AI Data Centers Are Now a Midterm Election Issue

[00:00:00] Speaker 1: A bill down has become a top issue for candidates in both parties running in the midterm elections this year and public opinion data on data centers has turned negative with 64% of Americans who responded to Reuters and Ipsos polls saying that they don't think it's a good thing to build data centers at a rapid rate. So where has this sentiment come from or has it been here all along? Joining us now for more on this is Daryl West, Brookings Center for Technology Innovation Senior Fellow. Daryl, thanks for being with us. It's really interesting to see both sides sort of play into this narrative. So let's start big picture here. What are the top concerns heading into the midterm elections from constituents? [00:00:40] Daryl West: Energy, water and land use policies are the top concerns that people have about data centers. And this change towards two thirds of Americans having doubts about data centers is a remarkable change. If you go back a year, you wouldn't see numbers anywhere close to that. But people in certain parts of the country have seen their electric rates go up, that obviously concerns them, ties into the whole affordability issue. And then in the southwest, where water is scarce, people worry about the water aspects. So there are a number of different factors that have propelled the public in a more negative direction vis-a-vis data centers. [00:01:15] Speaker 1: And Daryl, it's interesting to see the way that both sides are playing into this. Maybe walk us through exactly how those are, because it seems like one side is saying, oh, a key benefit is this economic development, while others are raising the red flags and the issues that you just mentioned. [00:01:28] Daryl West: The companies are basically saying, this is an economic development project. It's going to be good for communities. It'll provide construction jobs. And then once the data center is up and running, there'll be operational jobs there. Tax revenues will be a big plus for a lot of local communities. But people are not buying this argument anymore. It used to be that communities were competing with one another and offering tax breaks to companies to build these data centers. Now, because of the changing landscape and the local opposition, communities don't want to offer the tax breaks anymore. In fact, they actually want companies to start paying their community for the right to build the data center in that area. So it's a very contentious issue, and it actually could have profound consequences for the future of AI, as well as the overall digital economy. [00:02:18] Speaker 1: Daryl, when thinking about the midterm elections, there are some key races going on, especially within Texas, within Ohio, where this is a substantial concern. I mean, you have that Senate race between Democrat James Tallarico and Republican Ken Paxton really taking a toll within Texas, some may saying that this might even make a blue wave come to fruition. What do you make of that? [00:02:40] Daryl West: I mean, it's surprising how many races across the country, senatorial races, House races, and gubernatorial elections, where data centers has become a big issue. You mentioned Ohio. The Democrat Sherrod Brown has been running ads characterizing his opponent, John Husted, as, quote, "the face of data centers," because in the past, Husted supported tax breaks. In Texas, it's been a hotly contested area, as well. Governor Abbott, a year ago, was very supportive of data centers, and Texas, of course, has many data centers within that state. He has called for an audit of data centers just to make sure the energy needs are being met, and making clear who is actually paying for the increased energy costs there. So, it's really become an issue all around the country, and is a bipartisan issue, but Republicans and Democrats are worried about data centers. [00:03:30] Speaker 1: Daryl, you mentioned before, but constituents and a few of those that we mentioned within this latest poll, they have changed the tide, changed the tune on how they think about these data centers. And not only are we seeing that from constituents, but also from public officials as well. We know that, for example, Pennsylvania governor turned how they perceive supporting data centers to ultimately not necessarily supporting them. So, are people worried that maybe they might vote for an official who has one stance, but then, as soon as they're elected, they could do an about-face? [00:04:01] Daryl West: Well, they certainly worry about that, and there's many past presidents of politicians changing their tune on contentious issues. But what I'm going to watch on election night is how many of the candidates who, in the past, were supporting data centers end up losing. And then, how many of the opponents of data centers end up doing well? Democrats have linked the data center issue to affordability concerns. People are worried about the big tech companies, very wealthy companies, asking for tax breaks from local communities. We feel that communities actually are in a stronger position now to drive a harder bargain with the tech companies, given the local opposition. And so, tech companies are going to end up having to pay more for these data centers to the local communities. And that, of course, is going to affect their business models and the possible rate of returns that they may get out of the huge amount of infrastructure investments that are taking place right now. [00:05:03] Speaker 1: Daryl, we have about 30 seconds left, but do you think that these midterm elections could have an impact on the rapid race that we have seen of AIO build out? Can we see a slowdown following the elections? [00:05:15] Daryl West: There could be a slowdown. We've already seen a number of local communities declare a moratorium, either six months or 12 months. If the opposition forces to data centers do well in the midterms, that trend could accelerate. And there could be some policy changes that make it more difficult for tech companies to build these data centers. [00:05:34] Speaker 1: Yeah, we saw that in New York State. Daryl, thank you so much for the insight. Appreciate your time.