For more than three years, Artificial Intelligence (AI) has been driving financial markets, yet its macroeconomic productivity effect remains a subject of debate. The simulation results presented in this report illustrate how AI-induced growth could fundamentally enhance US debt sustainability. Due to the progressive tax system, revenues increase disproportionately to economic growth, while expenditures remain demograph-ically inelastic. This fiscal wedge reduces the debt-to-GDP ratio without requiring austerity measures. However, this dy-namic is constrained by technological misinvestments and fiscal countermeasures in the form of tax cuts. Furthermore, monetary policy errors pose a threat if interest rate cuts are predicated on productivity expectations that ultimately fail to materialise. Consequently, AI implicitly represents a wager on the sustainability of US sovereign debt.

The silent wager: artificial intelligence, productivity and US debt sustainability(PDF, 294 KB, accessible)