AI growth may ease U.S. debt pressure, but Brookings sees no full fix
A Brookings paper says productivity gains from AI could cut deficits, but higher costs tied to AI would likely absorb much of the benefit.
By Maya Lindqvist · Senior Technology Correspondent
3 min read
Artificial intelligence could improve the U.S. budget outlook, but it is unlikely to erase the country’s debt problem, according to a new Brookings Institution paper. The finding challenges a view promoted by Elon Musk, who has argued that broad use of AI and robotics may be the best answer to the federal debt burden.
Musk, the chief executive of Tesla and SpaceX, said on the Nikhil Kamath podcast last year that AI and robotics at scale were “pretty much the only thing” likely to solve the U.S. debt crisis. U.S. debt stood at about $39.5 trillion at the time referenced by Fortune.
The Brookings study, written by Ben Harris, Neil R. Mehrotra and William Overcash, says faster growth from AI could reduce fiscal deficits in a meaningful way. The authors also conclude that even upbeat assumptions do not show AI closing the gap by itself.
The case for optimism rests on the scale of investment and the possibility that AI can lift productivity, according to the Brookings authors. They wrote that heavy capital spending and unused productivity potential make it understandable that some observers see AI as a fiscal breakthrough.
Other data cited in the discussion point in the same direction. BNP Paribas raised its near-term U.S. growth estimates this year after AI-related capital spending announcements came in stronger than the bank had expected. Fortune reported that BNP Paribas still expected full-year 2026 growth of 2.6%, while its markets team lifted its fourth-quarter-over-fourth-quarter estimate to 2.6% from 2.1%.
A June study from the Centre for Economic Policy Research also found early signs of productivity gains from AI adoption. CEPR estimated AI-attributed labor productivity growth for 2026 at 1.8%, with gains above 2% in high-skill services and finance.
Brookings says AI could also affect major spending categories. The Congressional Budget Office estimated 2026 outlays of $674 billion for Medicare and $472 billion for Medicaid, and the Brookings authors wrote that AI could lower costs if it reduces inefficiency in health care.
Higher productivity could lift tax receipts as well, according to Brookings. The authors said productivity growth usually raises revenue by expanding the tax base, with the long-run response close to proportional in many advanced and emerging economies.
Why the gains may not be enough
The Brookings paper says a standard productivity surge would improve the fiscal picture sharply. In that scenario, the authors found that primary deficits would turn negative, the yearly deficit would drop by more than $2 trillion, and the deficit as a share of gross domestic product would fall by nearly 5 percentage points.
AI could bring costs that offset part of that improvement, according to the paper. If AI lowers health costs and lengthens lives, Brookings says older Americans could draw Social Security benefits for longer periods.
The authors also warn that labor disruption could raise unemployment and increase reliance on income support. Brookings says defense costs could climb as governments compete over AI capabilities.
The study points to tax and interest-rate risks, too. Brookings says AI could shift national income away from heavily taxed wages and toward less-taxed forms of capital income and corporate profits, while stronger investment demand could push interest rates higher and increase federal interest costs.
Brookings concludes that these factors would cut into AI’s fiscal benefits. In the most favorable version examined by the authors, the offsetting effects reduce the potential deficit improvement by half; in the least favorable version, they erase about two-thirds of it.
This story draws on original reporting from Fortune.