"Hope for the best, plan for the worst." This concise adage, offered by Jared Bernstein, former Chairman of the Council of Economic Advisers, encapsulates his pragmatic view on the role of artificial intelligence in mitigating the nation's burgeoning deficit. Speaking on CNBC's 'Money Movers,' Bernstein engaged with the hosts on the health of the U.S. consumer, the Treasury's debt financing strategies, and the speculative notion that AI could be the economic panacea.
Bernstein highlighted a critical economic indicator often overlooked: inflation-adjusted consumer spending. He noted that this vital measure "has actually been flat December to May," indicating a potential slowdown despite a robust labor market. This stagnation in real consumer spending, which typically fuels 70% of U.S. GDP, is a significant concern, especially when coupled with declining inflation and rising real wages, factors that historically buoy consumer confidence.
The conversation then shifted to the Treasury's formidable task of financing the national debt. Bernstein observed that the current administration "has a tremendous financing job to do... to borrow enough to finance the federal debt, which of course their budget bill has, you know, really very significantly increased." This massive borrowing requirement poses a genuine risk of pushing up interest rates, which would further exacerbate the debt burden. For every point the debt-to-GDP ratio increases, interest rates tend to rise by about two basis points, creating a compounding challenge.
Amidst these fiscal anxieties, the idea of AI emerging as a "savior" to boost productivity and offset deficit pressures has gained traction in some circles. However, Bernstein remains skeptical. He asserted, "Historically, technological changes have not had anywhere near the kind of dramatic productivity-enhancing effects folks are claiming." While acknowledging AI's potential, he cautioned against relying on such speculative gains for federal budgeting, deeming it "pretty reckless."
For founders, VCs, and AI professionals, Bernstein's commentary serves as a sober reminder that technological advancements, while transformative, are not guaranteed solutions to complex macroeconomic challenges. The underlying fundamentals of consumer health and fiscal responsibility remain paramount. A realistic assessment of AI's economic impact, rather than an overly optimistic one, is crucial for both national policy and private sector strategy.
