“Unintended Consequences provides a provocative interpretation of the causes of the global financial crisis and the policies needed to return to rapid growth. Whether you agree or not, this analysis is well worth reading.” - Nouriel Roubini, New York University; Chairman, Roubini Global Economics
“Unintended Consequences offers deep and well-argued analyses on almost every issue.” - The New York Times
“…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
“…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
“…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
“…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
“…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
“Unintended Consequences is far smarter and more thought-provoking than most economics written for the general public” - Greg Mankiw, Harvard University, Former Chairman of the Council of Economic Advisors
“…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
“…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
“There are an amazing number of good ideas and interesting points made in Unintended Consequences. The thinking underlying it, and the obvious depth of understanding of the author, are very impressive.” - Steven Levitt, coauthor of Freakonomics; 2004 John Bates Clark Medal
“Unintended Consequences is full of substance, it is one of the must-read books of the year, and once I finish it I will be giving it a second read through right away.” - Tyler Cowen, Professor, George Mason University
AI Summary.The authors estimate roughly 57 gigawatts of operating US data center capacity against a planned development pipeline of about 509 gigawatts, which is not a completion forecast since projects may be delayed, scaled back, or abandoned. Their central scenario has 182.8 gigawatts of added capacity becoming operational through 2032, 117.2 gigawatts completed later, and 226.9 gigawatts never completed.
Stijn Van NieuwerburghBrookings Papers on Economic Activity
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Stijn Van Nieuwerburgh projects ~$10.3T will be spent on the AI buildout over 2025–2032, averaging 3.63% of GDP. He estimates 2/3 of that spending reflects IT equipment and one-third real estate and associated power infrastructure.
How much of the planned data center pipeline gets built?
Core argument: Using Cleanview project-level data from July 2026, the authors estimate roughly 57 GW of operating U.S. data center capacity against a planned development pipeline of roughly 509 GW, which they stress is not a completion forecast.
The required investment is enormous. A representative 200 MW AI training campus costs roughly $8.2 billion, about two-thirds of which reflects IT equipment and one-third the real estate and associated power infrastructure. We estimate that 183 GW is completed by 2032 with a further 118 GW completed after 2032. This pipeline will trigger about $10.3 trillion dollars of investment over 2025–2032. At an average of 3.63% of GDP per year, the projected buildout would be larger relative to the economy than the major U.S. canal, railroad, electrification, highway, and telecommunications investment booms. It would double the electricity consumption of the entire U.S. residential sector.
Takeaways by Macro Roundup® AI
Using Cleanview project-level data from July 2026, the authors estimate roughly 57 GW of operating U.S. data center capacity against a planned development pipeline of roughly 509 GW, which they stress is not a completion forecast.
The authors’ central scenario allocates the announced pipeline so that 182.8 GW of additional U.S. capacity becomes operational during 2025–32, including 19.0 GW tied to projects already operational in 2025 or 2026.
The authors’ scenario has 117.2 GW of planned data center capacity completed after 2032 and 226.9 GW never completed, applying lower realization rates to more distant and less fully documented projects.
Related Articles:
Rear Window— Major cloud providers posted annual revenue growth of 37% at Amazon Web Services, 43% at Microsoft Azure and 82% at Google Cloud, with rising revenue backlogs of $514bn and $496bn respectively at Google Cloud and Amazon Web Services. Earnings growth appears highly contingent on continued hyperscaler capital spending and research, which rose from $460bn to $870bn.
AI Set to be Largest CapEx Cycle Ever … and Soon Majority Externally Financed— Hyperscaler and data-center investment is tracking toward $1.5tn annually by 2030, which in real terms would exceed the 2005-06 housing boom, the 1990s fiber peak, and the 1882 railroad peak combined. External debt and equity are projected to fund close to 90% of the buildout, making it dependent on credit markets.
The Summer I Turned Pretty— A warning sign in a boom cycle is when companies closest to final demand weaken while capital spending beneficiaries keep thriving, as when telecom operators' shares rolled over while communications equipment stocks kept rising. Semiconductor stock prices and free cash flow are soaring while large cloud providers' shares stagnate and their free cash flow plummets.
