One Way to Ease the US Debt Crisis? Productivity
It’s certainly possible — but growth would need to reach levels that the US has failed to meet for most of the past half century.
AI holds out hope to make workers more productive.
Photographer: Andrey Rudakov/Bloomberg
In a May report on alternative scenarios for the long-term US budget outlook, the Congressional Budget Office estimated the impact of productivity growth that was faster or slower than the 1% annual average in its baseline forecast. It made a big difference.
These forecasts were completed before the passage of the Republican-backed budget bill, which by the CBO’s reckoning markedly worsened the debt outlook. But the basic point still holds — higher-than-expected productivity growth could turn what is starting to look like an out-of-control debt problem into a much more manageable one, with the debt-to-gross-domestic-product ratio flattening rather than continuing to rise.