Trump Says Certain Levels of Inflation could Help Pay Down U.S. Debt

President Donald Trump has said that certain levels of inflation could help reduce the burden of the US national debt, offering an unusually direct acknowledgment of inflation's potential effect on the real value of government obligations.

President Donald Trump says certain levels of inflation could help reduce the U.S. debt burden.

Trump made the remarks in an interview with Time published in early October.

Asked about the national debt, Trump said that lower interest rates had previously made borrowing cheaper but suggested there were other ways to address the debt.

“You can do it through other means,” Trump said.

“I know I'm the best in the world. The best—I don't want to tell you what those means are, but you can pay off the debt through other means.”

Trump then pointed to economic growth as another way to improve the debt picture.

“But the one thing that you can do is pay it off through growth,” he said.

He subsequently added: “You know, inflation, certain levels of inflation, will also pay off that debt very rapidly. Very rapidly.” The remarks were also reported by Fortune.

Inflation can reduce the real, inflation-adjusted value of existing fixed-rate debt because the dollars used to repay that debt are worth less in purchasing-power terms.

However, inflation does not automatically reduce the government's overall debt burden.

Higher inflation can also push interest rates higher, increase borrowing costs and affect the government's ability to refinance debt.

The scale of the US fiscal challenge is substantial. The national debt has surpassed $40 trillion, while annual federal interest costs have already exceeded $1 trillion.

The Congressional Budget Office has projected that annual net interest costs will continue rising over the coming decade. Trump and Treasury Secretary Scott Bessent have also emphasized economic growth as a way of improving the government's debt-to-GDP position.

A faster-growing economy can reduce the debt ratio if economic growth outpaces the increase in government debt.

Trump's comments do not amount to a formal announcement of an inflation policy.

The Federal Reserve remains responsible for monetary policy, and the president's statement should be understood as a comment on the potential fiscal effect of inflation rather than evidence that the administration has adopted a policy of deliberately increasing inflation.