Big Tech's AI Blackmail

State and local data center extortion is going national.

Photo credit: CommScope

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In response to the rapid growth of data centers in recent years — those large facilities that hold the plumbing necessary for businesses to store and manage their data — residents of many communities have stepped up to voice their concerns about the inevitable downsides of data center construction, which include noise, high energy and water use, and environmental degradation. These protests have occurred across the country, from Virginia to Arizona to Massachusetts.

In rare instances, those local residents have been joined by state legislators or other local leaders. More often, though, elected officials roll out the red carpet for Big Tech data centers, lavishing them with public subsidies and other regulatory favors. For example, the Michigan legislature this week approved $90 million in tax breaks for data center construction as one of its final acts before adjourning for the year.

The underlying justification for those subsidies and shortcuts is always that, if one state doesn’t do it, the one next door will (or already is), so states have to play along if they want the property tax revenue associated with data center development. Big tech firms successfully pit state leaders against each other, threatening to go anywhere that will provide them their desired largesse, and making a patently absurd case that hosting data centers is broadly beneficial for local communities.

Now, Big Tech firms have taken that gameplan national, threatening the federal government with the same tactics it has used to continually pummel state and local legislators. Having the feds cave in a similar way would be grave news for responsible economic development at all levels of government.

Last week, Politico reported that Big Tech firms are pushing the outgoing Biden Administration for an executive order that would "allow data centers to exceed pollution limits, open federal lands to data center construction and give data centers priority access to available power supply.”

If they don’t get it, the tech titans are threatening to move new data center construction to the Middle East. And if Biden doesn’t deliver, I imagine they’ll ask the incoming Trump administration for the same thing.

This is government policy by extortion, plain and simple, and done in the name of accelerating the construction of facilities that provide few jobs, no surrounding economic development, and that, perhaps most importantly, are vital and necessary infrastructure for the corporations in question, negating the need for public subsidies or other regulatory shortcuts to bolster their construction.

One added wrinkle is that the tech corporations are arguing an executive order on data centers is necessary to protect America’s advantages in the artificial intelligence industry. They claim that failure to ease data center construction will hinder the development of AI in ways that are detrimental to America’s national interest, and at least imply that standing in the way of new construction is unpatriotic.

This is something important to watch out for. As Big Tech firms search for more subsidies and regulatory shortcuts, they are going to slap AI onto anything and everything they do as a way to make it seem fancy and indispensable, when most of it will be useless or unrelated to artificial intelligence under any normal definition of the term. This will help them justifying foisting ever-growing costs onto the public for the same old junk they’ve always been putting out there.

The phenomenon of pretending lines of business are connected to AI when they’re not even has a name: AI-washing. An example is Amazon’s vaunted AI checkout in its grocery stores, which depended on contractors in India to actually do the work. (There are several more examples of faux-AI at that link.)

If Biden or Trump give in to Big Tech blackmail and deliver this executive order, it will not only irreparably harm the communities where Big Tech gets to discard current rules in order to build new data centers, it will reward AI-washing and political blackmail. It will also make it harder for state and local leaders to justify fighting those projects, as they will have the federal stamp of approval — and if new construction is on federal land, state and local leaders would be powerless to stop it anyway.

Again, I want to emphasize that data centers are some of the worst possible things on which to pin dreams of economic development. They also, again, are the necessary infrastructure for Big Tech firms to do what they do. There’s no justification for publicly subsidizing them, nor for allowing tech corporations to sidestep the regulatory safeguards any other corporation would have to follow if it wanted to build a major, intrusive new facility in a community. Tech firms also need to comply with state data privacy laws, which may be more complicated if data centers are situated overseas, and particularly in repressive surveillance states.

A recent report by the Virginia Joint Audit and Review Commission found that new data center construction in that state, in addition to the direct subsidies the tech firms have collected, will cost residents more than $400 per year in higher residential electricity costs. That’s a real, tangible loss that is also political poison.

If it were me, I’d call Big Tech’s bluff and dare tech CEOs to build elsewhere, betting that they’ll ultimately do what they need to do, which is build in the U.S. on their own dime.

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SIMPLY STATED: Here are links to a few things that caught my eye this week.

• A new White House analysis estimates that algorithmic price-fixing by landlords raises rent by an average of $70 per month, for a total of $3.8 billion in higher rent payments in 2023 alone.

• Analysts expect a lot of corporate relocations in 2025, fueled by hefty subsidies.

• Residents of port towns around the country are taking on large cruise corporations.

• The Energy and Policy Institute released a new paper explaining how monopoly utilities “use customer money to fund lobbying, corporate branding, and luxury lifestyle expenses.”

• A new study shows that corporate mergers “are followed by large and persistent increases in lobbying activity, both by individual firms and by industry trade associations.”

• A lawsuit alleges that several upper-tier colleges have been engaged in a price-fixing scheme.

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— Pat Garofalo