The United States is staring down a $35 trillion debt crisis, and the challenge ahead is daunting. Public debt has risen substantially over the last few decades, a trend exacerbated by the pandemic. The global debt-to-GDP ratio is on course to hit 100% by the end of the decade, with the U.S. leading the charge alongside other major economies like China and Brazil. But what if artificial intelligence (AI) could help solve this complex fiscal puzzle?

The Problem: Rising Debt, Slow Growth, and Political Gridlock

According to the latest Fiscal Monitor from the International Monetary Fund (IMF), public debt is higher than pre-pandemic levels in most countries, including the U.S., and continues to rise. In the U.S. specifically, debt is growing by roughly 2 percentage points of GDP every year, a trend that cannot continue indefinitely. At this rate, the U.S. is projected to be in a precarious position, with high interest payments crowding out other critical spending areas like healthcare, infrastructure, and climate adaptation.

What makes this situation even more concerning is that political discourse, especially in an election year, seems to focus more on offering tax breaks than on addressing the national debt. Candidates from both sides have proposed policies that could potentially worsen the fiscal situation. The IMF has long recommended timely, decisive fiscal adjustments to address rising debt, and yet the political will to make tough choices remains elusive.

Can AI Offer a Solution?

Artificial intelligence has already begun revolutionizing various sectors of the economy, from healthcare to finance. However, its potential to reshape fiscal management is just beginning to be explored. Here’s how AI could help the U.S. navigate its debt crisis:

Optimizing Government Expenditure: AI can help governments identify inefficiencies in public spending by analyzing vast datasets to detect redundancies, waste, and inefficiencies. Machine learning models could be used to review government contracts, procurement, and resource allocation, ensuring taxpayer money is spent efficiently.
Revenue Mobilization: AI could enhance tax collection by detecting patterns of tax evasion and avoidance. Through predictive analytics, the government could better target audits, reducing the tax gap, and increasing revenues. Additionally, AI can help create fairer, more progressive tax systems by analyzing how different tax policies impact various demographic groups, ensuring that revenue is mobilized without exacerbating inequality.
Economic Forecasting and Debt Risk Analysis: AI-powered models can more accurately forecast economic trends and help policymakers anticipate risks to the debt-to-GDP ratio. The IMF’s debt at risk framework already highlights the importance of assessing various adverse scenarios. AI could help refine these assessments by accounting for political, financial, and macroeconomic variables in real-time, helping the U.S. take preemptive measures to avoid fiscal disasters.
Streamlining Social Programs: AI can optimize the delivery of social services, reducing administrative costs and improving access to benefits. By automating eligibility determinations and reducing fraud, AI could ensure that social spending remains sustainable and well-targeted to those most in need.
Enhancing Transparency and Trust: One of the IMF’s key recommendations is to improve transparency and governance in fiscal reforms to build public trust. AI can play a significant role here by automating data sharing and improving accountability in public finance management. Blockchain technology, powered by AI, can provide tamper-proof records of government transactions, increasing trust in the system and boosting taxpayer compliance.

A Path Forward: AI-Driven Debt Solutions

The U.S. debt crisis requires bold, innovative solutions. AI’s ability to improve fiscal efficiency, mobilize revenue, and enhance governance provides a unique opportunity to address these challenges head-on. However, leveraging AI for debt reduction must be paired with sound fiscal policies, including progressive tax reform, strategic spending cuts, and investments in growth.

One approach could involve using AI to automate debt buybacks when market conditions are favorable, reducing interest payment obligations over time. Additionally, AI can help forecast the economic impact of policy decisions, enabling the U.S. government to make more informed choices about when and how to implement fiscal adjustments.

