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Taxpayers Must Not Be on the Hook for Bailing Out the AI Industry

 SCHEERPOST, September 3, 2026,By C.J. Polychroniou

Hundreds of billions of dollars are flooding the AI industry. Economist Gerald Epstein says this bubble could burst.

The U.S. economy is heading toward uncharted territory. Artificial Intelligence (AI) is transforming business operations and all areas of finance, the national debt is on an unsustainable fiscal path, and most middle-income Americans cannot keep up with rising costs. Moreover, as hundreds of billions of dollars are flooding into artificial intelligence, there are serious concerns that an AI bubble could trigger another bailout with taxpayer money.

In the interview that follows, leading progressive economist Gerald Epstein, who initiated and directs the Game Changers project at the Political Economy Research Institute at the University of Massachusetts Amherst, talks about AI’s impact on finance and the bailout problem and how a transformative public finance strategy can revive democracy, promote equity and social justice, and build strong and sustainable communities. Epstein is professor of economics and founding co-director of the Political Economy Research Institute. 

C.J. Polychroniou: AI is possibly the fastest-growing technology in history and is already reshaping the U.S. economy in innumerable ways as organizations of all kinds are deploying AI tools across every functional area. But there are many public concerns surrounding AI, including whether it is becoming “too big to fail.” If so, taxpayer money may be used yet again to bail out private companies and institutions from collapse. What are the dangers here?

Gerald Epstein: There are indeed many public concerns about the economic and financial implications of AI. But let me focus on AI’s impact on finance as there are legitimate fears that the government may be asked at some point to bail out the AI industry, especially given the close ties of the Trump administration to AI firms.

As Marc Jarsulic and I argue in our Game Changers policy analysis “No More Bailouts,” the AI investment boom is increasing the level of risk for AI-related firms. The reason is that for these investments to be profitable, AI revenue will need to grow substantially. But some financial analysts doubt that the revenue will materialize. For example, in Bain’s Technology Report 2025, it is estimated that capital expenditures of $500 billion per year would be required to cover anticipated AI demand. To fund this investment, annual AI revenue would need to increase to $2 trillion. However, after accounting for likely cost reductions at the AI firms, Bain’s research concluded that their annual revenues would fall $800 billion short of that mark.

In that context, some of the risks of the AI-led investment boom have been shifted to financial markets as the AI boom is relying increasingly on debt. The revenues of the tech monopolies are extraordinary, but they are insufficient to pay all the costs of data centers. In 2025, the capital expenditures of the top five hyperscalers were more than 30 percent of their total revenue. They are projected to rise to more than 40 percent by the end of 2026. This has forced these companies to turn to debt and equity markets for finance. In 2025, major tech hyperscalers alone issued $120 billion in debt, but the figure was pushed toward $175 billion in 2026 and is expected to rise to $300 billion annually in the coming years.

A distorted government response to an AI-bust is in the cards. A rational policy response to an AI bust would not include bailouts of AI-related firms or their creditors. The investment boom, and the debt that helps finance it, have been engineered by sophisticated actors aiming to dominate a potentially lucrative innovation. There is no ex ante (“before the event”) government safety net for financial bets of this kind. Caveat emptor (“let the buyer beware”) applies to the firms playing the AI domination game if it ever applied to anyone. Unfortunately, we cannot count on a rational response from the current administration. Extensive conflicts of interest and cronyism mean that government bailouts for insiders would be on the table. Hyperscalers and other AI-related firms have received extraordinary government support. The Trump administration has taken over 90 federal actions to help the AI industry, including executive orders easing permitting for massive data centers, federal support for AI exports and reducing regulatory barriers for the industry. The Trumpian transactional quid pro quo is apparent. Nvidia and Intel have given the government equity to curry favor. A number of major AI companies contributed several million dollars to Trump’s White House demolition — a.k.a. his “ballroom” — fund. And AI firms continue to finance MAGA. This is business as usual for Trump.

If AI goes south, we should expect major pressures from the Trump administration for a debt- or taxpayer-funded bailout.

Bailout operations are a trademark of neoliberalism. That being said, what is the actual problem with bailouts, and how do we put an end to the bailout problem?………………………………………………………………………………………………………………………………………………………………………………………………………………… https://scheerpost.com/2026/09/03/taxpayers-must-not-be-on-the-hook-for-bailing-out-the-ai-industry/

September 5, 2026 - Posted by Christina Macpherson | business and costs, politics, technology, USA