Could an AI boom transform the budget outlook?

With the budget deficit rebounding over the last year and Congress characterised by partisan dysfunction, the odds of a full-blown fiscal crisis developing over the next decade are rising. The US faced a similarly bleak fiscal outlook in the early 1990s but, partly thanks to the ICT-related surge in GDP growth, it ended that decade with the budget in surplus. The AI boom we expect over the next decade could deliver a similar budget miracle, although only if Congress takes advantage of that strong backdrop to undertake a significant fiscal tightening.