AI's Comprehensive Plan to Tackle the U.S.'s $35-Trillion Debt Crisis

Kevin to ChatGPT:

Provide a summary in bullet points of the main talking points:

Transcript of Fiscal Monitor October 2024 Press Briefing from October 23rd 2024

ChatGPT:

Here’s a summary of the main talking points from the press briefing:

Global Public Debt: Public debt is projected to surpass $100 trillion in 2024, with the global debt-to-GDP ratio nearing 100% by the end of the decade, surpassing the pandemic peak.
Debt Diversity: Public debt trends vary globally:
- One-third of countries (including China, the U.S., Brazil, France, etc.) have rising debt.
- Another third see slower debt growth or declines.
- The rest have lower debt levels than pre-pandemic.
Debt at Risk Framework: The IMF introduced a "debt at risk" framework to assess the risks of debt projection scenarios. A severe adverse scenario could see public debt 20% of GDP higher than baseline projections.
Need for Immediate Action: Delaying fiscal adjustments is risky and costly. Governments must act now to stabilize debt, particularly in countries at high risk of debt distress, with frontloaded measures if needed.
Balancing Fiscal Priorities: Governments must manage rising debt while maintaining investments in critical areas like public investment, healthcare, and climate adaptation.
People-Focused Fiscal Reforms: Adjustments should avoid cuts in public investment and social spending to minimize adverse effects on growth and inequality.
Revenue Mobilization: Broad-based, fair tax systems can create fiscal space, especially in emerging markets with untapped tax potential.
Regional Insights:
- Sub-Saharan Africa: Fiscal adjustments are critical to debt management and development.
- U.K.: Faces rising debt and low growth; public investment should be protected.
- China: Debt is rising, but there is policy space to manage it while transitioning to a new growth model.
Lessons from the Past: Fiscal adjustment should be timely, decisive, well-designed, and communicated effectively, with transparency and governance being key.
U.S. Elections Impact: Fiscal policies from both candidates in the 2024 U.S. election could impact debt, with concerns over tax breaks and spending proposals.
Developing Countries: Countries like Nigeria face challenges from low revenue-to-GDP ratios and rising debt service obligations. Broader tax bases and targeted transfers for the poor are essential.
Closing Remarks: The IMF stresses that fiscal governance and timely adjustments are crucial to managing global public debt effectively.

Kevin to ChatGPT:

What does the transcript specifically say about the US economy and/or its labor market projections?

ChatGPT:

Here are the key points from the transcript specifically addressing the U.S. economy and labor market projections:

Debt Growth in the U.S.: The U.S. is one of the largest economies where debt is substantially higher than pre-pandemic levels, growing by about 2 percentage points of GDP each year. The IMF acknowledges that this rising debt path cannot continue indefinitely, but the U.S. has policy tools at its disposal to control public debt when the political system decides to act.
U.S. Economic Performance: The U.S. is in a favorable economic and financial position compared to other advanced economies. Financing conditions are easing, and the Federal Reserve has started to pivot its monetary policy. U.S. growth has been outperforming other advanced economies, and the labor market shows strong indicators that are the envy of many other countries.
Labor Market: The U.S. labor market is robust, with low unemployment and indicators that suggest resilience. This strong labor market makes the U.S. economy well-positioned to manage fiscal adjustments.
Timing of Fiscal Adjustments: Given the favorable economic conditions and strong labor market, the IMF suggests that now is the right time for the U.S. to adjust its fiscal policies. Taking action now would not only benefit the U.S. but also have positive implications for global financial markets, as the U.S. plays a significant role in determining global financial conditions.

In summary, the U.S. economy is experiencing solid growth, a strong labor market, and easing financial conditions, making it a prime moment for fiscal adjustments to address the rising public debt.

Kevin to ChatGPT:

How can the U.S. fix its 35 trillion-dollar debt? Create a well thought out plan that is considerate of the U.S. economy and projected growth over time. The business plan needs to be detailed and list parties that need to be involved to reduce the debt significantly enough so America can remain a strong economy.

