Jennifer M. Harris, The Generational Force Hollowing Out the Economy, NYTimes, June 29, 2026.
We are witnessing one of the largest peacetime mobilizations of capital in modern American history. Topping $1 trillion annually by next year, the artificial intelligence buildout is expected to rival or surpass previous technological booms at their peaks — rail, electrification and the internet revolution.
Many economists believe that at a time of rising inflation, a weakening job market and global unrest, this boom is keeping the U.S. economy afloat. “A recession tied to the balloon of A.I.,” is how PJ Vogt, a popular podcaster, describes the perspective. Look more closely, however, and the picture changes. A.I. is vacuuming up so much of our land, talent, semiconductor chips, building materials — and, above all, so much of our money, that it is beginning to crowd out the rest of the economy.
In other words, A.I. isn’t merely compensating for the weakness in the rest of the economy. It is, at least in part, causing it.
Jason Thomas, research head at the investment firm Carlyle, noted in a January report that data center investment may be swelling to the point that it could consume virtually all the private money available for new, non-housing investments.[...]
Start with housing. New homes that could ease the affordability crisis aren’t getting built, as land slated for houses is sold instead to data center developers.[...]
The push to reinvigorate American manufacturing, which has been championed by both major political parties, is also in peril.[...]
Then there is venture capital, investments that help determine which industries will drive our economy in the future. A.I. firms captured nearly two-thirds of all global venture capital investment in 2025, up from roughly 30 percent in 2022. [...]
This dynamic may even be driving inflation. Red-hot demand for scarce semiconductor chips, in particular, is jacking up the cost of consumer goods that rely on them, from cars to laptops to phones. [...]
The lesson
The lesson isn’t that the rail or internet buildouts weren’t worthy investments — or that A.I. isn’t worthy today. [...] The lesson is that until these benefits manifest themselves, these technological booms can entail formidable opportunity costs as investment-hungry portions of the economy go without. Often, these costs, if not correctly managed, can lead to recession.
What is clear in hindsight is that the economic benefits of a new technology don’t just happen. They are determined by the myriad choices we make about how to use it. Right now, just as was the case with rail or the internet, the economic gains from the technology are initially lagging.
What to do
What, then, to do? Historically, we have largely just sat on our hands, suffered the consequences of booms and waited for the benefits to show up. But we can do better than that. We can take action to address the growing pains that accompany technology booms. Fortunately, we can utilize the policy tools we already have, the ones we deploy to dig ourselves out of recessions or to temper speculative bubbles.
The federal government and the Federal Reserve should see that vital sectors — such as housing, entrepreneurship, energy infrastructure and critical supply chains — don’t starve as we continue building A.I. [...]
Next, policymakers could develop an honest to goodness industrial policy for A.I. — subsidies, tax incentives, regulations and different ownership structures — that prioritizes deploying the technology for the kind of economy we want to live in: inexpensive, with clean energy, biomedical breakthroughs and advanced manufacturing.
Finally, introduce reforms to the myriad rules our corporations must follow, to focus them more on developing new products and services and less on the kind of financial engineering that simply gooses a company’s stock price. [...]
There's more at the link.
P.S. For a different context for that song and some lyrics, try this article, Feed Me Donald! – Trump, Musk, the Internet, and Monsters from the Id.
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