Brookings: AI Could Cut U.S. Deficit by $2.2T by 2036, but Five Factors May Erase Over Half Gains

According to a working paper released by Brookings Institution and Federal Reserve economists on July 15, U.S. artificial intelligence productivity improvements could reduce the annual fiscal deficit from roughly 6% of GDP to 2%, cumulative savings of approximately $2.2 trillion by 2036. However, five headwinds—including extended lifespans, changing tax base structure, labor market pressures, rising borrowing costs, and increased defense spending—could offset more than half of these gains, limiting actual fiscal improvement to roughly $1 trillion or less.

The research also references the 1990s internet revolution, which boosted stock markets and economic activity, increasing U.S. tax revenue by 2.2% of GDP and helping reduce the fiscal deficit by 60% between 1992 and 2002. Yet those gains proved temporary, disappearing within a decade as the tech bubble burst.