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US’s Reagan-era economic promises return as Trump’s AI-fueled growth fantasy

Back through political history to the age of Ronald Reagan, Republicans have repeatedly promised the US public that tax cuts would pay for themselves, firing up economic growth and filling the government’s coffers. The promise never really panned out. From the Gipper’s day on, the Republicans’ tax cuts inevitably increased the budget deficit. Despite its failure, though, the promise is back, coated in a fine new layer of artificial intelligence pixie dust. It will fail again. The treasury secretary, Scott Bessen…

By the Truvace desk2 min read1 sourceJournalismTRV-2026-1325· cite & verify
US’s Reagan-era economic promises return as Trump’s AI-fueled growth fantasy

In brief

Published 11 Oct 2026, the article argues the Trump administration is reviving the Reagan-era promise that tax cuts pay for themselves, now justified by AI-driven growth. Treasury Secretary Scott Bessent promises 3% annual growth and Trump claims unprecedented expansion will cover federal debt, while bond markets push 10-year yields to a quarter-century high.

The significance is that AI is being used as fiscal cover for a widening budget gap, with interest on debt at 3.3% of GDP and the Treasury competing with AI superscalers borrowing for datacenters. What remains uncertain is whether AI can deliver sustained productivity gains at the scale assumed, and whether foreign and private demand for Treasuries will stabilize borrowing costs.

Main points

  1. Treasury Secretary Scott Bessent promises 3% annual growth from an AI-laced economy, a rate achieved only twice this century outside the Covid rebound.
  2. The 10-year Treasury yield surged to its highest in almost a quarter century as investors demand more to cover the funding gap.
  3. Interest payments on federal debt are consuming 3.3% of GDP, up from 2.1% average over prior 50 years, while deficit hit 6% of GDP.
  4. Treasury now competes for private capital with AI superscalers borrowing hand over fist to fund datacenter buildout for training agents.

The problem

Relying on AI-driven growth to pay for tax cuts is increasing federal borrowing costs and debt service, with no realistic growth path to close the deficit.

The rundown

The piece traces the return of Reagan-era claims that tax cuts pay for themselves, now reframed with AI. Bessent's 3% growth target and Trump's claim of growing faster than ever are presented as a way to handle $40 trillion in debt, while markets push 10-year yields to a near 25-year high.

It details fiscal math: deficit at 6% of GDP, CBO projection near 7% by 2033, One Big Beautiful Bill Act adding $4.7tn through 2035, and CRFB scenarios requiring 4.4% growth for a 3% deficit by 2036 and 7.2% for balance, assuming temporary cuts become permanent and tariff revenue is lost.

Sources

  1. JournalismThe Guardian2026-10-11

The debate