AI Insights
Can Artificial Intelligence Rescue America’s Fiscal Future? | American Enterprise Institute
Let’s keep the budget math nice and simple. Back in March, the Congressional Budget Office (CBO) projected the national debt climbing to 118 percent of GDP by 2035, up from 100 percent this year. Now tack on another 10 percentage points or so thanks to the budget bill just signed by President Trump. A sub-optimal outcome.
Yet amid this continued drift away from solvency, an intriguing theory has emerged: Artificial intelligence might generate enough added economic oomph to stabilize or even reverse America’s dangerous debt trajectory.
It’s a tempting scenario for politicians to latch onto. If AI is the new electricity, as some enthusiasts suggest, then faster productivity growth could generate a revenue windfall, offset deficits and debt, and lessen the need for painful spending cuts or tax hikes.
Good news: There’s precedent. According to the CBO’s historical data, total factor productivity (TFP) growth—essentially how much more output we get from the same amount of labor and capital, often driven by technology and innovation—averaged 1.6 percent to 1.8 percent annually from the late 19th century through the 2000s. These gains came in transformative waves tied to economy-altering, general-purpose technologies like electricity and the internet.
That historical backdrop makes a recent paper by Douglas Elmendorf, Glenn Hubbard, and Zachary Liscow (EHL) all the more striking—and revealing in its limits. Drawing on Congressional Budget Office scenarios, the authors show that a sustained 0.5 percentage point annual increase in TFP growth—if somehow achieved—would reduce debt held by the public by 12 percentage points of GDP by placing the US economy back on its historical productivity trajectory. Over 30 years, such a TFP acceleration could shrink the debt-to-GDP ratio by 42 points.
But the EHL paper is clear: None of the plausible policy reforms it examines—covering immigration, housing, permitting, R&D, and business taxes—comes close to producing such a TFP growth surge. They conclude that growth-enhancing reforms may help trim future tax hikes or spending cuts but cannot, on their own, stabilize the debt. That half-point TFP boost remains a hypothetical scenario, not a forecast or expectation grounded in current policy options.
That’s where AI enters the picture—not in the EHL paper, but in today’s broader debate. If AI technologies do generate a historic step-change in productivity akin to past GPTs, the fiscal upside could be transformative. But that’s a speculative bet, not yet an empirically grounded plan.
It would be awesome, however. Joe Davis, investment firm Vanguard’s global chief economist and head of investment strategy, assigns a 45–55 percent probability to a “productivity surge” scenario, one where AI becomes economically transformative by the 2030s. Under this outcome, technology keeps inflation in check while higher tax revenues from stronger growth cause the gusher of red ink to stabilize. So kind of a 1990s replay.
Yet prudent fiscal policymaking shouldn’t bank on technological salvation. Davis also sees a 30–40 percent chance of AI disappointing, leaving productivity sluggish while deficits continue climbing.
Yes, the case for AI optimism is reasonable. But it’s not nearly certain enough to bet the public purse on a best-case outcome or even something a bit short of that. Savvy politicians should pursue a dual strategy: embrace growth-friendly AI policies while maintaining fiscal discipline. This means permitting reform, science investment, R&D incentives, high-skilled immigration … and fixing entitlements sooner rather than later.
The AI productivity boom may materialize, but to wager America’s fiscal future on it would be the ultimate tech gamble. A better play: Hope for exponential growth, but budget for linear reality.
AI Insights
Chip Firms in Malaysia Pause Investment Plans on Tariff Angst
Chip firms in Malaysia are holding back on investment and expansion as they await clarity on tariffs from the US, according to Malaysia Semiconductor Industry Association President Wong Siew Hai.
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AI Insights
Witcher Game Maker Among Europe’s Priciest Stocks as Hype Grows
Optimism over a distant video-game launch has turned a Polish studio developing the title into one of Europe’s most richly valued companies, topping even hot sectors such as defense and electrification by one measure.
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AI Insights
Tampa General Hospital, USF developing artificial intelligence to monitor NICU baby’s pain in real-time
TAMPA, Fla. – Researchers are looking to use artificial intelligence to detect when a baby is in pain.
The backstory:
A baby’s cry is enough to alert anyone that something’s wrong. But for some of the most critical babies in hospital care, they can’t cry when they are hurting.
READ: FDA approves first AI tool to predict breast cancer risk
“As a bedside nurse, it is very hard. You are trying to read from the signals from the baby,” said Marcia Kneusel, a clinical research nurse with TGH and USF Muma NICU.
With more than 20 years working in the neonatal intensive care unit, Kneusel said nurses read vital signs and rely on their experience to care for the infants.
“However, it really, it’s not as clearly defined as if you had a machine that could do that for you,” she said.
MORE: USF doctor enters final year of research to see if AI can detect vocal diseases
Big picture view:
That’s where a study by the University of South Florida comes in. USF is working with TGH to develop artificial intelligence to detect a baby’s pain in real-time.
“We’re going to have a camera system basically facing the infant. And the camera system will be able to look at the facial expression, body motion, and hear the crying sound, and also getting the vital signal,” said Yu Sun, a robotics and AI professor at USF.
Yu heads up research on USF’s AI study, and he said it’s part of a two-year $1.2 million National Institutes of Health grant.
He said the study will capture data by recording video of the babies before a procedure for a baseline. Video will record the babies for 72 hours after the procedure, then be loaded into a computer to create the AI program. It will help tell the computer how to use the same basic signals a nurse looks at to pinpoint pain.
READ: These states are spending the most on health insurance, study shows
“Then there’s alarm will be sent to the nurse, the nurse will come and check the situation, decide how to treat the pain,” said Sun.
What they’re saying:
Kneusel said there’s been a lot of change over the years in the NICU world with how medical professionals handle infant pain.
“There was a time period we just gave lots of meds, and then we realized that that wasn’t a good thing. And so we switched to as many non-pharmacological agents as we could, but then, you know, our baby’s in pain. So, I’ve seen a lot of change,” said Kneusel.
Why you should care:
Nurses like Kneusel said the study could change their care for the better.
“I’ve been in this world for a long time, and these babies are dear to me. You really don’t want to see them in pain, and you don’t want to do anything that isn’t in their best interest,” said Kneusel.
MORE: California woman gets married after lifesaving surgery to remove 40-pound tumor
USF said there are 120 babies participating in the study, not just at TGH but also at Stanford University Hospital in California and Inova Hospital in Virginia.
What’s next:
Sun said the study is in the first phase of gathering the technological data and developing the AI model. The next phase will be clinical trials for real world testing in hospital settings, and it would be through a $4 million NIH grant, Sun said.
The Source: The information used in this story was gathered by FOX13’s Briona Arradondo from the University of South Florida and Tampa General Hospital.
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