To help you understand the trends surrounding AI and other new technologies and what we expect to happen in the future, our highly experienced Kiplinger Letter team will keep you abreast of the latest developments and forecasts. (Get a free issue of The Kiplinger Letter or subscribe). You’ll get all the latest news first by subscribing, but we will publish many (but not all) of the forecasts a few days afterward online. Here’s the latest…
Generative AI has big potential in the public sector. Federal AI chatbots could answer public questions related to Social Security, passports or small business loans. Federal workers could save time and boost productivity by harnessing AI tools embedded in e-mail, databases and other software. Government IT could be streamlined, cybersecurity enhanced, and government expenses curbed.
Accelerating AI adoption
But implementation could be difficult in this years-long process. To kick things off, the White House is pressing for fast adoption to unlock productivity gains and even streamline regulations and other bureaucratic processes for businesses and citizens.
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New guidance from the Trump administration calls for federal agencies to adopt AI in a timely and cost-effective manner while also addressing attendant risks. The administration is also concerned with any one dominant AI player taking over and hindering choice, so it calls for requirements that make it easy for vendors to sell to the government.
The new policies update Biden-era memos and retain a lot of the safeguards and requirements, but with a greater focus on accelerating AI adoption. The federal government will have an outsized impact on AI since it spends more than $100 billion per year on information technology investments.
That huge pool of money means leading AI companies, Alphabet, Amazon, Microsoft, OpenAI, Anthropic and others will work hard to land government AI contracts, while also pushing the government to shift non-IT spending to AI-enabled software. There will be a huge focus on defense contracts, with the Pentagon’s budget nearing $1 trillion.
Safety and compliance
As AI adoption ramps up in the government, problems will arise, including privacy and security concerns, as well as trouble finding effective uses and training the federal workforce. Because of these risks, AI vendors will emphasize safety and compliance.
But some are waiting to see how actual AI use unfolds. There have been reports that the Department of Government Efficiency, known as DOGE, has used AI tools in ways that are not compliant with transparency and risk-mitigation practices.
“The true test will be how the Office of Management and Budget works with all federal agencies, including DOGE, to implement these critical requirements in a timely and transparent manner,” says Quinn Anex-Ries, a senior policy analyst at the Center for Democracy & Technology, a Washington, D.C.-based nonprofit focused on digital rights. The push for fast adoption could be in tension with rigorous safety compliance in high-risk areas.
Insights for business
Overall, federal AI adoption has a big benefit for businesses: Providing insight into how AI is actually used in an organization. Agencies are legally required to provide reports on their top uses of AI. “It’s a really important tool for the private sector,” says Anex-Ries, pointing to 2024’s Federal AI Use Case Inventory.
The report notes how the Department of Labor is using an AI assistant to help answer procurement and contract questions, and the U.S. Patent and Trademark Office is using AI to help examiners find relevant documents. The Centers for Disease Control and Prevention is using AI to speed up investigations of multistate foodborne disease outbreaks. The Veterans Benefits Administration is using AI to detect fraudulent direct deposit changes.
As long as the reporting continues, businesses will have a treasure trove of insight on AI adoption. Though there’s near-term uncertainty about Congressional spending, the longer-term outlook is clear: AI will be increasingly used across the federal government.
This forecast first appeared in The Kiplinger Letter, which has been running since 1923 and is a collection of concise weekly forecasts on business and economic trends, as well as what to expect from Washington, to help you understand what’s coming up to make the most of your investments and your money. Subscribe to The Kiplinger Letter.