Can AI Save America From a Recession?

Can AI Save America From A Recession?

AI has impacted every sphere of American life and we've already seen how changes in AI development can drastically effect the stock market and given the chaotic state of current politics and economics, many wonder if AI has the power to prevent recessions if the US economy tanks into a hard landing.

Firstly, there's a good historical precedent for the country sliding into a recession based on the federal reserve's raising of the federal funds target rate by 5.25%, the fastest cycle in 40 years. Historically, rate hikes this large tend to cause hard landings.

How can AI help? Well, JP Morgan has a quote regarding tech investment that sheds light on the possibilities:

"A tech-led investment spending boom, accompanied a sharp acceleration in productivity growth, fueled growth in the second half of the 1990s. The 1990s US experience, in which a supply-side boost to both productivity and labor supply fueled growth, would seem to provide the best recipe for a soft-landing outcome."

Tech spending to fuel the AI revolution might just be the supply-side growth recipe the Fed needs to stick a soft landing and prevent a recession. Economists speculate AI becoming into a 1.3 trillion dollar sector by 2032, and with investors hopping on countless generative AI startup bandwagons, we've only begun to see the boom.

The only thing that can hinder the AI revolution from preventing a recession is the failure of businesses to integrate the technology quickly enough. A recent study suggested new technologies take anywhere between eight and thirty years for widespread adoption by businesses and that's time we don't have to dodge an economic disaster.

Why Businesses and Institutions Should Integrate AI Now

Enough time has passed to solve the larger philosophical quandaries that come with using AI. Even academic institutions like Northeastern university have come around and integrated Anthropic's AI system into campus life.

People may be wary of AI's impact on the economy and job displacement, but as of now, the metrics regarding AI and economic growth are pointing to better outcomes for integrating AI than restricting it.

Businesses of all kinds have begun using AI to perform a variety of tasks, what needs to be changed though, is the nature of AI shaming on a social and a business level.

Search engines need to stop detecting for and deranking AI content once it becomes clear that it's the wave of the future. People need to stop shaming businesses for using AI content in their marketing materials.

I'm sure both these phenomena will cease to exist rather soon as the technology becomes so advanced that using it becomes undeniably preferable. And, we're basically there with OpenAI's CHatGPT 4o, so we should start moving the needle today.

From customer service to AI applications for management, research, content marketing, recruitment, training and more, businesses need to start using AI.

There are other reasons people should invest in the AI economy other than pushing for the positive economic impacts of AI though. AI will transform the global economy and which AI system will be chosen to lead that transformation will likely dictate which country becomes the world's super power.

The AI Arms Race and The Global Economy

Everyone saw how drastically tech stocks dipped after the announcement of China's DeepSeek R1 model. We can already see how dependent global economics are with the progress of every country's various AI models.

Whichever AI technology is deemed to have the fastest, most powerful computing power at the least cost will likely lead the 4th industrial revolution and with it, create advantages for the nation that supports that model with economic benefits that range from labor markets, supply chains, labor productivity gains, technological innovation, and much more.

AI in The Tariff War

Beyond the AI Arms Race, Trump has already entered the US into a trade war with China by implementing large tariffs on their goods. Many businesses that rely on Chinese goods saw the costs of running their businesses rise to intolerable rates overnight.

AI could be an integral solution to these problems for businesses by predicting disruptions to supply chains, expediting research and development, and then cutting costs and streamlining operations, which businesses need to overcome economic hurtles.

Integrating AI is a not just a business or economic concern, it's a geo-political concern that should be in the American national interest to promote. Our citizens and our government need to hop on the bandwagon knowing China has likely already begun moving the gears required to make the full-shift toward integrating AI.

Positive Predictions

Goldman Sachs chief economist, Jan Hatzius, has predicted positive results regarding AI's effect on economy. In 2008 when everyone and their mother forecasted a recession, he was alone in correctly predicting a soft landing.

Today, he views AI simply as an engine for productivity enhancement. Some jobs may be lost in the process of kickstarting the artificial intelligence economy, but breakthroughs in innovation will lead to the creation of new jobs.

Conclusion

So, can AI save the U.S. from a recession? It can and it needs to for the sake of American global superiority. If AI investments and integration aren't strong enough to push us into a soft landing, then they may not be strong enough to push us ahead of China in the international AI arms race.

That's why it's aptly called a race. Time and speed are crucial, so businesses need to fight for tomorrow by investing in and integrating AI today.