This would correspond to the labor market being at full employment and the economy operating at its capacity,” Baker writes. “If the water flows into the tub too quickly, the bathtub overflows and we get water all over the floor. This would be the inflation story.”Right now, the “rich people” faucet — the AI spending bubble — is gushing at full blast, while the other one barely trickles. In sum, Baker posits that the “collapse of the AI bubble will create the room the economy needs for policies that would make the lives of tens of millions of people far better. More on the AI bubble: There’s a Stunning Financial Problem With AI Data Centers