ChatGPT:

Fixing the U.S.’s $35 trillion debt requires a multi-faceted, long-term strategy that carefully balances fiscal responsibility, economic growth, and social equity. Below is a detailed business plan that outlines key steps the U.S. government, private sector, and civil society can take to reduce the national debt without stifling growth or exacerbating inequalities.

1. Establish a Bipartisan Fiscal Commission

Objective: Create a bipartisan task force that includes economists, business leaders, and lawmakers from both parties to craft comprehensive debt-reduction policies. This commission would operate under the guidance of Congress and the Treasury Department to ensure that fiscal strategies are fair, transparent, and long-term.
Actions:
- Conduct a full assessment of government spending and revenues.
- Set specific targets for debt reduction over 5-, 10-, and 20-year horizons.
- Ensure policies address both short-term deficits and long-term debt sustainability.

2. Gradual, People-Centric Fiscal Consolidation

Objective: Reduce deficits by focusing on sustainable, growth-friendly fiscal policies that minimize harm to the economy and low-income populations.
Actions:
- Cut Unnecessary Spending: Conduct a comprehensive review of federal programs to eliminate waste, fraud, and redundancy. Consolidate similar programs and ensure funding for essential services is protected (e.g., defense, healthcare, infrastructure).
- Reform Entitlements: Gradually reform Social Security, Medicare, and Medicaid to ensure their long-term solvency. This could involve means-testing benefits for higher earners, gradually raising the retirement age (reflecting increased life expectancy), and addressing inefficiencies in healthcare spending.
- Deficit Reduction Targets: Aim for reducing annual deficits by 1-2 percentage points of GDP each year, allowing debt to stabilize as a percentage of GDP over time.
- Debt Buybacks: Explore opportunities for debt buybacks in favorable market conditions to reduce interest payment obligations.

3. Progressive Tax Reform

Objective: Mobilize revenue through tax reform to ensure that the wealthiest individuals and corporations contribute a fair share while incentivizing investments in growth.
Actions:
- Increase Capital Gains and Dividend Taxes: Gradually raise the capital gains tax rate to align more closely with income tax rates, particularly for high-income earners.
- Wealth Tax: Introduce a modest wealth tax on net worth above a certain threshold (e.g., $50 million), generating revenue while addressing wealth inequality.
- Corporate Tax Reform: Close corporate tax loopholes and introduce a minimum tax rate on large multinational corporations to prevent profit-shifting to tax havens.
- Expand the Tax Base: Simplify the tax code, reduce deductions and exemptions that disproportionately benefit high-income earners, and increase enforcement to reduce tax evasion and avoidance.

4. Strengthen Economic Growth and Productivity

Objective: Focus on policies that enhance productivity and innovation, driving higher long-term growth, which reduces the debt-to-GDP ratio naturally.
Actions:
- Invest in Infrastructure: Direct significant investment into infrastructure (clean energy, digital infrastructure, transportation, water systems) to create jobs, enhance efficiency, and improve long-term economic prospects.
- Support Innovation and R&D: Increase government funding for research and development, especially in sectors like artificial intelligence, biotechnology, and green technology, to keep the U.S. at the forefront of global innovation.
- Education and Workforce Training: Enhance funding for education, particularly STEM (Science, Technology, Engineering, and Mathematics) fields, and vocational training programs to upskill the workforce for the jobs of the future.
- Immigration Reform: Implement comprehensive immigration reform that includes pathways for high-skilled workers and innovators to enter and remain in the U.S., boosting labor force growth and entrepreneurship.

5. Healthcare Cost Containment

Objective: Reform healthcare to reduce the long-term fiscal burden on the government while improving access and outcomes.
Actions:
- Negotiate Drug Prices: Empower Medicare to negotiate drug prices directly with pharmaceutical companies to lower prescription drug costs.
- Value-Based Care: Shift healthcare reimbursement models from fee-for-service to value-based care, which rewards providers for improving patient outcomes at a lower cost.
- Preventive Care: Increase funding for preventive care programs to reduce the prevalence of chronic diseases that drive healthcare costs higher.

