The AI revolt in Maga-land

0:00Decisions made in Washington can affect your portfolio every day. But what policy changes should investors be watching? Washington Wise is an original podcast from Charles Schwab that unpacks the stories making news in Washington right now and how they may affect your finances and portfolio. Listen at schwab.com slash Washington Wise.

0:24We're going on an AI road trip this week. The FT's Joe Miller recently took a trip to Missouri, a state that voted for U.S. President Donald Trump over Kamala Harris by more than 18 percentage points in the last election. One of Joe's stops, a church in a town called Independence. So I've just arrived here to the St. Mark's Methodist Church here in Independence, where local residents are due to meet in about half an hour. And already the car park is full. The crowd is here tonight to oppose a$6.6 billion data center that was just greenlit for construction. And just by looking around, you get a sense that the opposition here is not confined to people of a certain age or profession.

1:15Now, the Trump administration has been pushing this kind of construction. Gracious and holy God, we come tonight as your people concerned about not only our neighbors, our friends, our brothers and sisters, but about your creation. Some residents are worried about how much water the data center might use. Others, the societal and moral implications of what the center would power. Well, we live in independence and we are a little bit suspicious of this stuff that it seems like they've kept this under wraps until just recently. That's Bruce Gall. He's here with his wife. I don't want to subsidize a multi-billion dollar industry and I'm just getting by.

1:56I'm on Social Security. I'm disabled. So how am I supposed to make it when these guys are the fat cats and they're polluting my environment, making a ton of noise and just running roughshod over the whole system? Now, Bruce is a Democrat, but the opposition to these data centers is bipartisan. And Republicans in Washington are starting to worry about backlash against the White House's AI agenda. An agenda, they say, might backfire in the very states that won Donald Trump the presidency. More of a populist uprising, you know, come up with pitchforks and the torches. Here we come. But, you know, you can only mess with people for so long.

2:41This is Swamp Notes, the weekly podcast from the Financial Times, where we talk about all the things happening in U.S. politics, finance, and the economy. I'm Mark Filippino, and this week we're asking, is Donald Trump's AI push fueling a revolt against Republicans? Here with me to discuss back from Missouri is Joe Miller. He's the FT's Washington correspondent. Hi, Joe. Hi, Mark. Joe, tell me about your reporting trip. Why did you want to go to Independence, Missouri? Well, I was first looking at Missouri because one of the most vocal opponents of AI in the Senate is Josh Hawley. He was obviously a senator for Missouri, Republican senator for Missouri.

3:18And I'd also heard that there was a small city in the state that had become the first in the US to temporarily ban data center construction after a large backlash. And it seemed like a good place to go to get the temperature of how mostly Republican voters in a mostly Republican state were feeling about this breakneck deployment of AI across the country, not just in terms of data center buildouts, but also in terms of the deployment of the technology that is already costing jobs and leading to concerns about child safety and the rest. So it was really a place that I felt would give us a good sense of how people were feeling, you know, in the middle of the country.

4:04All right. So you went to Trump country. And as you said, not all of them are fans of Trump's AI stance. Remind me exactly what are his policies? So Donald Trump's administration has been incredibly boosterish when it comes to AI. Donald Trump appointed an AI czar. His name is David Sachs. He comes from Silicon Valley. He's very close to the AI companies. The administration rolled out an AI action plan. And essentially, the stance has been to remove as many roadblocks for the industries, to help them fast track data centers, to help them avoid state level regulations. and all of this has caused quite a lot of consternation within elements of Donald Trump's MAGA coalition because another way of looking at AI is it's an incredibly disruptive technology which has come from the coastal elites and which is set to take their jobs and devastate their local communities.

5:05Their children are already hooked on this stuff, talking to chatbots quite often instead of confiding in their teachers or their family or their community, that there is a potential to replace the church as the hub of the community, the people who would seek comfort. And so I was keen to understand how this is reverberating within Trump's MAGA coalition. And what I found was a backlash with a kind of intensity that surprised me, and I must say surprised a lot of the people who I was talking to in Washington about the ramifications of Trump's AI policy. And let's just back up for a second. We have seen some of these concerns play out at a higher level this year with the sell-offs that we've seen in, just for an example, the software industry.

