The U.S. Economy Is Hooked on AI Spending

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Caitlin McCabe (0:27)

Talks to end the war in Ukraine enter a new phase as a top US. Army official takes on an unexpected diplomatic role, speaking directly to Russia. Plus, what happens to the US economy if you take away AI spending? Well, things start to look a little less rosy.

Konrad Putzier (0:45)

There are some calculations that basically estimate that about half of GDP growth in the first half of this year is due to AI. And the story is really that without AI, there really isn't growth in many other parts of the economy.

Caitlin McCabe (0:59)

And if you're serious about selling your home, you might need to drop the price. It's Tuesday, November 25th. I'm Caitlin McCabe for The Wall Street Journal. And here is the AM Edition of What's News, the top headlines and business stories moving your world today. We begin with the latest in the complicated push for peace in Ukraine. We are reporting that Army Secretary Dan Driscoll met with a Russian delegation in Abu Dhabi yesterday, with more discussions continuing today, in a sign that peace talks have entered a new phase, including direct talks with Moscow. Driscoll is well liked by the administration and has been called a killer in the past by President Trump. His role here is a departure from his usual focus on training soldiers. But it highlights how White House officials believe Russia and Ukraine might be more receptive to military broker negotiations and comes after US allies scrambled to respond to the leak of President Trump's 28-point peace plan, which was widely seen as heavily weighted in Russia's favor.

Robbie Gramer (2:06)

This plan drops a lot of people in Washington, a lot of people in Ukraine and in the rest of Europe are shocked. And it sparks this flurry of diplomacy and a lot of anxiety.

Caitlin McCabe (2:17)

BATS Journal national security reporter Robbie Gramer. He says Trump ordered envoys Steve Whitcoff and Jared Kushner to start drafting a plan last month, similar to the one that paused fighting in Gaza.

Robbie Gramer (2:29)

Kushner and Whitcoff drafted it up and then brought in a Kremlin insider, someone really close to Putin, Russian financier named Kirill Dmitriev. They brought him to Miami for a few days of secret talks to hash things out.

A few weeks later, they then brought in one of Ukrainian president, Vladimir Zelensky's top aides, Rostam Uvmurov, for consultations. Just a couple days after that, the plans leaked and this diplomatic firestorm started. Since then, the United States dispatched Marco Rubio, Trump's acting National Security Advisor and Secretary of State to Geneva to hash out talks with the Ukrainians. European leaders who were at a G20 summit in South Africa scramble to create their own counterproposal and the talks in Geneva seem to yield positive results for both sides.

Caitlin McCabe (3:18)

Robbie noted that how this has played out has given some insight into how Trump approaches foreign policy.

Robbie Gramer (3:24)

He relies on this small group of advisors. He says, bring me a big and bold plan. Let's shake things up. Let's break up the status quo and see what happens. And of course, that leaves American officials, US allies, even lawmakers in the dark. They can be shocked. They can be frustrated. They can say the administration is only adopting Russian talking points here. All of that happened. But it does offer a window into how Trump operates and how Trump at least assesses he can possibly finally bring an end to this war in Ukraine, which on the campaign trail he vowed to do from day one.

Caitlin McCabe (4:00)

At the same time, the war shows no signs of slowing, with Russia launching a wave of attacks on Ukraine today, killing at least six people in strikes that hit city buildings and energy infrastructure. And a Ukrainian attack in southern Russia killed three people and damaged homes.

We are exclusively reporting that House Speaker Mike Johnson has warned the White House that most Republicans are opposed to extending the Enhanced Affordable Care Act subsidies. The message from Johnson came in a phone call with administration officials just as reports indicate Trump's advisers have been drafting a plan for a temporary two-year extension paired with reforms, including income caps to limit who qualifies for the aid. 20 million Americans face a sharp spike in health care costs if Congress fails to act by the mid-December deadline. Democrats have said they will introduce an amendment giving Republicans an opportunity to extend the tax credits for a three-year period. The primary hurdle for many GOP lawmakers is the taxpayer-funded portion of the subsidies, which go toward health care plans that cover abortions, which they view as a red line. When you think about the US economy over the past several months, you'd be forgiven for feeling confused by all the mixed signals. Encouragingly, economic growth has been strong, but the job market is cooling and inflation is still elevated. It's no secret that the current artificial intelligence boom has been driving a lot of that economic growth, but as journal economics reporter Konrad Putzier explains, it might be accounting for more growth than you think. In essence, if you take away AI spending, the economy looks in worse shape, and that's only adding to fears of an AI bubble that have recently taken hold in financial markets. Konrad, I think we all know that AI is helping to juice the economy. I mean, I'm just thinking of the sheer number of data centers that are being built alone, but how dependent is the American economy on AI?