6. Tackle the Climate Crisis with Revenue-Generating Policies

Objective: Implement climate policies that help reduce the federal deficit while addressing the urgent need for climate action.
Actions:
- Carbon Pricing: Introduce a carbon tax or cap-and-trade system to generate revenue and incentivize the transition to a low-carbon economy. Proceeds from carbon pricing could be used to fund green infrastructure and debt reduction.
- Green Bonds: Issue "green bonds" to finance sustainable energy projects, leveraging private capital to fund necessary infrastructure without increasing the federal deficit.

7. Improve Public Finance Management and Transparency

Objective: Enhance the transparency and efficiency of government spending, ensuring taxpayer dollars are spent effectively.
Actions:
- Use Technology for Governance: Implement technology solutions to improve fiscal transparency and track how public funds are used. This could help reduce waste and corruption while building public trust.
- Performance-Based Budgeting: Require agencies to link spending to performance metrics, ensuring that programs that do not achieve desired outcomes are cut or reformed.

8. Entice Public-Private Partnerships (PPPs)

Objective: Involve the private sector in national infrastructure, healthcare, and technological projects to share costs and improve efficiency.
Actions:
- Infrastructure Development: Utilize PPPs to finance and build public infrastructure, sharing costs between the government and private investors.
- Energy Transition: Encourage private investment in renewable energy projects through tax incentives and guaranteed returns, reducing public spending requirements.

9. Federal-State Collaboration

Objective: Leverage state governments to support national debt reduction efforts.
Actions:
- State-Level Spending Controls: Work with state governments to control spending, especially in areas like Medicaid, which is a shared federal-state responsibility.
- Tax Sharing Arrangements: Explore revenue-sharing models where states contribute to national debt reduction through improved fiscal practices.

10. Engage the Public

Objective: Build public awareness and support for debt reduction efforts by communicating the long-term benefits of fiscal stability.
Actions:
- Public Campaigns: Educate the public on the importance of fiscal discipline through a nationwide campaign that highlights how stabilizing debt benefits future generations.
- Taxpayer Trust: Ensure that tax revenues are transparently allocated and efficiently spent to build trust in government efforts to reduce the deficit.

Key Stakeholders Involved:

Congress: Must pass legislation enacting tax reforms, spending cuts, and infrastructure investments.
Treasury Department: Tasked with managing federal finances and implementing the debt-reduction plan.
Federal Reserve: Coordinates monetary policy, helping manage inflation, interest rates, and debt servicing costs.
Private Sector: Engaged through PPPs, innovation initiatives, and green investments.
State Governments: Collaborate on spending controls and tax-sharing arrangements.
Civil Society: Provides public support and ensures government accountability through advocacy groups, think tanks, and academic institutions.

Projected Impact (5, 10, and 20 Years)

5 Years:
- Debt stabilizes as a percentage of GDP.
- Revenue mobilization increases by 1-2% of GDP.
- Gradual deficit reduction by 1% of GDP per year.
- Infrastructure projects boost economic growth, adding 1-1.5% to GDP annually.
10 Years:
- Debt-to-GDP ratio begins to decline.
- Social Security and Medicare reforms yield cost savings.
- Sustainable tax revenue increases, closing budget gaps.
- Healthcare costs reduced through preventive care and drug price negotiations.
20 Years:
- Debt is reduced to manageable levels (below 60% of GDP).
- The U.S. economy benefits from higher productivity due to investments in infrastructure, education, and innovation.
- Public confidence in government improves, ensuring long-term compliance with fiscal policies.

This plan ensures a comprehensive approach, balancing fiscal responsibility, growth, and equity to gradually reduce the $35 trillion debt without stifling the economy or harming the most vulnerable citizens.