AI Summary.Estimated sustainable government net debt limits across 25 OECD countries average 234% of GDP under historical interest-rate and growth assumptions (221% for the US) and 214% under current rates (186% for the US). If interest rates rise systematically with debt, the model yields no solution for the US, UK, France, Italy, Greece, and Japan.
Mark WarshawskyAmerican Enterprise Institute
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Warshawsky calculates the US has a sustainable net debt limit, “the lowest level of debt at which a country can no longer service its sovereign debt and must effectively default,” of 186% of GDP, which he forecasts will be reached in ~15 years under current policy and economic conditions.
How high can government debt rise before it becomes unsustainable?
Core argument: Sustainable net debt limits across the US and 24 other OECD countries average 234% of GDP under historical interest rate–growth differentials and 221% for the US, falling to 214% on average and 186% for the US under current, higher interest rates and growth.
Using historical, current, and dynamic interest rate-to-economic growth differentials, countries’ sustainable debt limits are calculated on a net of central bank holdings of government debt basis. Sustainable net debt limits average 234% of GDP for these countries assuming historical rates and economic growth (221% for the US), 214% assuming (higher) current interest rates and economic growth (186% for the US). If, however, interest rates were to rise systematically with debt according to conservative assumptions, there is no model solution for France, Greece, Japan, Italy, the UK, and the US, given their current high debt levels; the average sustainable limit is 178% for the other countries. A reasonable conclusion to draw for the US is that the fiscal path under current policy and trends with rising interest rates is not sustainable in the short to intermediate term. A major fiscal consolidation package will be needed soon, as interest rates rise, unless significantly higher inflation or capital controls will result.
Takeaways by Macro Roundup® AI
Sustainable net debt limits across the US and 24 other OECD countries average 234% of GDP under historical interest rate–growth differentials and 221% for the US, falling to 214% on average and 186% for the US under current, higher interest rates and growth.
If interest rates rise systematically with debt under conservative assumptions, the model yields no solution for France, Greece, Japan, Italy, the UK, and the US given their current high debt levels, while the average limit for the remaining countries is 178%.
A reasonable conclusion is that the US fiscal path under current policy and trends with rising interest rates is not sustainable in the short to intermediate term, and a major fiscal consolidation package will be needed soon unless significantly higher inflation or capital controls result.
Related Articles:
Soaring Bond Yields, Gaping Deficits and Towering Debts: What Could Go Wrong?— An analysis of 22 rich countries estimates that if each refinanced its entire debt at current five-year bond yields, Britain would need the largest primary surplus to stabilize its debt-to-GDP ratio, about 1.5%, followed by Italy at 1.4%, France at 1.2% and America at 1%.
How Might Fiscal Policy Respond to the Rise of Artificial Intelligence?— The Congressional Budget Office estimates that a permanent 0.5 percentage point increase in annual productivity growth would lower publicly held federal debt after 30 years by 39% of GDP, offsetting roughly half the projected rise from 101% of GDP to 175%. Higher revenue and slower spending growth outweigh higher interest costs.
Can AI Avert the Impending Federal Budget Crisis?— U.S. GDP per capita, about $87,000, is projected to reach $102,000 by 2035 with 1.8% annual productivity growth, or $110,000 with 2.7% growth. Because the healthcare sector has been slow to adopt AI, health spending is projected to rise from 18.3% of GDP to 21% under slower growth and 21.7% under faster growth.
AI Summary.An analysis of more than 31,000 global venture capital deals finds 62% lost money and over half lost 50–100% of invested capital, though the distribution of returns has much fatter tails than buyouts or public equities. Venture funds averaged a public market equivalent ratio of about 1.4, indicating returns above public markets.
Michael Mauboussin and Dan CallahanMorgan Stanley
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Btw the mid-90s and 2018, 62% of global venture capital investments lost money, and more than half of the deals lost 50–100% of invested capital. Yet US VC returned ~40% higher mean wealth btw 1984 and 2020 than a parallel investment path in the S&P 500.
Do most venture deals lose money while funds outperform public markets?
Core argument: Across more than 31,000 global venture capital deals from the mid-1990s to 2018, 62% lost money and over half of all deals lost 50–100% of invested capital, measured as multiples of invested capital.
