"In a Financial Times column on Sunday, the market veteran pointed out that the "immigration boom-bust cycle" that the U.S. is experiencing now is unprecedented in scale, swinging from a net gain of more than 3 million in 2023 to an expected trickle of just 400,000 this year. The drastic throttling in the labor force could slash U.S. growth potential by more than 20%."
"Meanwhile, the U.S. debt-to-GDP ratio is already at 100% and expected to continue galloping higher, topping the World War II-era record high in the coming years. But again, AI could come to the rescue by propelling economic growth enough to stabilize the debt. The global bond market even appears to be pricing in that scenario, Sharma said, pointing to surging yields for Japan, France and the U.K., even though they have smaller budget deficits than the U.S. does."
""The main reason AI is regarded as a magic fix for so many different threats is that it is expected to deliver a significant boost to productivity growth, especially in the US," he added. In addition to the workforce and debt woes, AI could even ease inflation risks, including tariff-driven pressure, by enabling companies to raise wages but still keep prices steady, Sharma said."
A sharp slowdown in U.S. net immigration risks reducing labor supply and cutting growth potential by more than 20%. U.S. public debt-to-GDP is at about 100% and is projected to rise toward a World War II-era peak. AI is expected to raise productivity enough to help offset labor shortfalls, support economic growth, and stabilize public debt dynamics. AI-driven productivity could also ease inflation pressures by allowing wage increases without proportional price rises. A boost to productivity of roughly 0.5 percentage point annually over decades could significantly lower projected public debt ratios by mid-century. Recent U.S. productivity growth has outpaced other developed economies.
Read at Fortune
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