.S. debt burden put trend growth at about 2%, reflecting a slowdown in U.S. workforce growth.

Shortages of engineers to design factories, skilled workers to build them, and ready hands to begin production will limit the pace of new investments, even if the next president continues Mr. Trump’s policies.

Mr. Trump’s supporters believe one reason the economy is outperforming expectations is his deregulation program, which includes relaxing mileage standards for cars, liberating internet providers from costly pressures, employing more transgender, minority and unionized workers, and implementing lighter regulations for banks.

Still, those measures mostly provide a one-time lift to labor productivity, whereas studies at J.P. Morgan and Goldman Sachs indicate AI offers prospects for a sustainable acceleration.

For example, freeing internet providers from the tyranny of woke enforcement cut the average cost of connecting a new household to the internet in Louisiana to $3,943 from $5,245 last year. It is not going down that much again in 2026.

Much of this progress was possible because Republicans controlled both political branches of government, but it could prove ephemeral when Democrats get another turn controlling Washington’s regulatory machinery.

Also, what Mr. Trump gives with one hand, he takes away with the other.

Woke requirements for federal assistance in building out the internet have ended.

The One Big Beautiful Bill Act provides funds to assist rural hospitals, but states that adopt MAHA mandates, such as nutrition training for physicians, will result in more generous funding.

Mr. Trump’s price controls for prescription drugs are more extensive and cumbersome than were Mr. Biden’s. His complex tariff schedules are creating a regulatory compliance morass and resulting in the loss of goods at customs houses.

The Justice Department is using a federal law meant to punish firms that cheat the government if they continue to apply diversity criteria in hiring and hold government contracts.

The CBO analysis of productivity growth and the national debt didn’t factor in Mr. Trump’s new limits on legal immigration or a productivity driver such as AI, which makes millions of workers’ skills obsolete.

A lot could be resolved by increasing legal immigration, with an emphasis on the kinds of workers needed in immigrant-heavy sectors such as agriculture, construction, healthcare and STEM-related activities.

AI may allow car insurance companies to get by with fewer claims adjusters per vehicle, but more legal immigrants, drivers and cars would reemploy many adjusters, even at a lower ratio.

Deregulation is great while it lasts.

AI will last regardless of politicians such as Sen. Bernard Sanders, Vermont independent, who have gone Luddite, but it requires enough of the right people with the right skills and work interests to boost broader growth and lower deficits.

To tame the runaway national debt and drive stronger growth through AI, America needs more generous and strategic immigration policies.

• Peter Morici is an economist and emeritus business professor at the University of Maryland, and a national columnist.