Famed economist Paul Krugman argued it’s “likely” the United States “would be heading into a recession” right now, were it not for the massive financial investment that is currently being made in the development of artificial intelligence.
“Stagflation is very much on people’s minds again, for good reason,” the 2008 winner of the Nobel Memorial Prize in Economic Sciences wrote in his Substack newsletter published on Sunday.
Krugman has previously warned of the devastating effect that President Donald Trump’s tariffs and anti-immigrant crackdowns could have on the U.S. economy.
And now, he said, they are combining and “creating a significant inflationary shock” and “imposing a significant drag on economic growth.”
If “the AI boom goes bust,” he cautioned, “the odds are high that the US economy will be plunged into a recession.”
Last week, Krugman warned how the Trump administration is about to “ICE the economy” with its deportation program, predicting how certain industries that rely on undocumented workers ― like agriculture and meatpacking ― will be decimated by the policy and ultimately lead to further inflation.