Elon Musk argues that AI might be essential for addressing the U.S.'s rising debt crisis, now at $39.5 trillion. While a Brookings study suggests AI could help reduce fiscal deficits, they caution that it won't completely solve the problem. AI investments are expected to boost productivity, particularly in healthcare and high-skill services. However, potential downsides include increased unemployment and higher social security costs due to longer lifespans. The report indicates that while AI could improve budget forecasts, it cannot be solely relied upon to resolve the fiscal issues facing the U.S. government.

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Economy national debt

Elon Musk says AI is the only way to fix the $40 trillion U.S. debt crisis—but a new study says even the most optimistic scenario won’t fill the hole

Eleanor Pringle

By Eleanor Pringle Eleanor Pringle

Senior Reporter, Economics and Markets Down Arrow Button Icon

Eleanor Pringle

By Eleanor Pringle Eleanor Pringle

Senior Reporter, Economics and Markets Down Arrow Button Icon

July 2, 2026, 7:09 AM ET

Scott Bessent, US treasury secretary, during an Economic Club of New York (ECNY) event in New York, US, on Tuesday, June 23, 2026.

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In the great debate about rebalancing the United States’ debt to its economic growth, the optimists suggest that expanding the economy is preferable to cutting federal spending. It would certainly be less painful.

Indeed, SpaceX founder CEO Elon Musk has suggested that the productivity gains thanks to AI may be the only way to save Uncle Sam from his growing debt burden— $39.5 trillion at the time of writing.

Musk, the CEO of Tesla, has long been a debt hawk, even if it meant going against President Trump on the matter. Musk told the Nikhil Kamath podcast last year that AI and robotics used on a large scale is “pretty much the only thing that’s going to solve the U.S. debt crisis.”

A victim of its own success

However, even though the groundwork for a debt resolution in the form of a “once-in-a-lifetime” productivity boom appears to have been laid—across financing, early productivity gains, and efficiency and revenue opportunities—the Brookings report suggests that an AI productivity shock may mean the U.S. economy becomes a victim of its own success.

A “traditional” productivity shock would be positive for the debt picture, the trio writes: primary deficits turn negative, the annual deficit falls by over $2 trillion, and deficit as a share of GDP declines by almost 5 percentage points. “Here, the techno-optimists are validated,” the authors add.

However, AI has the potential to be so transformative that it “should give optimists pause,” the economists note. The first factor is that efficiencies in healthcare, which translate to lower costs, also mean that societies are likely to live longer and will draw more heavily on social security support as a result.

Additionally, the report suggests the much-feared labor market shift means more unemployment, and more individuals relying on income support payments as the dust settles. Defense spending is also likely to increase as countries seek to win the AI arms race.

Next, the authors write: “A changing composition of national income may push the tax base away from highly taxed labor income to less-taxed non-corporate capital and corporate profits. And lastly, increased demands for investment may raise the neutral rate of interest, which pushes up equilibrium interest rates and boosts interest expenditures.”

As a result, while AI will improve the budget outlook somewhat, it can’t be relied upon to solve the U.S.’s fiscal problem. The team found that, at best, these factors offset AI’s potential to reduce budget deficits by half. At worst, these mitigating factors would knock two-thirds off any improvement.

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About the Author

By Eleanor PringleSenior Reporter, Economics and Markets

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Eleanor Pringle is an award-winning senior reporter at Fortune covering news, the economy, and personal finance. Eleanor previously worked as a business correspondent and news editor in regional news in the U.K. She completed her journalism training with the Press Association after earning a degree from the University of East Anglia.

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