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
Ramp Debuts AI Agents Designed for Company Controllers
Financial operations platform Ramp has debuted its first artificial intelligence (AI) agents.
AI Insights
How automation is using the latest technology across various sectors
A majority of small businesses are using artificial intelligence and finding out it can save time and money.
Artificial Intelligence and automation are often used interchangeably. While the technologies are similar, the concepts are different. Automation is often used to reduce human labor for routine or predictable tasks, while A.I. simulates human intelligence that can eventually act independently.
“Artificial intelligence is a way of making workers more productive, and whether or not that enhanced productivity leads to more jobs or less jobs really depends on a field-by-field basis,” said senior advisor Gregory Allen with the Wadhwani A.I. center at the Center for Strategic and International Studies. “Past examples of automation, such as agriculture, in the 1920s, roughly one out of every three workers in America worked on a farm. And there was about 100 million Americans then. Fast forward to today, and we have a country of more than 300 million people, but less than 1% of Americans do their work on a farm.”
A similar trend happened throughout the manufacturing sector. At the end of the year 2000, there were more than 17 million manufacturing workers according to the U.S. Bureau of Labor statistics and the Federal Reserve Bank of St. Louis. As of June, there are 12.7 million workers. Research from the University of Chicago found, while automation had little effect on overall employment, robots did impact the manufacturing sector.
“Tractors made farmers vastly more productive, but that didn’t result in more farming jobs. It just resulted in much more productivity in agriculture,” Allen said.
ARTIFICIAL INTELLIGENCE DRIVES DEMAND FOR ELECTRIC GRID UPDATE
Researchers are able to analyze the performance of Major League Baseball pitchers by using A.I. algorithms and stadium camera systems. (University of Waterloo / Fox News)
According to our Fox News Polling, just 3% of voters expressed fear over A.I.’s threat to jobs when asked about their first reaction to the technology without a listed set of responses. Overall, 43% gave negative reviews while 26% reacted positively.
Robots now are being trained to work alongside humans. Some have been built to help with household chores, address worker shortages in certain sectors and even participate in robotic sporting events.
The most recent data from the International Federation of Robotics found more than 4 million robots working in factories around the world in 2023. 70% of new robots deployed that year, began work alongside humans in Asia. Many of those now incorporate artificial intelligence to enhance productivity.
“We’re seeing a labor shortage actually in many industries, automotive, transportation and so on, where the older generation is going into retirement. The middle generation is not interested in those tasks anymore and the younger generation for sure wants to do other things,” Arnaud Robert with Hexagon Robotics Division told Reuters.
Hexagon is developing a robot called AEON. The humanoid is built to work in live industrial settings and has an A.I. driven system with special intelligence. Its wheels help it move four times faster than humans typically walk. The bot can also go up steps while mapping its surroundings with 22 sensors.
ARTIFICIAL INTELLIGENCE FUELS BIG TECH PARTNERSHIPS WITH NUCLEAR ENERGY PRODUCERS
Researchers are able to create 3D models of pitchers, which athletes and trainers could study from multiple angles. (University of Waterloo)
“What you see with technology waves is that there is an adjustment that the economy has to make, but ultimately, it makes our economy more dynamic,” White House A.I. and Crypto Czar David Sacks said. “It increases the wealth of our economy and the size of our economy, and it ultimately improves productivity and wages.”
Driverless cars are also using A.I. to safely hit the road. Waymo uses detailed maps and real-time sensor data to determine its location at all times.
“The more they send these vehicles out with a bunch of sensors that are gathering data as they drive every additional mile, they’re creating more data for that training data set,” Allen said.
Even major league sports are using automation, and in some cases artificial intelligence. Researchers at the University of Waterloo in Canada are using A.I. algorithms and stadium camera systems to analyze Major League Baseball pitcher performance. The Baltimore Orioles joint-funded the project called Pitchernet, which could help improve form and prevent injuries. Using Hawk-Eye Innovations camera systems and smartphone video, researchers created 3D models of pitchers that athletes and trainers could study from multiple angles. Unlike most video, the models remove blurriness, giving a clearer view of the pitcher’s movements. Researchers are also exploring using the Pitchernet technology in batting and other sports like hockey and basketball.
ELON MUSK PREDICTS ROBOTS WILL OUTSHINE EVEN THE BEST SURGEONS WITHIN 5 YEARS
Overview of a PitcherNet System graphics analyzing a pitcher’s baseball throw. (University of Waterloo)
The same technology is also being used as part of testing for an Automated Ball-Strike System, or ABS. Triple-A minor league teams have been using the so-called robot umpires for the past few seasons. Teams tested both situations in which the technology called every pitch and when it was used as challenge system. Major League Baseball also began testing the challenge system in 13 of its spring training parks across Florida and Arizona this February and March.
Each team started a game with two challenges. The batter, pitcher and catcher were the only players who could contest a ball-strike call. Teams lost a challenge if the umpire’s original call was confirmed. The system allowed umpires to keep their jobs, while strike zone calls were slightly more accurate. According to MLB, just 2.6% of calls were challenged throughout spring training games that incorporated ABS. 52.2% of those challenges were overturned. Catchers had the highest success rate at 56%, followed by batters at 50% and pitchers at 41%.
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Triple-A announced last summer it would shift to a full challenge system. MLB commissioner Rob Manfred said in June, MLB could incorporate the automated system into its regular season as soon as 2026. The Athletic reports, major league teams would use the same challenge system from spring training, with human umpires still making the majority of the calls.
Many companies across other sectors agree that machines should not go unsupervised.
“I think that we should always ensure that AI remains under human control,” Microsoft Vice Chair and President Brad Smith said. “One of first proposals we made early in 2023 was to insure that A.I., always has an off switch, that it has an emergency brake. Now that’s the way high-speed trains work. That’s the way the school buses, we put our children on, work. Let’s ensure that AI works this way as well.”
AI Insights
Artificial intelligence predicts which South American cities will disappear by 2100
The effects of global warming and climate change are being felt around the world. Extreme weather events are expected to become more frequent from droughts to floods wreaking havoc on communities as well as blistering heatwaves and bone-chilling cold snaps.
While these will affect localized areas temporarily, one inescapable consequence of the increasing temperatures for costal communities around the globe is rising sea levels. This phenomenon will have even more far-reaching effects, displacing hundreds of millions of people as coastal communities are inundated by water, some permanently.
These South American cities will disappear
While there is no doubt that sea levels will rise, predicting exactly how much they will in any given location is a tricky business. This is because oceans don’t rise uniformly as more water is added to the total volume.
However, according to models from the Intergovernmental Panel on Climate Change (IPCC) the most optimistic scenario is between 11 inches and almost 22 inches, if we can curb carbon emissions and keep the temperature rise to 1.5C by 2050. The worst case scenario would be 6 and a half feet by the end of the century.
Caracol Radio in Colombia asked various artificial intelligence systems which cities in South America would disappear due to rising sea levels within the next 200 years. These are the ones most at risk according to their findings:
- Santos, Brazil
- Macaió, Brazil
- Floreanópolis, Brazil
- Mar de Plata, Argentina
- Barranquilla, Colombia
- Lima, Peru
- Cartagena, Colombia
- Paramaribo, Surinam
- Georgetown, Guayana
The last two will be underwater by the end of the century according to modeling done by the non-profit Climate Central along with numerous other communities in low-lying coastal areas.
Their simulator only makes forecasts until the year 2100 as the above image shows for the areas along the northeastern coast of South America including Paramaribo and Georgetown.
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