Final Thoughts

The U.S. can fix its $35 trillion debt, but it won’t happen overnight, nor will it happen through political promises of tax cuts and short-term fixes. By harnessing the power of AI, the U.S. could pave the way for smarter, more efficient fiscal management, ensuring that the country remains strong and competitive in the global economy. As the IMF warns, delaying fiscal adjustments will only increase the risk and cost of addressing public debt. The time to act is now, and AI may just be the key to unlocking a sustainable future for America.

ChatGPT public conversation available here.

Following communication sent to Secretary Janet Yellen of the U.S. Treasury Department as well as Chair Jason Smith of the House Committee on Ways and Means, Chair Ron Wyden of the Senate Committee on Finance, Chair Jodey Arrington of the House Budget Committee, Speaker Mike Johnson and Senate Majority Leader Chuck Schumer of the Congressional Leadership, Vice President Kamala Harris and Shalanda Young (Director of the Office of Management and Budget) at the White House, Washington D.C., Chair Jerome Powell of the Federal Reserve, Director Lael Brainard of the National Economic Council, Gene Dodaro, Comptroller General of the Government Accountability Office (GAO) and Director Phillip Swagel of the Congressional Budget Office (CBO).

Correspondence to Vice President Kamala Harris, running in the 2024 presidential election:

Subject: Innovative Solutions to Address the U.S. $35-Trillion Debt Crisis Leveraging AI and Technology

Dear Vice President Kamala Harris,

I hope this message finds you well during these critical final weeks of your campaign. My name is Kevin Bihan-Poudec, founder of the Voice for Change Foundation, a nonprofit dedicated to advocating for ethical AI and innovative socio-economic solutions. I want to take a moment to wish you the best of luck in the final stretch of the election. Your leadership gives great hope for our nation's future.

As we look ahead to your potential presidency, I wanted to share my recent research on how Artificial Intelligence (AI) can address one of the most pressing challenges facing the U.S.: the $35 trillion national debt.

My research outlines a comprehensive plan leveraging AI to reduce debt, improve fiscal transparency, and boost economic productivity. Key components include:

Bipartisan Fiscal Commission: A task force to set long-term debt reduction goals.
People-Centric Fiscal Consolidation: Reducing unnecessary spending while protecting essential services.
Progressive Tax Reform: Mobilizing revenue through fair taxation and closing loopholes.
AI-Driven Governance: Using AI to optimize government spending and enhance transparency.
Green Initiatives: Climate policies that generate revenue through carbon pricing and green bonds.

AI offers an unprecedented opportunity for innovative, data-driven solutions to manage the national debt. With your leadership, we can put in place a strong framework to stabilize the debt-to-GDP ratio and ensure long-term economic sustainability.

You can access the full comprehensive plan here:
AI's Comprehensive Plan to Tackle the U.S.'s $35-Trillion Debt Crisis

I would be honored to discuss this further and explore how AI can be integrated into future fiscal policies under your administration.

Thank you for your time. I look forward to supporting your efforts to lead our country toward a brighter, more sustainable future.

Best regards,
Kevin Bihan-Poudec
Founder, Voice For Change Foundation

Correspondance to Chair Jerome Powell of the Federal Reserve:

Subject: Leveraging AI to Tackle the National Debt: A Collaborative Path Forward

Dear Chair Powell,

I hope this message finds you well. My name is Kevin Bihan-Poudec, founder of the Voice for Change Foundation, where we advocate for ethical AI and innovative solutions to socio-economic challenges. Given the Federal Reserve's recent stance on potential interest rate cuts and the caution expressed by officials like Neel Kashkari regarding modest reductions, I wanted to reach out with insights on how AI might contribute to reducing the national debt while addressing monetary challenges.

As you know, the Federal Reserve faces critical decisions in the coming months. Modest rate cuts, though necessary, may have limited impact given persistent inflation pressures and a tight labor market. Economic data suggests that the Federal Reserve is likely to adopt a measured approach, balancing the need for rate adjustments with inflationary risks.