Exhibit 8 shows in excess of 31,000 observations of returns, measured as multiples of invested capital at the beginning of the period, for global venture capital deals. These results are from the mid-1990s to 2018. 62% lost money and more than one-half of all deals lost 50 to 100% of invested capital. The offset is that the tails are much fatter than those for buyouts or public equities. Public market equivalent (PME) is generally reflected as a ratio between private equity and public market returns. A ratio above 1 reveals relative outperformance and below 1 means underperformance. Here’s an example of how PME works. Say a fund drew $200 million from its investors in January 2021 and paid out $470 million in December 2025. An investor could have invested the $200 million in the S&P 500, which returned $392 million over the same period. The PME would be 1.2 ($470/$392). For venture funds, the average over [1984-2020] was about 1.4.
Takeaways by Macro Roundup® AI
Across more than 31,000 global venture capital deals from the mid-1990s to 2018, 62% lost money and over half of all deals lost 50–100% of invested capital, measured as multiples of invested capital.
Venture capital return distributions have much fatter tails than those of buyouts or public equities, offsetting the majority of deals that lose money.
Public market equivalent, the ratio of private equity returns to public market returns, averaged about 1.4 for venture funds from 1984 to 2020, with a ratio above 1 reflecting relative outperformance.
Related Articles:
Killer Incentives: Status Competition and Pilot Performance during World War II— Analysis of over 5,000 German World War II fighter pilots finds that public peer recognition was associated with higher victory scores among skilled pilots without higher mortality, while average pilots gained little in victories but died at higher rates. The authors conclude status-based awards can have uneven effects in high-risk settings.
The Deep End: 2025 Alternative Investments Review— In venture capital, only consistently investing with top-quartile managers outperformed the S&P 500, while the median manager at best matched public equity markets and fourth-quartile managers destroyed value relative to equities. Fees are part of the issue: an 11.7% annualized NASDAQ 100 return falls to 7.4% under a 2%/20% fee structure.
One Hundred Years in the U.S. Stock Markets— Over a century, U.S. publicly traded stocks generated roughly $91tn in shareholder wealth enhancement, with returns strongly positively skewed and dominated by a relatively small number of high-performing firms. Because most possible outcomes fall below the mean in a skewed distribution, the authors argue financial planning should focus on median outcomes or the full distribution.
AI Summary.US Treasuries erased nearly all gains that followed the Treasury Department's surprise decision to increase buybacks of longer-dated bonds, with the 30-year yield rising above 5.27% and the 10-year touching 4.71%. The reversal signals the move has done little to ease concern about surging government debt.
Michael MacKenzie and Alice GledhillBloomberg
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The 30-year yield rose ~7bps to as much as 5.27%, and the 10-year yield hit 4.71%, erasing “almost all” the gains that followed Treasury’s surprise decision to increase buybacks of longer-dated bonds.
Do bigger bond buybacks ease concerns about surging government debt?
Core argument: The US 30-year Treasury yield rose more than seven basis points to as much as 5.27%, returning to where it stood just ahead of the Treasury Department's buyback announcement, before paring the gain.
US Treasuries erased almost all of the gains that followed the Trump administration’s surprise decision to increase buybacks of longer-dated bonds, signaling the move has done little to alleviate the angst about the surging government debt that has pushed some yields to the highest in close to two decades. The 30-year yield on Thursday rose over seven basis points to as much as 5.27%, where it was just ahead of the US Treasury Department’s announcement early Wednesday, before paring the gain. The 10-year yield touched 4.71%, just shy of its highest level since early 2025.
Takeaways by Macro Roundup® AI
The US 30-year Treasury yield rose more than seven basis points to as much as 5.27%, returning to where it stood just ahead of the Treasury Department's buyback announcement, before paring the gain.
US Treasuries erased almost all of the gains that followed the Trump administration's surprise decision to increase buybacks of longer-dated bonds, suggesting the move has done little to alleviate angst about surging government debt.
The US 10-year yield touched 4.71%, just shy of its highest level since early 2025, as angst over government debt pushed some yields to the highest in close to two decades.
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Bessent Boosts Debt Buybacks After Climb in Treasury Yields— The US Treasury announced it is at least doubling the size of its liquidity support buyback operations for government debt maturing in 10 to 30 years, following long-dated yields reaching their highest levels in years. Yields on the longest bond fell nearly 10 basis points to 5.185%.
