Posted on by rjonakait

Data Center Elections

While he did not originate the phrase, Tip O’Neill is the person most associated with “All politics are local.” As an absolutism, it was never true. It certainly is not now. Affordability, the quality and equality of healthcare, wars, and many other national flashpoints are affecting the elections throughout the country, but the political truism always does have some merit. Some issues, such as the border and immigration enforcement, have more traction in one place than another. And it also holds true for data centers, which may be of general concern in this country, but are a special focus in some electoral races.

Data centers are not so much a partisan issue as an anti-incumbent one. A mere year ago officeholders were flinging their arms open to data centers. The centers would bring construction jobs and some permanent ones into the county, district, or state with perhaps even an increase in the tax base. But then a grassroots opposition developed catching many of the public servants by surprise. Data centers have existed for a long time, and they had not produced a backlash. However, the politicians had not understood that the new centers were much different from the old ones. They are exponentially larger as the computing power needs of AI are exponentially larger than for routine internet uses. Snopes reports that a typical ChatGPT search uses nearly ten times the power of an average Google search. By some estimates electric demand of a typical data center is comparable to that of 25,000 private homes.

Economics tells us that more demand for a product increases prices. Some communities have seen large jumps in the cost of electricity, and voter-residents have blamed data centers for this trend. There are other causes of increased power demands besides the centers. Hotter summers due to global warming have brought more demand for air-conditioning, for example, but the centers in some localities have been a major driver of increased utility costs. This may force local electric companies to expand their facilities, but this is seldom an easy process. It often takes five or more years to generate new power. The expansion takes money, and if the tech companies do not pay for that expansion, it inevitably passes to all the users. For utility companies to satisfy the increased demand from data centers, they have already had to buy expensive peak-time power, which is more costly than it might otherwise be because of our aging and inefficient power grid system. Fears of possible brown outs in some localities because of data centers have spread. These are hot topics on many community social media sites.

Water is also of concern in the data center disputes. Computers generate heat, and the extraordinary computing powers of the so-called hypercenters produce immense amounts of heat, which must be dissipated. Doing so through air-conditioning would just tax the power grids even more. Instead, some centers are cooled by water, vast amounts of water, and the fear is this use will leave the communities where the centers are located with insufficient water. The tech companies respond that data centers will use less water than golf courses. This, perhaps, should make us question golf courses that do not recycle water, but in any event the statement is misleading. Golf courses are spread throughout the country, and their water use is widely dispersed. The sources of the water needed for the cooling are concentrated in the communities where they are located. Tech companies have prioritized data center construction in rural, low-tax regions with inexpensive real estate and often limited infrastructure. Fears are that streams will be sucked dry and that groundwater needed for wells will drop.

There are other concerns as well. The increased electricity demand increases the burning of fossil fuels with greenhouse gases and other pollution increasing. And the computers, cooling systems, and the back-up generators running 24/7 produce a constant noise that nearby residents say could drive a person crazy.

Some of the concerns about data centers, while very real, may be a particular form of American paranoia and overstated, but the paranoia has often been fed by the tech companies’ lack of transparency. Some vaguely promise that electric costs will be paid for by the companies and that water use will be limited by technologies that don’t yet exist.

Politicians who genuflected before data centers have tried to catch the bandwagon questioning the tech companies, raising questions about the leadership, perspicacity, and sincerity of the officeholders. For example, Texas Governor Greg Abbott, who less than a year ago, announced that Texas, with a vulnerable energy grid and a limited water supply, was to be an “epicenter” for AI and data centers, has now announced a moratorium on new data center approvals. Opposition to data centers has emerged quickly as an issue in many local and state elections and may affect who controls the Senate next year. Ohio is a case in point.

Jon Husted, the Republican incumbent Ohio Senator, is running for a new term. Husted had served extensively in state government and was serving as lieutenant governor when he was appointed to the Senate seat vacated by J.D. Vance upon Vance’s election to the vice presidency. As lieutenant governor, Husted pushed hard for data centers, assuring the people that they would bring jobs. He offered major tax incentives to tech companies. In 2026 Ohio became the fourth largest state in data center development with an expected $40 billion in investment contemplated through 2030. But as a result, Ohio voters saw their electricity bills increase often dramatically. Possibly in response, Senator Husted introduced the Ratepayer Protection Act that would require the tech companies themselves to cover the excess electricity costs. The bill died in the Senate.

Democrat Sherrod Brown, who was a 7-term member of the U.S. House of Representatives, then Senator from 2007-2025, is Husted’s opponent. Brown has run many anti-data center ads highlighting utility costs and “sweetheart tax breaks” to tech companies. He maintains that local communities should have veto power over whether centers are built in their neighborhoods. A leaked memo says that a Republican Senate Committee recognizes that Brown’s anti-data center messaging has gained traction with voters.

In what has been a red state, Brown leads in most polls, but narrowly. The race is rated a tossup. Stay tuned. Data centers may control who controls the Senate.

