Arithmetic OOD Failure Unfolds in Stages in Minimal GPTs

Abstract: Arithmetic benchmarks are often reduced to a single held-out score, but that score can conflate qualitatively different failures. We study a controlled minimal GPT trained on exhaustive 2-digit addition, where all local digit transitions are already present in training, and ask why 3-digit generalization still fails. The failure is staged. First, there is a layout barrier: a learned absolute-position model collapses under a pure 3-digit layout shift, and mixed-layout exposure is the only intervention that materially weakens this barrier. Second, after layout repair, the hundreds position behaves like a carry flag rather than a semantic hundreds digit; targeted carry probes reverse the relevant logit margin, whereas a matched extra-data control does not. Third, after carry repair, the main remaining bottleneck is conditional recomposition: high-conditioned tail data outperforms a matched control, high-only data, and tail-only data on all true-3-digit suites, and the same ordering reappears in a larger 2-layer bridge experiment. The residual errors after recomposition are then overwhelmingly tens-only, and a separate 10-seed late-stage study shows that a sign-aware tens repair raises exact match on the hardest thousands-carry suite from 0.664 to 0.822. We therefore provide an experimentally testable decomposition of arithmetic OOD failure into layout, carry-semantics, recomposition, and late tens-residual stages.