Warnock Pushes Federal Reserve Chair Kevin Warsh to Implement Artificial Intelligence Policy That Protects All Americans, Not Just Tech Executives

According to a Bloomberg analysis, spending on artificial intelligence has risen to about 8 percent of U.S. gross domestic product

Americans' retirement accounts are increasingly tied to the artificial intelligence industry, driven by massive increases in the stock prices of chip and AI companies

Earlier this year, Senator Reverend Raphael Warnock introduced legislation to support America's workforce amid the rise of artificial intelligence

Senator Warnock: "But here's my problem: Americans are worried about what AI will mean for the economy, and I'm worried that this viewpoint isn't represented at the Fed"

Washington, D.C. - Senator Reverend Raphael Warnock (D-GA), Ranking Member of the Senate Banking Committee's Economic Policy Subcommittee, questioned Federal Reserve Chair Kevin Warsh about how to protect Americans from potential economic uncertainty tied to the growth of the artificial intelligence (AI) industry.

"I'd be worried about a massive economic slowdown. You know, the impact of Wall Street on Main Street, and I'd be worried about job losses," said Senator Warnock. "Stock prices tumbling would mean Americans could not retire as planned, and I don't want to see taxpayers holding the bag should this AI bubble pop…But here's my problem: Americans are worried about what AI will mean for the economy, and I'm worried that this viewpoint isn't represented at the Fed."

According to a recent Bloomberg analysis, AI spending accounted for approximately 8% of U.S. gross domestic product and was a leading driver of economic growth. Despite growing alignment between the tech industry and top Wall Street investors, major AI firms have yet to generate meaningful profits. During Wednesday's Banking Committee hearing, Senator Warnock pushed Chair Warsh to consider this as he seeks input on AI.

Senator Warnock has championed protections for American workers as automation and AI reshape the workforce and economy. In February, Senator Warnock introduced the Investing in Tomorrow's Workforce Act to increase investments in worker training and prepare workers for jobs of the future. He also successfully secured $65 million in funding for the Georgia Institute of Technology to help the university remain a national leader in computer science research and innovation.

Watch the Senator's full remarks HERE

See below a transcript of Wednesday's hearing exchange

Senator Reverend Warnock (SRW): "The American economy is heavily leveraged on the success of artificial intelligence, and this is an issue that I'm very interested in-been engaging and talking to folks in the industry and folks outside of the industry, various stakeholders. According to a Bloomberg analysis, AI spending most recently climbed to about 8% of the U.S. gross domestic product, driving the country's economic growth. Chair Warsh, you have long been bullish on AI. However, up to now, despite investors betting big on them, none of the major AI models have been meaningfully profitable. What are the consequences to our economy if none of these companies ever become profitable?

Federal Reserve Chair Kevin Warsh (KW): "So, if they were to disappoint investors, I think the capital markets would dry up for them, and some of that capital investment would be curtailed."

SRW: "I guess that's one way of putting it. I guess I'm getting at where ordinary folks are in the midst of that. The markets behind the markets are real people who have retirement savings and who are trying to make their present as well as their future work. American retirement accounts are increasingly tied to AI, and so there's the human issue driven by massive increases in the stock prices of chip and AI companies. You might talk about the current markets in a way. It sort of-it is tall and narrow. Let's imagine if we are in an AI bubble. What would happen to our economy, and more specifically, Americans' retirement savings, if that bubble popped?"

KW: "So, I think it's a fair question, Senator. I take it seriously. I'm not in the business of providing a Wall Street newsletter, but I'll say broadly to your question about the effects on the economy: booms and busts do not help the real economy, and they don't make the central bank's job easier. What the central bank is trying to achieve is price stability-full employment-all in the context of financial stability.

"On the question of these AI companies, certainly the surge in their investment and the surge in their valuations is notable. But I'll also note one other thing, Senator. Over the course of the last couple of months, we've seen the market cap-both of the public companies and of private companies-under some pressure at the overall indexes. We do seem to see a broadening out now. Why is that? Because earnings now for the last several quarters more broadly are moving up. I don't want to suggest that should give us any complacency, but what the Fed's looking for is economic strength to broaden and the inflation that we talked about earlier to become more narrow."

SRW: "So, I'd be worried about a massive economic slowdown. You know, the impact of Wall Street on Main Street, and I'd be worried about job losses. Stock prices tumbling would mean Americans could not retire as planned, and I don't want to see taxpayers holding the bag should this AI bubble pop. I'm not against AI. AI is not going anywhere. It has both promise and peril. I just want us to be thinking critically about this from all angles.

"Earlier this month, you announced a new task force to assess the effect of AI on productivity and jobs. The three individuals you chose for the task force are tech executives who have directly worked for or with AI labs. All three of them. Yes or no, will the Fed include anyone on this task force with an alternative viewpoint on AI? For example, anyone who represents the workers whose lives may be up ended by increased adoption of AI tools and technology?"

KW: "So, Senator, it's a fair question. As I mentioned to your colleague a few moments ago, what I'd say is one of the people on those task forces is an academic. Now I don't want to suggest that the academic is representing some…"

SRW: "You don't want to suggest that the academic is being academic-"

KW: "-I don't want to suggest that, but this isn't a faculty lounge discussion. What I do want to suggest is that academic's work has spent a lot of time talking about prior technology shocks and the displacement that it has on labor. The assurance I can give you is that these three people on that task force, like the other task forces, they're not the deciders. You'retalking to one of the deciders. The 19 of us around the FOMC with a breadth of backgrounds and interest, we're going to decide what we think of their conclusions."

SRW: "As a decision maker, I always want various viewpoints. I certainly have nothing against an academic expertise. I think you know that that's important, and it's too often ignored in some of the appointments that we've seen around here lately. But here's my problem: Americans are worried about what AI will mean for the economy, and I'm worried that this viewpoint isn't represented at the Fed."

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