Can AI Outrun America’s Deficit Problem?

Kevin Hassett, Director of the National Economic Council, outlines a bullish outlook for the U.S. economy centered on productivity gains from artificial intelligence and federal workforce reductions. A reduction of over 300,000 federal employees is projected to save $500 billion over a decade, with displaced workers typically earning $30,000 more in the private sector. Current AI adoption mirrors the 1990s internet boom, where hedonic adjustments to price deflators masked significant GDP growth; similarly, today’s AI advancements offer massive value increases despite stable subscription costs. While the federal deficit remains a concern, particularly with rising yields, U.S. household net worth has increased by approximately $90 trillion over the last decade, even when accounting for national debt. Labor market data suggests that while firms failing to adopt AI face risks, those utilizing the technology see significant increases in sales, employment, and wages.