Can AI Help Pull America Out of Its Debt Crisis?

When U.S. President Donald Trump unveiled his “big, beautiful” new legislative proposal last month, critics quickly pounced, armed with data from the Congressional Budget Office (CBO). Even before Trump’s plan—which includes trillions in tax cuts—the CBO’s baseline forecast showed the federal debt rising from today’s 100% of GDP to 156% by 2055.

But there’s a lesser-known wrinkle: alongside its main forecast, the CBO also published eight alternative scenarios based on different assumptions. Some are grim—if interest rates rise by just 0.05 percentage points more than expected each year, debt could surpass 200% of GDP. Others are more hopeful—if annual productivity growth rises by 0.5 percentage points above the CBO’s expectations (possibly due to AI), debt could level off at around 113% of GDP, even without austerity measures.

This has fueled optimism among some economists and investors. Private equity giant Apollo suggests that “AI could solve America’s fiscal problem.” But is that too good to be true? There are at least three reasons for caution.

1. Innovation’s impact is unpredictable.

History shows that technological revolutions don’t always produce steady productivity gains. Productivity surged about 3% annually between 1995–2005—likely due to digitalization—yet averaged only 1.5% from 2005–2022. In 1987, Nobel laureate Robert Solow famously lamented that computers were “everywhere except in the productivity statistics.”

2. Uneven adoption.

Different industries embrace new technologies at vastly different rates. Oxford Economics warns that AI could widen these gaps, meaning its benefits might not spread evenly across the economy.

3. Social disruption.

Higher productivity can be a double-edged sword. JPMorgan and the IMF estimate AI could replace up to half of U.S. jobs by 2034. Past industrial and agricultural revolutions also displaced workers, but over decades—not within the 7 years JPMorgan predicts for AI’s impact. Without robust policy responses—like universal education or expanded social safety nets—AI’s disruption could spark political and social unrest that undermines growth.

Optimists counter that:

Even modest productivity gains could significantly improve fiscal projections given today’s low baseline.

A small number of large, influential companies adopting AI could drive substantial national growth.

While the current administration hasn’t developed a cohesive AI strategy, future governments might, especially if public pressure mounts.

The bottom line? The CBO’s AI-boosted scenario is worth watching—not only for tech stock investors but also for U.S. Treasury bondholders. Critics see the White House’s faith in an AI-led productivity miracle as a mirage—or, in AI terms, a “hallucination.” But it explains why some in Washington believe debt and inflation can be tamed without painful cuts, and why they’re determined to make the U.S. the primary global beneficiary of AI—potentially at Europe’s expense.

Whether AI truly rescues America’s fiscal future, or merely buys time before a reckoning, will depend on how innovation is managed, adopted, and—crucially—how its social costs are addressed.

Can AI Help Pull America Out of Its Debt Crisis?