Trump says AI and Warsh can revive 1990s boom; economists are skeptical
President Donald Trump says his nominee for Federal Reserve chair, Kevin Warsh, and rapid advances in artificial intelligence can recreate the economic boom of the 1990s by persuading the Fed to cut interest rates, the White House and administration officials said. Economists and former Fed officials warned the comparison is flawed and that current conditions differ sharply from the late 1990s.
Trump announced his selection of Warsh on Jan. 30, and Treasury Secretary Scott Bessent wrote on social media in January that the president wanted a replacement for Chair Jerome Powell with “an open, Greenspan-like mind,” according to Bessent. In speeches and writings, Warsh has argued that AI-driven productivity gains could justify lower interest rates, a view that aligns with the president’s desire for rate cuts but departs from Warsh’s past record as an inflation hawk when he served as a Fed governor after the 2007-2009 recession, according to Fed records and contemporary reporting.
Many economists said the administration’s account of the 1990s is incomplete. Dario Perkins of TS Lombard called it “a rather distorted version of what actually happened in the 1990s,” and RSM economist Joe Brusuelas wrote that recent productivity gains reflect earlier automation investments rather than AI. Martin Baily, a former White House economic adviser, said companies take time and money to adopt new technologies and train staff, limiting how fast AI can raise productivity.
Federal Reserve Gov. Michael Barr said in a speech this month that an AI-driven boom is unlikely to be a reason to lower policy rates, noting that business borrowing to invest in AI and increased household borrowing could push rates up. Austan Goolsbee, president of the Federal Reserve Bank of Chicago, said the late-1990s analogy is hard to accept and that Alan Greenspan’s insight then was that productivity gains justified holding off on rate increases, not cutting rates.
Analysts also pointed to structural differences between the eras. Government deficits are larger now, global trade barriers have climbed and immigration flows have changed, factors that economists including Perkins and Michael Pearce of Oxford Economics said make the current environment less benign than the late 1990s. Those differences, they warned, could limit the extent to which AI alone can deliver a repeat of the 1990s expansion.
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