AI and deflation: the State's next budget shield

The AI paradox: more efficiency, lower prices, and a State that doesn't know how to stop spending

What happens if artificial intelligence boosts productivity and prices fall? The answer, according to the analysis of several experts in economics and politics, is not an improvement in general welfare, but an inflationary reaction from the public sector to preserve its clientelist structure. The scenario outlined is one of deflation induced by automation —cutting costs in logistics, administration, services— colliding with the wall of insatiable public spending.

The central argument is that any savings generated by AI in the private sector will be absorbed by the State through higher taxes or money printing. The reason is simple: the administration has no incentive to shrink. On the contrary, every efficiency gain in the private sector translates into more pressure to fund clientelist networks, subsidies and agencies that are never touched. As a veteran analyst points out, "cutting spending is counterproductive for them. Do you know what a clientelist network is?".

Where AI will actually be efficient: the Tax Agency

The only department where AI will be applied with enthusiasm is the Ministry of Finance (Hacienda, Spain's tax authority). Revenue collection is sacred. The technology will make it possible to cross-reference data, detect fraud and optimise tax collection with pinpoint precision. The rest of the services —healthcare, education, justice— will keep the same waiting times, because efficiency there is not of interest. The debate notes that the administration "will only use AI efficiently in the tax collection department".

The predictable result is an explosive combination: prices trending down due to competition and automation, but fiscal pressure trending up to sustain public spending. In other words, a deflation that never reaches the citizen's pocket because the State neutralises it with monetary inflation. The parallel with Zimbabwe is no coincidence: when the public sector refuses to adjust, the money-printing machine ends up prevailing.

The citizen, caught between productivity and plunder

While companies cut costs thanks to AI, the average citizen watches their shopping basket fail to drop —olive oil at 15 euros, as one participant jokes— while taxes keep rising. The productivity generated does not translate into purchasing power, but into more room for the State. The paradox is served: the technology that could set us free ties us even more tightly to the revenue machine.

The conclusion is hardly encouraging: unless the model of the State changes radically, AI will not bring shared prosperity, but a new chapter in the old story of fiscal inflation. As a summary, "in anything involving revenue collection, in everything".