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If you take the long view, America’s economic outlook is pretty bleak. Like a lot of rich countries, it is overwhelmed by debt it has no plans to reduce. Even more troubling is its aging population, which will reduce growth and leave fewer people to pay all that debt.
There is only one hope: a sudden increase in productivity that will boost growth so much it will pay for everything. As it happens, that is precisely the promise, or one of them, of AI. But what are the chances of it coming true?
The stock market is banking on it, as is Kevin Warsh, President Donald Trump’s nominee to chair the Federal Reserve, who is hoping AI-driven growth could justify a cut in interest rates. It’s a tall order, as net interest outlays are expected to take up 5.4% of US GDP by 2055 — and that’s assuming interest rates lower than they are currently. Meanwhile, America’s fertility rate is about 1.7, below the replacement rate of 2.1. It is even lower in other countries; at this rate, the world population is expected to peak in 2055 and take 2 percentage points off GDP by 2050.
Continue reading the entire piece here at Bloomberg Opinion (paywall)
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Allison Schrager is a senior fellow at the Manhattan Institute and a contributing editor of City Journal.