Posted on by rjonakait

Hamilton, Morgan, and Adam Smith

Our 250th anniversary has been used by various individuals and organizations to promote ideas and policies other than the celebration of our founding. For example, a recent piece in the Financial Times points out that since Adam Smith’s The Wealth of Nations was also published in 1776, this is time to honor Smith’s ideas. Michael Strain, the author of “On America’s 250th, remember your Adam Smith,” maintains that both the Declaration of Independence and Wealth “prioritise liberty. In the Declaration,” he writes, “Jefferson argues that individual liberty is an inalienable right. Smith argues that prosperity is advanced when market activity is free and not unnecessarily constrained by big government, powerful monopolies, trade barriers or other limits on market competition.” Both, he asserts, have profoundly influenced the United States. “The ideas animating those documents — the importance of free people and free markets to human flourishing — have profoundly shaped America and the modern world.” The author is concerned that commitment to these ideas is now under “direct assault” in America.

The author misleads. While the Declaration has been a grand, aspirational document, Adam Smith’s ideas of free markets and the “invisible hand,” while often given token obeisance, have never been the driving force of the economy or of freedom in this country.

At the country’s inception, Alexander Hamilton laid out his economic ideas in his 1791 Report on Manufactures. His proposals, not Smith’s, became the driving economic philosophy for the United States both in the Eighteenth Century and well beyond the Civil War.

Hamilton was familiar with Adam Smith’s notions of free markets and the invisible hand, but Hamilton rejected them, at least for America. Smith encouraged free international trade. Hamilton, on the other hand, sought tariffs to raise government revenue but also to protect infant American industry. Hamilton also diverged from Smith by advocating government subsidies to industry. In addition, Hamilton encouraged what were then called “internal improvements,” what today would be labeled government spending on infrastructure. Hamilton favored not lesser government but a more powerful national state that would operate to give as much favoritism to businesses as it could.

In the Nineteenth Century, Hamilton’s ideas were incorporated into Henry Clay’s “American system,” although Clay sought even higher protective tariffs than Hamilton did. Abraham Lincoln admired and followed Clay, and Clay’s principles became founding principles of the Republican party. Its 1860 platform, in addition to opposing the extension of slavery, promised to increase tariffs, pass homestead laws (which, in effect, gave away federal land), and build a transcontinental railroad that depended on federal subsidies. These were not consistent with the ideas of Adam Smith.

More crucial to the country’s early economic growth than free markets were the internal improvements of the government. The prime early example was the Erie Canal, which transformed the American economic landscape. The goods and produce of heartland America now had an international outlet through the port of New York, making New York City the economic center of the country. triumphing over Boston, Philadelphia, Baltimore, and Charleston. The canal, of course, was not the product of free enterprise, but of government, in this case New York State government. Railroads later became an economic engine, but the tracks for the intercontinental road, a product of Lincoln’s presidency, and other train routes were laid with federal government subsidies. After the Civil War, many tariffs increased to protect American industries, despite what Adam Smith wrote as desirable in Wealth of Nations.

The federal government interfered with free markets in another significant way in the decades before and after the turn of the Twentieth Century. Adam Smith believed that there should be a free market in labor. Whether that was achievable in his day is not clear, but it became increasingly difficult in the Gilded Age with the rise of massive corporations. These companies did not have to bargain with workers; they could dictate wages and working conditions — well, they could at least until the rise of labor unions, which put labor on a more equal bargaining footing with management. However, time and again, in a part of our history seldom taught, the government interfered in these “free” markets with military force suppressing unions and strikes.

A hundred years after Hamilton, another American economic giant rejected Adam Smith, the invisible hand, and free markets. Smith wrote before the industrial revolution. He posited that while companies would try to make more money than their rivals, competition would ensure that firms would level out and none would dominate the market. His ideas were formed when comparatively little capital was needed to enter a market, but his model of perfect competition did not exist with the rise of large-scale, capital-intensive enterprises after the Civil War. Then it became possible for a few giant firms to overcome competitive restraints and control significant portions of their markets. As Jean Strouse indicates in her massive and masterful biography Morgan: American Financier, J.P. Morgan, who helped shepherd the United States through several severe economic crises, saw competitive markets as inefficient and wasteful driving down the profits needed for necessary capital formation. In a process that came to be known as “morganisation,” Morgan eliminated “ruinous” price wars by combining rival companies into monopolies or cartels that controlled both prices, which could be increased, and wages, which could be reduced. Morgan insisted that the result produced greater industrial efficiency which led to greater national prosperity while leading–by coincidence, of course–to vast wealth for Morgan and other plutocrats. (Adam Smith did not foresee the vast power of the trusts and monopolies, but he did acknowledge, “People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.”)

Any Smithian idea of a small government was destroyed in the Twentieth and Twenty-First centuries as the American state grew and then grew some more. And the notion that free markets unencumbered by government have been our primary economic driving force is indefensible. There are legions of examples, but it is clear, for example, that special tax provisions for oil and real estate industries alone, but also for many other enterprises, have tilted capital markets. Many corporate and personal fortunes have been made or increased by government contracts in “markets” that would not exist without the large, modern state. And so on, and so on.

