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Edited by: James Desio and Carter Hutchinson

Happy Thursday! In today’s newsletter, we examine the cost to the United States of a Russian victory in Ukraine, increased global investment in AI, and the different components of federal spending. 

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1.  The True Price of Russian Victory

Topline: If Russia wins in Ukraine, US defense spending would increase by hundreds of billions of dollars over the next five years. AEI’s Elaine McCusker and Fred Kagan examine what it would cost for the America to defend Europe from a victorious Russia and conclude that the US would need to spend an additional $808 billion on defense by 2030.

The Details: The US defense would need to increase across the board to defend America’s crucial global interests and allies. This includes an increase in spending on land power ($87.8b), sea power ($50.3b), airpower ($108.7b), unmanned assets ($28.9b), munitions and air defense ($173.1b), basing and troop readiness, ($248.4b), and space and cyber capabilities ($36.5b).

Key Takeaway: Supporting Ukraine is in America’s best financial interest. McCusker and Kagan conclude that the near-term cost of supporting Ukraine is dwarfed by the long-term costs of allowing Russia to win. We should do everything we can to help Ukraine win now, or pay more in "blood and treasure" later.

"A world in which Russia beats Ukraine will be more dangerous and more expensive for America—and likely much more of both than we capture here." —Elaine McCusker and Fred Kagan

2. Skyrocketing AI Spending                

Topline: Spending on AI by businesses is projected to increase drastically, reaching $202.2 billion by 2028. AEI’s James Pethokoukis observes that AI agents are already transforming workplace operations across sectors—a promising sign of the technology’s potential as a general-purpose tool.

What Are They Used For? Companies are using AI agents to accelerate manufacturing, diversify financial analysis, and advance code writing, among other complex tasks.

A Closer Look: AI agents can both automate and shift work—take the Spanish company Consentino. They use AI agents to fill in for their customer service, and have replaced the work of 3–4 people who now serve the company in other areas. 

The Long-Term View? AI is diffusing throughout the economy. Pethokoukis writes that we’re moving past a focus on "long stagnation" and that the new approach to an AI-led economy is "everything, everywhere, all at once."

3.  Budget Breakdown

Topline: Soaring debt and deficits are eroding trust in our policymakers and our institutions. AEI’s Kevin Kosar breaks down where the money from the federal budget goes and underscores that most government spending goes toward entitlements—federal programs codified in law like Social Security, Medicaid, and Medicare.

Expanding Entitlements: Entitlement spending has outpaced discretionary spending since 1994. Entitlement programs are designed to grow in cost each year, but they do not have a dedicated funding stream growing with them.

What’s the Risk? The American economy depends on public trust. When confidence is lost in monetary institutions, like in 2008, major economic crises become a real possibility. The budget process is a key component of reducing the deficit and reinstating public confidence in American monetary policy.

“As entitlements have come to consume more and more of the budget one effect is that there is less of a budget to expend on all the important things, which, unsurprisingly, intensifies the political conflicts around these other expenditures. Legislators rail over a few billion dollars spent on a failed government program while entitlement spending drives trillion-dollar deficits.” —Kevin Kosar

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