5:57Because as you said, AI has the potential, or it seems like it has the potential to make a lot of these industries driven by software obsolete. It's something that has a lot of people concerned. So getting back to your trip, you went to Independence, this town in Missouri that I mentioned earlier. And we heard from some of the people that you talked to. Did anyone else stand out to you? Yes. So independence is a mixed city. It's not as deep red as the rest of the state. But there were plenty of Republicans at this event that I went to. And they were no more enthusiastic about this technology than Democrats who showed up.

6:36And one of the people who really stood out to me was a woman called Lisa Garrett. She's a Republican. She works for a church and she lives right next to the site of this new data center. And she told me how she even found out about the construction. My father was having open heart surgery. I was sitting in the hospital as he was in surgery. And I just thought I'd just scroll a little bit. And I saw this, It said something about AI data center in independence. And as I started reading, I thought, that's our road. Wow. So she had no idea. What did she think about it being built? Well, her views really echoed the views of many, many people I spoke to across the state in that she was really taken aback by the secrecy of all of it and the communication or lack thereof by the data center constructors.

7:31But mostly she was taken aback by the speed of it. She wants to know why all of this was happening so quickly with so little consultation, seemingly driven by Washington and, you know, by the Trump administration and rammed down the throats of people in places like Independence, Missouri. I just think sometimes things need to be slowed down a little bit, put some thought into it. And why does it need to happen so quickly? I know that there's a race, but I don't have a good answer for that. And Lisa there is talking about the AI race, which is, of course, something that the Trump administration emphasizes week in, week out, that the reason it needs to boost this industry is that America needs to win the AI race with China.

8:19And it's fair to say that Lisa did not share that view, or at least not fully share that view. I voted for this administration and didn't really think about that until it started to affect me. So Lisa's one person in this town in Missouri, but do we have a sense of how people around the country feel about AI and whether they feel the way Lisa does? Well, we tried to find that out and we commissioned some polling and the results were really stark. The polling found that about 60 % of Trump voters in 2024 were concerned about the speed of AI's development, and almost 80 % believed that the technology needed more regulation, which is obviously contrary to the position taken by Donald Trump's White House.

9:07And actually, in the weeks since I returned from Missouri, there's been an NBC poll that found that AI was less popular than ICE around the country. And that's really reverberated in Capitol Hill and throughout the administration. I've had it quoted back to me by many, many strategists who are really concerned about it. OK, we're going to take a quick break. We will be right back.

10:00Thank you.

10:07All right. So we know, generally speaking, that the public does not like AI data centers. That has been made abundantly clear. But what about at the state level? How are Republican governors navigating this, not just the governor of Missouri, but elsewhere as well? Well, that's what really got me very interested in this topic, because the backstory to all of this is that the Trump administration tried to push through something called a moratorium last year, what they were trying to do is to prevent individual states from passing regulation of AI. And they tried that through a number of vehicles in Congress, and they actually failed twice because there was opposition, not just from Democrats, but from some senior Republicans, some senators, and from governors around the country, notably Ron DeSantis in Florida, who many people, you know, see as a hopeful for the White House in 2028, but also from Arkansas Governor Sarah Huckabee Sanders, who's obviously a former press secretary for Trump during his first term, and Utah's Republican Governor Spencer Cox.

11:16And there was just this grassroots effort to go to the administration and say, no, we don't want this. We want to reserve the right as Republicans to pass laws governing AI, particularly child safety laws and laws around copyright in our own states. And as a consequence of that, the Trump administration essentially had to back down. Trump eventually signed an executive order, which it tries to stop states from regulating AI on their own. But most legal scholars think it doesn't have any teeth. So that was where it started really to gain my attention when there was this backlash on Capitol Hill.

11:56But it turns out that this is really coming from the grassroots. It really does. And, you know, going back to your trip to Missouri, you spoke to some Republican lawmakers who are also thinking about this issue, right? Yes, this was the most surprising part of the trip for me, Mark. I went to Jefferson City, which is where the state capital is in Missouri, right in the middle of the state. And I went to speak to a bunch of lawmakers there, and obviously it's a Republican-dominated legislature. And one of the people I spoke to was Republican State Senator Joe Nicola, whose district actually includes independents, which we heard from earlier.

12:34He's been concerned that AI tools are being used to surveil some of his constituents who work in Amazon warehouses in his area. And generally, he's worried about the rapid deployment of AI. And here's what he told me. We have data centers going up all over the place and we still have no regulation. So I've been really, really concerned in watching this. When AI came out at first with video and imaging, it was a little choppy, right? It wasn't real smooth. Well, now it's advanced so fast. I can't tell the difference by my eye. Just looking at it, I can assume, but I can't tell the difference. And what does Nicola think of the president's approach to AI that basically disregards some of the concerns that legislators have?