Indeed, it is striking that it is not Adam Smith but Alexander Hamilton who is again being invoked by present conservatives. J.D. Vance recently said, “American economic policy on the right is now much more Alexnder Hamilton that it is Milton Friedman.” Axios translates this to mean that “Vance believes the GOP’s intellectual center of gravity is shifting away from free markets to a more interventionist government that promotes domestic industry.” Welcome back Hamilton

Our 250th anniversary is not a time to bring back Adam Smith. Adam Smith has never been here.

Posted on by rjonakait

Thoughts on the Recent Bombings of Iran

The Vice President appropriately praised the personnel who carried out the Iranian bombings. That seems odd. For months this administration has proclaimed that previous administrations have decimated the military. The personnel, however, were trained before Trump 2.0. The planes and the bombs were conceived, developed, and constructed well before he took office. Trump may have made the decision to bomb, but the capability to do the mission belongs to previous administrations. Nevertheless, I don’t expect to hear apologies.

We are unlikely to hear anything as self-effacing from Trump as John F. Kennedy said: “Those of you who regard my profession of political life with some disdain should remember that it made it possible for me to move from being an obscure lieutenant in the United States Navy to Commander-in-Chief in fourteen years with very little technical competence.” And yet, Trump assuredly shares Kennedy’s professed lack of technical competence.

While the military has been praised, no such praise has been extended to our intelligence services. In fact, they have been disparaged. Nevertheless, Iran has steadfastly maintained that it was not developing nuclear weapons, and we have no reports from U.S. Intelligence that an Iranian nuclear bomb was imminent. However, Israeli Prime Minister Netanyahu said that Iran was only weeks away from an operational bomb. Of course, we do not know what intelligence supports the assertion, but we do know that Bibi has uttered that “weeks away” mantra many times over the last decade. It would seem that Trump accepts Israeli intelligence, or at least Netanyahu’s assertions, over our own intelligence. I find it troubling that we seem to have outsourced our intelligence to a foreign country.

It is also troubling that no intelligence — U.S. or Israeli — was presented to Congress prior to the attack. Moreover, the War Powers Act of 1973 might suggest that letting Congress know about a planned bombing of another country is, at the very least, a courtesy. Gosh, even Bush Jr. brought the invasion of Iraq to a vote in Congress. The intelligence was wrong, but…

We will soon start to get reports about how much the bombing has impeded Iran’s ability to build a nuclear bomb. Will the assertions be based on U.S. or Israeli intelligence? Why should we trust either of them?

We bombed Iran even though that country presented no imminent threat to our territorial safety. The decision fits in with an “Israel First” policy, and the operation should increase Israeli safety, but it also seems to signal that we will give an even freer rein to Israel in Gaza and the West Bank. If we so blithely accept Israel’s assertions about existential threats that we bomb Iran, must we also unquestioningly accept what they say about the importance to them of Gaza and the West Bank?

The bombings are expected to disrupt oil flows and distributions. It certainly will if Iran retaliates by successfully closing off the Strait of Hormuz. World oil prices will increase. Russia routinely benefits whenever oil costs more. Was strengthening Russia part of the goal?

Iran can retaliate by attacking our military assets in the Middle East, but it does not have the power to attack the territorial United States except, perhaps, in isolated acts of physical sabotage. It may have the ability for cyberattacks on our infrastructure, such as our antiquated power grid that the present administration ignores. However, the source of a cyberattack is often unclear. If there are such actions in the coming weeks, Iran will undoubtedly be blamed. This is an opportunity for other countries who want a weaker America to launch cyberattacks against us with Iran as their cover. And yes, I am thinking about Russia again.

Our officials say that they are only trying to end the Iranian nuclear bomb program and are not seeking regime change. I understand why they say that. During the campaign Trump and his acolytes were adamant that we were going to be out of the nation-building business, and yet, regime change inevitably leads to nation-building. In short, the proclamation that we do not seek a change is likely a lie. Some reports suggest that the Iranian people are fed up with the Ayatollah and want regime change. Is this true? And what would regime change in Iran look like? An autocrat often replaces an autocrat. Moreover, change often comes only after an ugly civil war in which other countries intervene directly or covertly. Change often spawns terrorist groups such as ISIS. What are the odds that a new Iran would be peaceful and cooperative?

We say that we seek to negotiate with either the new or the old Iran. If you were Iran, would you trust negotiations with the United States? You might conclude that nuclear weapons are the most sensible protection for yourself.

Other consequences of the bombing:

Language precision has suffered another blow. (It has already been almost fatally undermined by Trump himself.) Now comes Vance who says that we are not at war with Iran, but with Iran’s nuclear program. Huh? Trump says that we “obliterated” Iran’s nuclear capacity. The next day the administration says that Iran’s nuclear ability has been “severely damaged.” Making me wonder again about the quality of a Yale education, Vance says he does not understand the difference.

Did DOGE have a role in the planning for the bombing to prevent the ever-present threat of waste, fraud, and abuse?

When all is said and done, isn’t it a good thing if the bombing operation actually has prevented Iran from getting nuclear weapons?