Economist: AI Productivity Dividend Difficult to Resolve Fiscal Constraints, or Only "Buy Time" for High-Debt Economies

Feb. 27 – Economists note that even if artificial intelligence (AI) delivers a productivity boom, it won’t fix major economies’ fiscal dilemmas fundamentally—but it could buy them more time to adjust. OECD economist Filiz Unsal says AI-driven productivity growth could boost job creation, pushing debt levels in OECD nations like the U.S., Germany, and Japan 10 percentage points below current 2036 projections. Even so, those levels will still be far higher than today’s. Idanna Appio, a former New York Fed economist, calls productivity gains “magic” for boosting fiscal dynamics—but adds, “Our fiscal problems are far bigger than what productivity alone can solve.” Analysts highlight population aging as a key challenge. Vanguard’s Global Economic Research chief Kevin Khang says the debt’s root cause is aging populations and linked welfare spending: “Fixing this needs fiscal consolidation; AI only buys us time.” Additionally, tax and spending uncertainties remain: If AI causes job losses, or if profits and capital gains accrue disproportionately, government revenues could miss expectations. If productivity gains push up private-sector wages, government labor costs will also rise. Barclays warns that if an economic downturn hits before the AI boom, markets may react nervously to the fiscal trajectory in advance.