13:19Well, I knew he certainly was defying it because he's co-sponsored a bill that bans AI sentience. And that's one of 10 AI bills, as I understand it, introduced by Republicans that are making their way through the state legislature. But actually, he was, in our interview, far more outspoken about what he thought about Washington and the Trump administration's policy on AI itself. I don't care who the president is. If we don't have a national regulation on AI that, you know, an executive order is written, which really doesn't have the weight of law, and being told as an elected official in this state, I can't protect my people.

14:03No, that goes against my principles. You don't see often constituents and especially politicians turning their nose up to massive investment in their state. I mean, is there any concern that they're missing out on an opportunity? It's a very good question because one of the things I've been thinking about is how different the data center backlash is to your garden variety NIMBYism, so to speak, which is an acronym for not in my backyard. People who generally protest any kind of construction in their area. And I think it's different in a few major ways. I mean, one is the amount of secrecy involved in a lot of this data center construction.

14:46Often these projects, details of these projects are kept even from lawmakers in their own districts. It's not clear who the ultimate client is, what subsidies are being given, what the water usage or environmental impact is, etc., etc. You also have the fact that the CEOs of these companies, the people who founded these companies, are going out day in, day out saying this technology is really dangerous and talking up the potential job losses, etc. So people are instinctively afraid of this technology. And then there are local elements to this as well. Unlike other big projects, actually data centers create very few jobs.

15:24They create construction jobs at the beginning. But then once they're up and running, it really doesn't take that many people to maintain a data center. So it's not an enormous job boon for a local area. And so you have this kind of recipe for public unrest. And I don't think the industry, and in fact, I think people within the industry are starting to admit this in the last few weeks. I don't think they've done a particularly good job of explaining what the upside would be for a specific area to have an AI data center in its midst. Joe, which Republicans do support the AI push? Because I can't assume that all of them are against it.

16:05No, certainly not. I mean, there are several senators, for example, Ted Cruz in Texas, who are very pro the industry and who very much tout the line that AI regulation should be centralized in order to fast track the industry and to help boost it in the race with China. And of course, there is the so-called tech right, the Silicon Valley founders and investors who are very much attached to the industry and many of whom are embedded in this administration and help staff this administration, who are going around the world, frankly, saying that American AI dominance is important not just for the technological advancement of the world, but for geopolitical reasons, for geopolitical stability.

16:52And that American AI needs to underpin not just American tech, but global tech networks in order for the West, quote unquote, to survive. So there are certainly people within the Trump coalition who are pushing this hard. The question is whether they have any organic support among Republican voters. And the upcoming midterms, even though they're many months away, are going to be a big test of that. And I had a conversation with someone in the White House just a couple of weeks ago who confessed to me that the two things that the White House believes will define the upcoming midterms are ICE and AI.

17:36And those are the two issues that Republican strategists are most worried about. How big of a deal is this for Donald Trump? Do you have a sense? Well, the question really is whether Donald Trump, who has managed to maneuver himself in the direction of popular opinion time after time, either can do that when it comes to AI or wants to do that. It's worth pointing out that AI founders and investors are among his largest donors. And Trump, as is obvious, hosts a lot of the AI CEOs at the White House fairly regularly and likes to be seen to be close to these people who are spearheading US industry and really underpinning the entire economy at the moment.

18:23So it remains to be seen in the next few months whether Donald Trump breaks himself with a wing of his own coalition to side with the grassroots or whether he's willing to take the hit electorally that may come from being seen as siding with this industry, which is immensely unpopular. Joe, excellent reporting. Thank you so much for sharing your trip. And thanks for coming on the show. An absolute pleasure. Thank you. That's the FT's Washington correspondent, Joe Miller. You can read his full piece at the link in the show notes.

19:05This is Swamp Notes, the U.S. politics show from the FT. If you want to sign up for the Swamp Notes newsletter, we've got a link to that in the show notes, too. Our show was produced by Henry Larson and Sonia Hudson. It was mixed by Sam Giovinco. Special thanks, as always, to Pierre Nicholson. I'm your host, Mark Filippino. Our executive producer is Topher Forges, and the FT's global head of audio is Cheryl Brumley. Original music by Hannes Brown. Check back next week for more U.S. political analysis from the Financial Times.

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20:31Listen at schwab.com slash Washington Wise.