The US fiscal hole has an AI problem at its core
Washington has a multitrillion-dollar fiscal problem. United States Treasury Secretary Scott Bessent's answer, so far, is to look for loose change down the back of the sofa.
The United States faces a multitrillion-dollar fiscal problem, with Treasury Secretary Scott Bessent's efforts to address it proving insufficient. Bessent's recent attempts to curb long-dated US Treasury yields through bond buybacks are seen as a sign rather than a solution, and analysts believe that tackling fraud and waste will not significantly impact the budget shortfall.
High corporate-tax revenues and a planned defense-spending boost, along with mandatory social spending, continue to drive the deficit. The AI investment boom, driven by high and rising corporate profits, is both a source of revenue and a competitor for financing. High servicing costs on the US$40 trillion debt pile and uncertain new revenues from Trump's tariff campaigns further complicate the situation.
The Congressional Budget Office projects debt held by the public to nearly double over the next decade, reaching $56 trillion by 2036. Despite near-historical top-line revenues, corporate-tax revenues have declined due to the AI boom and tax provisions in the One Big Beautiful Bill Act (OBBBA). The Federal Reserve's attempts to shrink its bond holdings may be hindered by tensions with the Treasury, potentially derailing Bessent's plans to reduce servicing costs.
The stakes for AI repayment of trillions spent on its development remain high, and the AI boom's impact on inflation and Treasury's efforts to cap long-term yields pose additional challenges for the Fed.
Written by urgent.news from The Jakarta Post's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
