Is an AI Recession Coming? | The David Frum Show

The American economy faces a precarious future as a massive "debt balloon" fueled by artificial intelligence investment threatens to trigger a major recession. AI companies have borrowed over $466 billion in 2026 alone to finance data centers, driving up the cost of credit default swaps and signaling deep market anxiety. This private debt crisis is compounded by a federal deficit that has ballooned to $45 trillion, pushing interest rates higher and leaving the government with few tools to intervene. Unlike previous downturns, the dual pressures of persistent inflation and record-level national debt make traditional remedies—such as cutting interest rates or increasing government spending—extremely risky, potentially leading to 1970s-style stagflation. While enthusiasts claim AI-driven growth will eventually service this debt, the current 1.5% GDP growth rate suggests the technology may not generate sufficient revenue quickly enough to prevent a painful period of wealth destruction.