I Asked A.I. to Balance America's Budget
Its response was surprisingly simple
This weekend, Moody's became the third credit rating agency, after Standard & Poor's and Fitch, to downgrade U.S. debt from AAA-rated to Aa1. The danger of this downgrade is that it may become more expensive for the federal government to borrow money. That means interest on the national debt will eat up an increasingly large share of the annual budget, crowding out other priorities.
Moody's said it was downgrading U.S. treasury bills due to both political parties' consistent inability to get America's financial house in order. Nor have Trump and Republicans done anything to change course. The non-partisan Committee for a Responsible Federal Budget estimates that Trump's "big, beautiful" tax bill would add more than $3 trillion to the national debt over the next decade.
The last time America had a budget surplus was 2001, at the end of Bill Clinton's term. Since then, Republican presidents Bush and Trump have both exploded the deficit with massive tax cuts and spending increases. Obama and Biden both cut the deficit in half relative to their predecessors, but neither managed to produce a surplus.
Is balancing the federal budget really so hard? I was skeptical, so I decided to ask Claude, Anthropic's flagship LLM, to give me some ideas.
Here's the prompt I wrote:
You are a member of the United States Senate Budget Committee. Your task is to design a budget for the next ten years that will produce a budget surplus and, in the long run, eventually permit the United States to pay down its national debt. You may consider any combination of spending and tax policy changes, but you must ensure that these changes have minimal negative impacts on employment, consumer confidence, and investor confidence.
And you know what? Claude's response was actually pretty good. Let's break it down.
A balanced approach to fiscal sanity
The first thing Claude did was reassure me it had understood the task, crafting a plan "aimed at achieving a surplus while protecting economic fundamentals." Claude's strategy involved a mix of tax increases, spending cuts, and targeted spending designed to boost economic growth (and therefore tax receipts).
Take taxes first. Claude wants to impose a carbon tax of $25 per ton, increasing by five percent annually, with rebates for low-income households. It wants to close corporate tax loopholes and set a minimum effective tax rate of 25 percent on incomes over $1 million. Financial transactions would be subject to a 0.1 percent tax (except for retirement accounts), and IRS enforcement would be ramped up.
You may be confused about Claude's prescription for income taxes. "Isn't the top rate already greater than 25 percent?" Well, yes, but the top marginal rate isn't the same thing as your effective rate. Claude is basically proposing something like the "Buffett rule," named after investor Warren Buffett, who famously complained that he paid a lower effective tax rate than his secretary, since so much of his income took the form of capital gains.
Claude anticipates these changes would reduce the deficit by $350 billion by the fifth year, and $600 billion ten years out.
What about spending? Unlike our elected leaders, Claude understands that you can't make any headway cutting the deficit unless you tackle the Big Three: defense, healthcare, and Social Security.
On defense, Claude suggests reducing overseas contingency operations by 15 percent, streamlining procurement processes and eliminating redundant weapons systems, and consolidating military bases.
On healthcare: implement Medicare drug price negotiations, expand value-based care models, and reform provider payment systems.
On Social Security: remove the income cap on payroll taxes and adjust benefit formulas, gradually increase the retirement age by two months for the next six years, and adjust cost-of-living formulas to better reflect actual expenses.
Finally, Claude also suggests making certain cuts to discretionary spending, including reforming agricultural subsidies to target small and medium-sized farms and consolidating overlapping federal programs.
All told, Claude estimates these spending cuts would save $200 billion a year by year five, and $450 billion annually by year ten.
In addition to taxes and spending cuts, Claude's plan also includes economic growth initiatives with respect to infrastructure, research and development, and workforce development that would increase America's GDP by 0.5 percent or more from the third year on. This would generate greater revenues over time, and by year ten, Claude estimates the U.S. would be running a budget surplus of 0.5 percent of GDP, allowing us to slowly begin paying down the national debt.
Analysis
The first thing that jumps out at me about Claude's budget proposal is just how moderate it sounds. The proposed tax increases are quite mild, and the spending cuts don't significantly impact anyone's benefits. There's no revolution in this budget, whether of the progressive or reactionary flavor.
And you know what else isn't there? Tariffs, tax cuts for the rich, work requirements for welfare or Medicaid, cutting tens of thousands of people from the federal workforce, or any of the other staples of right-wing policy papers or Trump stump speeches. Most of Claude's suggestions — like Medicare negotiating drug prices, the Buffett rule, mild defense cuts, etc. — have been consistently championed by moderate Democrats for decades, but always triggered furious backlash from lobbyists and Republicans crying "socialism!"
I also noticed that a lot of Claude's policies are vaguely worded. But that's alright. Claude closes by asking me whether I'd like it to elaborate on any aspects of its budget strategy.
"Which corporate tax loopholes would you propose closing?"
Claude comes back with eight specific ideas, and the estimated revenues from each. I won't get into them all, but you'll recognize many of them if you've followed American politics over the last decade or so. Claude suggests reforms targeting international tax havens, eliminating the carried interest loophole, reforming the depreciation schedule, addressing stock buybacks, and taking on various industry carveouts such as fossil fuel subsidies. Claude estimates these reforms would net about $58 billion per year over ten years.
"Which weapons systems do you consider redundant?"
Claude wants to scale back the F-35 program by 25 percent, accelerate the retirement of the B-2 bomber and Littoral Combat Ship programs, reduce Carrier strike groups from 11 to 9, pause new Abrams tank procurement while modernizing existing units, consolidate various missile programs, and reduce land-based ICBM deployments to focus more on submarine and bomber delivery systems. These reforms would save about $15 billion per year over ten years.
"Which overlapping federal programs could be consolidated?"
Here Claude answers with dozens of suggestions across five major domains: economic development programs, education and training programs, health and human services, environmental and energy programs, and housing and transportation.
It's way too much to go into here, but just to give you one example, Claude suggests merging 160 housing assistance programs across the Departments of Housing and Urban Development, the US Department of Agriculture, and the Veterans Administration, saving $3.7 billion annually.
Conclusion
I'm not saying we should just go ahead and implement all of this. I sort of feel about A.I. the way I feel about Wikipedia. It's ok to start your research there, but not to finish it.
But when I look at the boondoggle that DOGE has become, I have to wonder: for a lot of tech guys, they seem kind of incapable of using basic A.I. tools to help streamline their work. Unless, that is, they were more concerned with implementing a political agenda from the start, regardless of what the data said.
Trump and his allies are always talking about "waste, fraud, and abuse," with the emphasis almost completely on the last two. That's not an accident, and it's obviously ideological. But the reality is that while there's some fraud out there, there's a lot more waste. And there's a lot more waste because any large organization is going to amass a lot of redundancies over time, preserved by a combination of special interest lobbying, general apathy, and institutional inertia.
Conservatives live in a fantasy world where they can cut taxes and raise defense spending, all without touching programs like Medicare and Social Security that benefit their elderly base, and this is somehow supposed to be called "fiscal discipline."
But Claude, which has no political constituency, simply looks at the data and comes to the obvious conclusion: you have to raise taxes and cut spending in the areas where government spending is greatest. And you have to do it in ways that place more of the burden on those best equipped to bear it, in order to minimize any harmful effects on the economy.
That's essentially what liberals like myself have been saying for years.
Published in Bouncin' and Behavin' Blogs
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Written by Dustin Arand
Lawyer turned stay-at-home dad. I write about philosophy, culture, and law. Author of the book "Truth Evolves". Top writer in History, Culture, and Politics.
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