In this context, I wanted to share my research, AI's Comprehensive Plan to Tackle the U.S.'s $35-Trillion Debt Crisis. This plan outlines how artificial intelligence can help stabilize and reduce the national debt while enhancing fiscal transparency and productivity. Below are some key highlights that may align with your agency’s goals:

AI-Driven Fiscal Consolidation: By leveraging AI to optimize government spending and streamline public investments, we can identify inefficiencies and reduce unnecessary expenditures without sacrificing essential public services.
Progressive Taxation Reform: AI can improve tax collection systems by identifying tax loopholes and increasing compliance, especially in high-net-worth individual and corporate tax structures.
Data-Driven Debt Management: AI tools can assess real-time economic data, helping to forecast debt risks and optimize fiscal policies, ensuring that rate cuts are applied strategically to minimize negative impacts on the debt-to-GDP ratio.
Green Initiatives: AI can assist in managing climate-related financial policies, such as carbon pricing, which could generate revenue while addressing long-term sustainability concerns.

You can access the full comprehensive plan here:
AI's Comprehensive Plan to Tackle the U.S.'s $35-Trillion Debt Crisis

Given the critical role the Federal Reserve plays in stabilizing the economy, your leadership is essential in exploring innovative ways to manage debt, especially as interest rate adjustments may only provide partial relief.

Below are specific suggestions on how the Federal Reserve could help drive the reduction of national debt:

AI-Driven Debt Forecasting: Implement AI tools to forecast debt and macroeconomic conditions, helping assess rate changes more accurately based on real-time data.
Monetary Policy Integration: Use AI to model the long-term effects of monetary policies on national debt levels, optimizing interest rate decisions.
AI for Government Efficiency: Collaborate with the Treasury to use AI for auditing federal spending, minimizing waste, and reallocating savings toward debt reduction.
AI-Enhanced Tax Systems: Leverage AI to optimize tax collection, close loopholes, and increase revenues without raising rates.
Monetary-Fiscal Coordination: Use AI insights to better align monetary and fiscal policies, ensuring proactive debt management.
AI-Powered Fiscal Tools: Implement AI tools to track and manage government spending, reducing waste and targeting resources effectively.
Debt Forecasting Models: Use AI for real-time forecasting to assess long-term fiscal decisions and interest rate adjustments.
Strengthen Public-Private Partnerships (PPP): Encourage partnerships to integrate AI into fiscal planning, improving fiscal sustainability.
Encourage Investment in Green Bonds: Support the issuance of AI-driven green bonds to channel funds into sustainable projects and reduce fiscal pressures.
Public Trust and Education Campaigns: Partner with AI-driven financial education platforms to improve public understanding of monetary policy, debt, and economic stability.

I would welcome the opportunity to discuss how AI can be integrated into future fiscal policies to help address the national debt crisis.

Thank you for your time, and I look forward to your thoughts on this matter.

Best regards,
Kevin Bihan-Poudec
Founder, Voice For Change Foundation

1. U.S. Treasury Department

Secretary Janet Yellen

2. House Committee on Ways and Means

Chair Jason Smith

3. Senate Committee on Finance

Chair Ron Wyden

4. House Budget Committee

Chair Jodey Arrington

5. Congressional Leadership

Speaker Mike Johnson

Senate Majority Leader Chuck Schumer

6. White House

Vice President Kamala Harris

Shalanda Young (Director of the Office of Management and Budget)

7. Federal Reserve

Chair Jerome Powell

Hello,

Thank you for contacting the Federal Reserve Board. We will make every attempt to respond to your message as soon as possible.

You better respond! The national debt isn't waiting for anyone!

8. National Economic Council

Director Lael Brainard

9. Government Accountability Office (GAO)

Gene Dodaro, Comptroller General

10. Congressional Budget Office (CBO)

Director Phillip Swagel

It is time to leverage modern technologies to tackle the economic issues that our supposedly forward-thinking country has been experiencing for centuries, starting in 1790 with a debt of $75 million.