City Comptroller Mark Levine is urging local lawmakers to invest in a rainy-day fund that will protect New Yorkers in case artificial intelligence causes an economic downturn.
A report released Thursday by the comptroller stated that AI could reshape the city’s economy in different ways, negative and positive, and that it is critical to prepare for the possibility of economic damage. Levine called for lawmakers to set aside 16% of annual tax revenue, drawn in part from existing rental assistance programs and education budgets. He said that would be enough to offset a “typical recession.”
“Three years ago, it was hard to get anyone to care in government,” Levine said at a press conference, referring to the changes anticipated due to increased use of AI. “They've started to care.”
“People feel paralyzed,” he said. “And I am pointing to the one thing that should be beyond debate.”
The call to action from the city’s chief financial officer comes as AI has become a major factor in society and the broader economy in the span of just a few years. A January report by the St. Louis Federal Reserve Bank said that the technology is “reshaping the way we work and live” and “already affecting gross domestic product” through an investment boom. At the same time, Levine said, AI has caused considerable anxiety that it may replace jobs, including office jobs in New York City, and cause a potential recession if the boom gives way to an investment bust.
The report outlined several scenarios for ways AI could affect New York’s economy. One included a possible economic downturn. Another scenario foresees possible economic growth.
The most likely economic scenario, according to the report, is an “AI-Empowered Economy” in which productivity rises gradually with “limited disruption” to the workforce. That scenario, Levine said, has a 35% chance of playing out, in part because many private equity firms backing AI, including Apollo, Blackstone and KKR, are located in New York City and have seen bonuses grow.
The second most likely scenario, however, is more alarming. In that, the ongoing AI investment boom collapses and has far-reaching implications for the economy, according to the report.
In that scenario, “...the U.S. stock market declines nearly 35% in year one. NYC's private sector loses 52,500 jobs over the year. At the deepest point, in 2027Q3, the City has roughly 135,000 fewer private-sector jobs than baseline,” the report states. The report adds that in that scenario, combined New York City tax revenues would fall nearly $9 billion over four years.
Levine said much about AI's future impact remains cloudy, but pushed lawmakers to trim budget costs in order to shore up a rainy-day fund. He pointed to two potential items: the rental assistance program CityFHEPS, whose annual cost for taxpayers has been “not sustainable,” and public schools, particularly smaller schools that have been built even as the number of students attending the city’s public schools has declined.
“ We're going to have to combine some of those schools,” Levine said. “Politically very tough, I know. Very, very tough. We're going to have to do that.”
Recent college graduates have been hit especially hard by the economic uncertainty, the report stated, with the unemployment rate for young, college-educated New Yorkers recently surpassing that of their non-college-educated peers.
Despite the uncertainty about what will happen – business experts and publications have taken to calling it the “AI Fog” – Levine urged lawmakers to take action soon.
“ We've never seen anything like this,” Levine said. “The Industrial Revolution took, what, 40 years to play out in New York City? I'm giving you a three to five-year timeline here. We are in uncharted territory.”
