According to a study from the Brookings Institution, AI holds the potential to bring a positive shock to the U.S.'s fiscal health. This could potentially lead to a reduction in the fiscal deficit, which is a significant concern for the country's economic stability. The report forecasts that by 2044, AI could lower the U.S. budget deficit by 1.5% of GDP, approximately $900 billion in nominal terms. This could have a profound impact on the nation's financial situation.

Unleashing the Power of AI to Transform Fiscal Health

AI and Health Care Services

The incoming Trump administration raises important questions about how AI might be implemented in delivering health care services. The Brookings Institution's study highlights the various channels through which AI can increase productivity and improve health care. Basic tasks like appointment scheduling can be automated, and more complex tasks such as patient flow management and preliminary data analysis can be handled by AI programs. This not only makes health care more efficient but also has the potential to "democratize" access to the system by providing more options for preventative medical care.AI's impact on health care extends beyond efficiency. It has the potential to transform the cost of care and the rates of illness, disease, and death. By improving diagnostic accuracy, AI can reduce wasteful spending on inappropriate treatments and lead to a healthier population. This, in turn, could have positive implications for Social Security and public health program outlays.

AI and the Fiscal Deficit

A more efficient health care system driven by AI could ease the pressure on the government's fiscal deficit. With the federal government spending an estimated $1.8 trillion on health insurance in 2023, accounting for around 7% of GDP, and projected subsidies totaling $25 trillion from 2024 to 2033, any improvement in efficiency can make a significant difference. By reducing administrative functions and optimizing treatment plans, AI has the potential to cut costs and lower the deficit.However, the adoption of AI in health care is not without challenges. There are impediments tied to regulation and incentives that need to be overcome. Economists like Ajay Agrawal at the University of Toronto's Rotman School of Management express a mix of enthusiasm and despair. While they recognize the potential benefits, they also highlight the friction due to regulation and incentives that can slow down the implementation process.

AI in the Public and Private Sectors

So far, diagnostics has shown the most advances in applying AI in health care. AI has already demonstrated "superhuman performance" in various diagnostic areas, from receiving input data to analyzing medical imagery. It has also shown significant promise in optimizing treatment plans through data analysis, developing more effective and less costly plans for individual patients.In the U.S., private insurers have generally been more keen on AI technology associated with preventative treatment. However, there has been less interest in using AI in diagnostic applications, which could lead to an increase in cases and more treatment. Public-private partnerships will be crucial in driving the rollout of AI across health care. The public health care sector needs strong incentives to drive change, while the private sector provides a stronger motivator in terms of cost reduction and profit generation.

AI under the Trump Administration

President-elect Donald Trump's second term could have a significant impact on the rollout of AI in health care and its economic impact. Trump has vowed to reduce government spending and form an outside panel to "dismantle Government Bureaucracy, slash excess regulations, cut wasteful expenditures, and restructure Federal Agencies." Public health funding is one area that could face cuts, which could frustrate the ability to roll out AI applications.On the other hand, rolling back regulations under a second Trump administration could expedite the implementation of AI across health care. While there are legitimate concerns about immature technologies harming people, there are also domains in diagnosis that are ready to go and could benefit from reduced regulations.In conclusion, AI has the potential to be a game-changer for the U.S.'s fiscal health. While there are challenges to overcome, the benefits are significant. By improving health care efficiency and reducing costs, AI could help lower the fiscal deficit and lead to a healthier population. Public-private partnerships will be essential in realizing this potential.