AI is a ‘New York story’ – for better or worse, official says
Thinking about AI. Ayman Siam/Office of NYC Comptroller
The New York City comptroller doubled down on calls to pad budget reserves in light of AI’s economic risks.
Will the artificial intelligence revolution help or hurt New York’s economy? New York City Comptroller Mark Levine – and a team of economists – puts the odds at about 50/50.
What’s certain is that New York will feel the effects one way or the other. “Wall Street has done well in no small part because we are financing the AI boom. That begs the question, what happens if that bubble bursts?” he told reporters this week. “I don’t think people appreciate how much this is a New York story.”
A new report from Levine’s office released Thursday morning lays out five different possibilities for how the current AI boom could affect hiring, tax revenue and wages in the city in the next few years. The report’s findings are based on a February analysis by Moody’s Analytics that evaluated similar scenarios in a national context. Levine’s office adapted and updated it for the local economy.
The most likely scenario – estimated at 35% likelihood – would see moderate job, wage and tax revenue growth – producing what the report refers to as an “AI-Empowered Economy.” An even more optimistic scenario – estimated at 15% likelihood – foresees a “productivity boon” that raises corporate profits without widespread job displacement. (Levine said their report built off of Moody’s projections, which were calculated by taking an average of its seven authors’ estimates, as well as that of Claude, a large language model.)
But three other possible scenarios, together totaling 50% likelihood, predict that AI will have negative outcomes for employment and tax revenue. That could look like AI investment falling flat, producing fewer private sector jobs, lower adoption and less tax revenue, a 25% likely scenario, per the report. Another scenario, at 20% likelihood, foresees that AI adoption will happen even faster than anticipated, producing more widespread replacement of jobs and an increase in unemployment. The worst case scenario, and deemed the least probable at 5% likelihood, is an “AI shockwave” that envisions the most significant job displacement and resulting tax revenue losses.
Throughout each scenario, Levine said, concerns about income inequality are what keeps him up at night. “I’m worried (that) the gains of the years ahead will flow to the people who own stock and not to people who live off wages,” he said.
All scenarios, Levine argues, demonstrate a need for New York City to massively grow its budget reserves to prepare for outcomes that economists can only guess at. Levine has already pushed to fortify the city’s budget reserves, but argues his office’s findings in the new report are reason to double down. Specifically, he has called for the city’s Revenue Stabilization Fund, often called the rainy day fund, to be built to 16% of the city’s tax revenue, which this fiscal year would equate to $13.5 billion, or roughly $11.5 billion more than is currently in the rainy day fund. While this year’s budget process is well under way, Levine suggested the city could find deeper savings to build reserves by curtailing growing spending on the CityFHEPS rental voucher program and combining city schools with declining enrollment.
Levine has also called for rules to be established to govern when funds can be withdrawn from the rainy day fund – for example a recession. Among those triggers to allow withdraws should be AI disruption, he said.