The Coming Great Repression?— Across countries and over time, higher public debt burdens are associated with lower relative returns on government bonds, the opposite of standard risk-premium predictions. The authors estimate financial repression—making banks captive bond buyers and loading them with low-return reserves—contributed 90.7 percentage points of GDP to Britain's postwar debt reduction, versus 20.3 from surprise inflation.
The United States Capital Structure— Because Social Security and Medicare benefits are politically untouchable, retirees effectively hold the most senior claim on US government resources while Treasury bondholders hold the riskiest one. On this argument, bondholders absorb adverse fiscal shocks through surprise inflation, financial repression, or both.
AI Summary.Only 20% of global household wealth growth came from net new investment in real assets such as machinery, housing, infrastructure and intellectual property, down from a 30% average over the prior quarter century. Nearly 60% came from asset prices rising faster than inflation and negative net worth in other sectors.
Rebecca Anderson, Jan Mischke, Arvind Govindarajan, Sylvain Johansson, et al.McKinsey
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A McKinsey analysis finds global wealth is increasingly composed of “paper wealth,” driven by the rise of US equity values to 2.4x the book value of net corporate assets, and the debt of Chinese corporations, which grew to 80% of their real asset value.
Is household wealth growth driven more by asset prices than investment?
Core argument: Only 20% of global household wealth growth in 2025 came from net new investment in real assets such as machinery, homes, infrastructure, and intellectual property less depreciation, versus a 30% average over 2000–2024.
In 2025, global wealth growth was driven to a greater extent by paper wealth, or nominal asset value growth decoupled from the real economy. Only 20% of household wealth growth was based on net new investment (real assets including machinery and equipment, homes and buildings, infrastructure, and intellectual property, less depreciation), compared to 30% on average from 2000 to 2024. Nearly 60% came from asset price growth above and beyond general inflation and negative net worth positions from other sectors. [For example, this includes equity value growth above net assets for corporations as well as government bonds greater than the book value of government assets]. This was a marked increase over the average from 2000 to 2024, when paper gains drove one-third of global wealth growth.
Takeaways by Macro Roundup® AI
Only 20% of global household wealth growth in 2025 came from net new investment in real assets such as machinery, homes, infrastructure, and intellectual property less depreciation, versus a 30% average over 2000–2024.
Nearly 60% of 2025 global household wealth growth came from asset price gains above general inflation plus negative net worth positions in other sectors, compared with about one-third on average over 2000–2024.
Paper wealth, meaning nominal asset value growth decoupled from the real economy, drove a greater share of global wealth growth in 2025, including equity values above corporate net assets and government bonds exceeding the book value of government assets.
Related Articles:
The Next Crash: Why This Time Might Not Be Different— The "excess CAPE yield" — the gap between cyclically adjusted earnings yields on stocks and inflation-adjusted Treasury bond yields — stands at 1.4%, far below its long-run average of 4.7%. Historically, a low excess yield has been associated with poor subsequent 10-year excess returns on stocks, though it does not reliably predict an imminent crash.
The Summer I Turned Pretty— A warning sign in a boom cycle is when companies closest to final demand weaken while capital spending beneficiaries keep thriving, as when telecom operators' shares rolled over while communications equipment stocks kept rising. Semiconductor stock prices and free cash flow are soaring while large cloud providers' shares stagnate and their free cash flow plummets.
One Hundred Years in the U.S. Stock Markets— Over a century, U.S. publicly traded stocks generated roughly $91tn in shareholder wealth enhancement, with returns strongly positively skewed and dominated by a relatively small number of high-performing firms. Because most possible outcomes fall below the mean in a skewed distribution, the authors argue financial planning should focus on median outcomes or the full distribution.
AI Summary.The US 30-year Treasury yield has traded above 5% for its longest stretch since 2007, with roughly 19% of trading sessions above that level, reflecting investor concerns about a growing debt pile and sticky inflation.
Michael MacKenzie and Ye XieBloomberg
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So far this year, the US 30-year has traded beyond 5% for 27 days ~19% of trading days, the most since 2007.
Are rising long-term bond yields signaling worries about debt and inflation?
Core argument: The US 30-year Treasury yield has traded above 5% for 27 days this year, about 19% of all sessions, the most since 2007, according to data compiled by Bloomberg.
