US’s Reagan-era economic promises return as Trump’s AI-fueled growth fantasy
‘Even if AI supercharged the economy, its impact on the government’s finances would be muted’ Back through political history to the age of Ronald Reagan , Republicans have repeatedly promised the US public that tax cuts would pay for themselves, firing up economic growth and filling the government’s coffers. The promise never really panned out. From the Gipper’s day on, the Republicans’ tax cuts…
Ronald Reagan's promise of tax cuts that pay for themselves and fuel economic growth has resurfaced under President Trump, now infused with the promise of AI-powered prosperity. Despite historical failures, the treasury secretary, Scott Bessent, is counting on an AI-driven economy to achieve an annual growth rate of 3%, a feat achieved only twice in the last century.
Trump's vision of unprecedented growth aims to reduce the federal debt by $40 trillion over time. However, financial markets remain skeptical, with the yield on the 10-year treasury bond reaching a near quarter-century high due to inflationary concerns from recent military actions. Rising bond yields are also driving up borrowing costs for the US government.
The deficit, already at 6% of GDP, is projected to approach 7% by 2033, with no realistic growth scenario able to plug the fiscal gap. AI's potential to drive growth remains uncertain, with even optimistic projections falling short of the 4.4% annual growth needed to balance the budget by 2036. The AI-powered economy may shift economic gains from labor to capital, further straining the government's finances and making it difficult for the government to address its mounting debt.
Written by urgent.news from Guardian Business's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
