If Trump Doesn't Change Course: Acemoglu Warns of a Deep Economic Crisis

TVS News AI, editorially supervised, presents If Trump Doesn't Change Course: Acemoglu Warns of a Deep Economic Crisis.

The key figure comes at the outset: over the next five to ten years, the United States could lose considerable economic strength, according to economist and economics Nobel Prize winner Daron Acemoglu. The precondition, he says, is that President Donald Trump ends his destructive course. Acemoglu describes two possible outcomes: a gradual decline in many small stages or a major shock, such as if the AI bubble bursts.

The United States is currently growing, and doing so more strongly than Europe. For Acemoglu, that is precisely what makes the situation urgent: The destructive process could be cushioned in the short term while permanently reducing the scope for political, economic and social action. In other words, he is not claiming that the crisis has already begun. This is a conditional warning: If Trump's course persists, the risks to growth, the government's ability to respond and democratic stability will increase.

Why a crisis could come in stages or as a shock

The gradual course

Acemoglu considers a gradual decline possible. The economy would continue to run but lose momentum over time. Five to ten years would be the period during which, according to his warning, the country could become economically weaker. Sudden headlines would not be necessary for this. The damage would occur over several stages as the institutional framework continues to erode.

The abrupt course would be the second possible outcome. Acemoglu explicitly cites the bursting of the AI bubble as a trigger. Expectations for artificial intelligence have been greatly overstated, he says. Such a shock would hit the United States particularly hard because the state would then have few financial resources and little institutional capacity left for a stabilizing response.

If Trump does not end this destructive course, a deep economic crisis is looming

Debt and weak institutions narrow the room for action

Acemoglu links the possible economic crisis to three concrete pressures: high government debt, overestimated AI and the destruction of democratic institutions.

High debt, according to Acemoglu, limits the US government's room for maneuver. This is the crucial connection: A shock does not only have to be economically severe. It strikes a state that simultaneously has less money and fewer functioning institutions available to cushion its effects.

According to Acemoglu, the starting conditions are even worse than during the financial crisis: Institutions are weaker today than they were then. In addition, hardly any international cooperation remains. This, too, is a consequence of the deliberate destruction of institutions. The US government is therefore losing not only financial room for maneuver but also the ability to respond to a global crisis together with other countries.

Trump also governs through decrees and attacks democratic institutions. Acemoglu says the institutions neither sanctioned the president's and his clan's rampant corruption nor prevented Trump from undermining the democratic order. For him, Trump is therefore more than a symbol: The weak institutional framework first made it possible for him to act and allows him to act as he does.

The AI bubble is more than a stock-market risk

Acemoglu regards the AI boom as a speculative bubble and doubts that technological progress has already reached the economy broadly. So far, aggregate statistics provide little evidence that companies are becoming significantly more productive through AI. He names one important exception: programming.

This distinguishes genuine technical advances from expectations about their economic benefits. For him, it is precisely this discrepancy that makes AI politically relevant. If expectations are disappointed while the government's room for action is also limited, the technology shock will strike the United States in a weak institutional environment.

Acemoglu also sees a social danger. If the state does not intervene, AI could increase inequality to an intolerable level. He therefore calls for “Worker AI” that works with employees in areas such as education and healthcare instead of replacing jobs. As long as the technology remains with large tech companies such as OpenAI, he says, this model is unlikely to emerge.

Trump's support extends deeper than the Republicans

Acemoglu points to three grievances driving discontent in the United States: unequal distribution of the benefits of prosperity, public services that do not meet people's expectations, and the sense that politicians are not listening.

He says this anger is justified. Political elites had neglected people without university degrees for decades. He cites Hillary Clinton's 2016 election campaign as an example: Trump surprised him, while he was also dismayed that Clinton might not have acknowledged the economic and social suffering of around 50 percent of the population over decades.

Acemoglu therefore does not explain Trump's support solely through his personality. Trump understands the everyday concerns of many people and uses them to advance his institutional destruction. Nevertheless, he remains the most dangerous right-wing politician: Unlike Marine Le Pen in France, Nigel Farage in Great Britain or the AfD in Germany, Trump explicitly pursues the goal of destroying democratic institutions.

The midterms will determine the next step

Acemoglu expects the Republicans to lose some seats in Congress in the midterms. He explicitly warns against drawing too much from that: What matters more is whether the Democrats find a presidential candidate by 2028 who understands the working class and resolutely pursues a renewal of liberalism.

He names Senator Jon Ossoff of Georgia and New York City Mayor Zohran Mamdani as possible candidates. Mamdani advocates democratic socialism and has made the cost of living a central issue. Acemoglu says the approach has the advantage of addressing dissatisfaction with expensive living conditions rather than arguing only on institutional grounds.

His overall assessment nevertheless remains cautious. He sees America regaining its role as a global leader and role model after overcoming the “Trump shock.” Without this change of course, from his perspective, weaker institutions, less cooperation, limited room for action and overestimated AI will remain combined — a mixture that could weaken things gradually or strike with a major shock.