The US 30-year bond yield is trading above 5% for the longest stretch since the dawn of the financial crisis, echoing investor concerns about a growing debt pile and sticky inflation. So far this year, the 30-year has traded beyond 5% for 27 days — or about 19% of all sessions, the most since 2007, according to data compiled by Bloomberg. It traded above that level for 50 days that year.
Takeaways by Macro Roundup® AI
The US 30-year Treasury yield has traded above 5% for 27 days this year, about 19% of all sessions, the most since 2007, according to data compiled by Bloomberg.
The 30-year yield traded above 5% for 50 days in 2007, according to data compiled by Bloomberg.
The 30-year yield's longest run above 5% since the dawn of the financial crisis echoes investor concerns about a growing US debt pile and sticky inflation.
Related Articles:
How Sky-High Deficits Threaten the Bond Market— The gap between 30-year and 10-year US Treasury yields has widened to 0.5 percentage points from 0.2, which suggests investors are more wary of future deficits, inflation, or random shocks. Dealers now buy only 10–15% of Treasurys at auction, down from 40–50% previously, according to JPMorgan Chase data.
How Might Fiscal Policy Respond to the Rise of Artificial Intelligence?— The Congressional Budget Office estimates that a permanent 0.5 percentage point increase in annual productivity growth would lower publicly held federal debt after 30 years by 39% of GDP, offsetting roughly half the projected rise from 101% of GDP to 175%. Higher revenue and slower spending growth outweigh higher interest costs.
The Budget and Economic Outlook: 2026 to 2036— The Congressional Budget Office projects the federal deficit will grow from $1.9tn (5.8% of GDP) to $3.1tn (6.7%) over a decade, above the 3.8% averaged over the past 50 years, with rising net interest costs driving much of the increase. Federal debt held by the public is projected to rise from 101% to 120% of GDP.
AI Summary.US after-tax non-financial corporate profit margins remain elevated by historical standards, estimated at 7.6% versus a post-1949 high of 8.2%, while employee pay as a share of non-financial corporate gross value added has fallen from 66% to 56%. One argument holds that subdued demographic growth leads companies to prioritize maximizing margins over expanding capacity.
Tan Kai XianGavekal
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In Q1 2026, US after-tax non-financial margins were estimated at 7.6%, just short of the post-1949 high of 8.2% in Q2 of 2021. Tan Kai Xian argues US corporate profits may not mean revert due to increased automation as the workforce shrinks relative to the economy.
Does slower population growth push companies to maximize profit margins?
Core argument: US after-tax non-financial corporate profit margins were estimated at 7.6% in the first quarter of 2026, just below the post-1949 high of 8.2% set in the second quarter of 2021.
US corporate profit margins remain elevated by historical standards. In the first quarter of 2026, US after-tax non-financial margins were estimated at 7.6%, only just below the post-1949 high of 8.2% reached in the second quarter of 2021. The second-quarter earnings season has also begun strongly, according to FactSet data. Employee remuneration as a share of gross value added for US non-financial corporate businesses declined from 66% in the fourth quarter of 2001 to 56% in the first quarter of 2026. [Will Denyer argued] "When strong demographic growth powers rapid demand growth, companies concentrate on expanding capacity and sales—on growing along with the growing market. That means they tend to focus less on their margins—less on getting the biggest profit they can out of every dollar of revenues. In contrast, when demographic growth is subdued, and hence there is less potential demand growth, companies are not so bent on expanding capacity as fast as they can, and are far more interested in squeezing the maximum possible margin from every dollar of sales."
Takeaways by Macro Roundup® AI
US after-tax non-financial corporate profit margins were estimated at 7.6% in the first quarter of 2026, just below the post-1949 high of 8.2% set in the second quarter of 2021.
Employee remuneration as a share of gross value added for US non-financial corporate businesses fell from 66% in the fourth quarter of 2001 to 56% in the first quarter of 2026.
Will Denyer argued that strong demographic growth leads companies to prioritize expanding capacity and sales, while subdued demographic growth pushes them to squeeze the maximum possible margin from every dollar of sales.
Related Articles:
The Record Divide Between Corporate Profits and Worker Pay— Labor's share of gross domestic income fell to 51%, the lowest since records began in 1947, while profits' share rose to 12.1%, the highest since 1950. Inflation-adjusted hourly wages are up 3% since the end of 2019, compared with a 50% rise in profits.
