Two seemingly unrelated stories have recently taken Washington by storm.
First, Democrats marched in lockstep behind the leaders of the nation’s frontier AI labs, who called for Washington to regulate the industry and slow down development. This campaign was kick-started when Jacob Coxon, a 27-year-old Anthropic researcher of four months, resigned from the company and publicly announced that artificial intelligence may kill us all.
His high-profile move kicked into high gear when Anthropic boss Dario Amodei — rather than insisting Coxon was incorrect — more or less concurred. In an essay insisting “we” must “pace the frontier,” Amodei admitted that rather than AI companies decelerating their own development, “the most effective method of pacing is via regulation that targets all US frontier AI companies, as that covers even those who are unwilling to cooperate voluntarily.”
Sam Altman of OpenAI announced he agreed with his top competitor. And astonishingly, Elon Musk, who has a long-standing loathing of Altman, agreed with them both. Within 48 hours, the Democratic Party’s entire top brass, ranging from former Vice President Kamala Harris to former President Barack Obama, had parroted Amodei’s plea.
Sen. Bernie Sanders (I-VT), who has long railed against AI to the point of calling for the criminalization of its development, went one step further. He appeared at an anti-AI rally with Coxon. And teachers union boss Randi Weingarten. And America Last-er Steve Bannon.
If you can see where this is going, on the opposite side is a remarkably defiant President Donald Trump. The president has repeatedly lambasted the AI doomers, branding the alarmism a “SICK conspiracy going on against AI and Data Centers, and the only one that is happy about it is China.”
The second story is less sexy but arguably more catastrophic. In a harrowing escalation of the lengthy erosion of the American bond market, the 10-year Treasury yield finally blew past 5%. This means that both the benchmark 10-year and the 30-year Treasury yields are at their highest points in 19 years. And then, even though the Federal Reserve defied Trump’s calls for a rate cut and instead hiked the federal funds rate for the first time in three years, medium- and long-term Treasury yields continued their upward climb.
Trump’s unyielding dedication to AI’s advancement is inextricably linked to his fear of rising interest rates. Although he’s wrong about the Fed’s ability to single-handedly reduce “interest rates” ranging from Treasurys to mortgage rates, Trump is correct to fear the implications of rising interest rates. And, better yet, he understands at a gut level that the potential for productivity acceleration from AI is the country’s only way to grow its way out of a fiscal crisis.
Already, AI, hyperscalers, and the data center buildout are likely the only reasons why the economy is not in a recession. By contrast, as new Fed Chairman Kevin Warsh pointed out, real GDP growth remains robust. And far from AI replacing workers, the labor market is operating at close to full employment, as the central bank projects it will continue to do.
The real risk to the American economy is the persistence of our inflation rate, which, by various measures, is at least 50% above the Fed’s maximum 2% target. And that inflation, which is fueled by Uncle Sam’s $2 trillion deficit, fuels the size of the deficit as net interest payments on the national debt compound.
Trump is not a fiscal hawk and has never pretended to be. But as a builder, he understands the general logic of bonds. If the United States is paying a real interest rate of 1% on its national debt but the economy is growing at a real rate of 2%, GDP expansion gradually erodes that debt. Reverse those figures, and we’re on the path to the sort of fiscal crisis that either ends with austerity or a total collapse of the U.S. government’s ability to borrow. With over 1% of the population reaching retirement age each year and amid our largest-ever deportation operation, a shrinking labor supply requires a productivity multiplier to sustain an economic growth rate greater than the real interest rate on our national debt.
In other words, while the AI doomers fear their technology is too powerful, Trump’s biggest fear is that it’s not powerful enough.
On the merits, Trump is probably correct for reasons best explained by Meta CEO Mark Zuckerberg, who noted that Anthropic is perfectly capable of pausing for safety assessment of its own accord, as Meta did for its own AI development. Furthermore, not one word out of Amodei’s mouth should be understood without the caveat that Anthropic is aiming for a $2 trillion valuation with its Nasdaq IPO next month.
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The “frontier” firms would be thrilled for the government to provide them an excuse for failing to meet financial targets and profitability, just as Democrats and the America Last caucus would be happy for growth to stall and our AI preeminence to cede to China. Trump indeed wants to beat China, which has maintained that its top AI priority is to “uphold the [CCP’s] overall leadership against internal and external foes that might use AI to undermine it.”
But Trump also wants to beat the basic math of debt and channel AI into helping our GDP reach escape velocity from a bond market that threatens to consume it.
Tiana Lowe Doescher (@TianaTheFirst) is an economics columnist for the Washington Examiner.