The Post‑COVID Decline in the Labor Share— The share of US national income paid to workers fell 1.6 percentage points below its pre-pandemic level, reaching a post-war low. The authors find this decline stems mainly from changes within industries rather than shifts in activity across sectors, following cyclical patterns seen in earlier recessions.
End of an Era: The Coming Long-Run Slowdown in Corporate Profit Growth and Stock Returns— The authors estimate that declining interest and corporate tax rates accounted for over 40% of real corporate profit growth from 1989 to 2019, while falling risk-free rates explain the entire expansion in price-to-earnings multiples. Real earnings before interest and taxes grew slightly more slowly than in 1962–1989, at 2.2% versus 2.4% per year.
AI Summary.The Congressional Budget Office estimates that a permanent 0.5 percentage point increase in annual productivity growth would lower publicly held federal debt after 30 years by 39% of GDP, offsetting roughly half the projected rise from 101% of GDP to 175%. Higher revenue and slower spending growth outweigh higher interest costs.
Karen Dynan, Douglas Elmendorf and Louise SheinerNational Bureau of Economic Research
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CBO baseline projects debt-to-GDP rising from 101% in 2026 to 175% in 2056. Dynan et al. study how AI might modify that projection. In all but their most optimistic scenario, TFP grows 0.5pp faster, and AI offsets 39–49 pp of that 74pp increase.
How much would faster productivity growth reduce federal debt?
Core argument: A permanent 0.5 pp increase in annual total factor productivity growth would lower publicly held federal debt after 30 years by 39% of GDP relative to CBO's extended baseline, offsetting roughly half of the projected rise.
[In the Base Case], faster economic growth [improves the federal budget and debt outlook] through four channels. First, [higher] incomes increase federal revenue, [while] the progressive tax system [modestly] raises revenue relative to GDP. CBO [estimates] that a [permanent] 0.5 pp increase in annual TFP growth would raise revenue after [30 years] by 0.14% of GDP. Second, [although] faster growth increases [some] federal spending, spending rises [more slowly] than GDP, [reducing noninterest outlays] relative to GDP. Under our [assumptions], discretionary spending falls from 6.1% of GDP in 2025 to 4.5% in 2056. Third, because faster growth does not [change the stock of] existing debt, that debt becomes smaller relative to GDP. Fourth, [stronger] growth generally raises interest rates, increasing the [cost] of new borrowing and [refinancing] existing debt. This represents a partial offset to the [fiscal gains]. [On balance], additional annual TFP growth of 0.5 pp would lower publicly held federal debt after [30 years] by 39% of GDP relative to CBO’s extended baseline. CBO’s extended baseline shows federal debt rising from 101% of GDP in 2026 to 175% in three decades, so this hypothesized increase in growth would offset roughly half of that projected rise.
Takeaways by Macro Roundup® AI
A permanent 0.5 pp increase in annual total factor productivity growth would lower publicly held federal debt after 30 years by 39% of GDP relative to CBO's extended baseline, offsetting roughly half of the projected rise.
CBO's extended baseline shows federal debt rising from 101% of GDP in 2026 to 175% three decades later, and CBO estimates a permanent 0.5 pp increase in TFP growth would raise revenue after 30 years by 0.14% of GDP.
Related Articles:
Can AI Avert the Impending Federal Budget Crisis?— U.S. GDP per capita, about $87,000, is projected to reach $102,000 by 2035 with 1.8% annual productivity growth, or $110,000 with 2.7% growth. Because the healthcare sector has been slow to adopt AI, health spending is projected to rise from 18.3% of GDP to 21% under slower growth and 21.7% under faster growth.
U.S. Treasury Investors Are Long in AI— The authors find U.S. government debt has a large positive productivity beta, because the tax code makes federal revenue highly sensitive to productivity growth while spending commitments change little, leaving bondholders implicitly long productivity growth. They argue greater market confidence in sustained productivity gains from AI could substantially reprice government debt, lowering nominal yields.
The Budget and Economic Outlook: 2026 to 2036— The Congressional Budget Office projects the federal deficit will grow from $1.9tn (5.8% of GDP) to $3.1tn (6.7%) over a decade, above the 3.8% averaged over the past 50 years, with rising net interest costs driving much of the increase. Federal debt held by the public is projected to rise from 101% to 120% of GDP.
