We’re still in the dog days of summer, a slack period for opinion pieces, so I’ll use the opportunity to take stock of what I see as the four big stories whose significance extends well beyond local concerns. As I see it they are:
- The war with Iran
- The Russo-Ukrainian War
- “Trade war” with Canada
- Data centers
The war with Iran
I articulated my opposition to the war with Iran on the first day of the war, largely on just war grounds. That hasn’t changed. I think it is incumbent on President Trump to explain how we will achieve victory in this war. Not what his objectives are—how we will achieve victory. At this point that seems to be some combination of economic pressure and military force. Why will this be successful now when it has not in the past?
The Russo-Ukrainian War
Ukrainian president Volodymyr Zelenskyy has rejected the notion of a wartime election, despite calls for it from his opposition. NBC News reports:
Echoing his ?previous comments on ?the matter, Zelenskiy said a wartime election might be possible if Kyiv’s partners could guarantee security, but that no one ?has proposed such a plan.
“Elections right now are a ?tsunami for ?the state, which will split Ukraine,” he said.
“That’s why my strategy is to steer the country toward an ending of the war and to preserve an ?independent ?and sovereign state.”
Fedorov, a longtime Zelenskyy ally who ?has been seen as a top political challenger, did not explicitly say whether he would stand ?in any future election.
Since the outset of hostilities I have argued that we should provide military and humanitarian aid for Ukraine. That, however, should not be construed as unqualified support for the Ukrainian government and everything it does. Russia was wrong in attacking Ukraine. We should continue to support Ukraine. We should use whatever leverage our support provides to nudge Ukraine in the direction of being more democratic, more liberal, less corrupt, and less ethno-nationalist.
“Trade war” with Canada
Cristina Roca reports at the Wall Street Journal:
After weeks of marathon talks between U.S. and Canadian trade officials, an agreement was almost in sight. Then, late on Friday, the talks collapsed at the 11th hour. Tariffs of 50% on $20 billion worth of Canadian goods went into effect, and Ottawa said it will respond with dollar-for-dollar levies on Sept. 8.
My general view is that we should engage in trade reciprocity with other countries. In the past I have been critical of the U. S.-Mexico-Canada Trade Agreement (USMCA) on the grounds that it wasn’t strictly reciprocal and that Canada and Mexico were each exploiting different aspects of the agreement to their own advantage and our disadvantage. That remains my view.
In the particular cases of Mexico and Canada I believe the long-term ideal objective is moving in the direction of a single, trans-continental economy. These aggressive moves and Canada’s reaction are not steps in the right direction.
Data centers
In general my view is that Congress has largely ceded what is inherently a national policy problem to the executive branch, states, local zoning authorities, utilities, and individual companies. The construction of data centers presents a classic collective-action problem. And historically that’s exactly the sort of problem for which Congress exists. Individual communities have every reason to consider the local costs of data centers but little reason to consider the national costs of not building them.
Unfortunately, Republicans have largely outsourced national data-center policy to President Trump while Democrats haven’t decided what national data-center policy should be. There’s something between “build anything anywhere” and “stop building data centers” that is the better policy strategy and Congress should establish a national framework for what that is.
Agree on first two. On Canada let’s not forget that Trump has unilaterally broken 2 trade agreements, one that he made and declared to be the best deal ever made (like everything he does). He then began suddenly imposing large tariffs. I am not seeing why Canada should trust anything he says. Canada is also the country that lost the lives of 7000 soldiers in our wars in Iraq and Afghanistan.
Congress has been pretty selective about dealing with collective-action issues. Before they do data centers it seems like data centers ought to try paying those communities.
Steve
Most of the money on data centers is being spent by “the usual suspects”: Amazon, Alphabet, Meta, Microsoft, Oracle. To the extent they’re on the list at all the LLM AI service providers are way down on the list.
One of the issues that concerns me is state and local governments bidding against one another by offering tax breaks to the builders. I don’t object to the building of data centers; I do object to my footing the bill for them while the primary beneficiaries (see above) save money.
In many cases the companies think they are owed those tax breaks. They make the deals in secret with the politicians in charge. In return, they tell the people in those places they are getting more jobs. But, the construction jobs are short term and even many of those are pretty specialized so it wont help locals. Locals also realize that the long term jobs running the centers arent going to locals. Those will go to outside people moving into their areas who are likely culturally different.
I dont know if we need collective action legislation yet as I think the builders should first try to change their tactics. Rather than expecting tax breaks they should offer to pay the communities. Maybe offer to subsidizing training in the state so that people working at the centers will be more local.
Steve
Data centers are certainly a collective action problem.
We have seen a number of transaction opportunities where data center growth is front and center. Think HVAC design, install and service. Electrical controls. Wire harnesses and connectors. Fire suppression or vibration dampening (CA and HI) systems. Environmentally controlled rooms. As a result we have talked to a number of people. I’m no expert, but a few observations.
1. This is a freight train coming. Unstoppable. Projections may be optimistic because of citizen and political pushback, but they will be built.
2. Some concerns are already being addressed; some are overblown; some are just the no growth crowd fearmongering. Recycled water is becoming the norm. Rivers and lakes will not be drained. Centers are building their own power sources on site – gas fired turbines. NY’s governor is blaming data centers for electricity rates. NY’s bad policy decisions are much, much more responsible than data centers. Scapegoating.
3. Construction jobs may be transient, but data centers will probably permanently employ 100-200 per copy. That’s not chump change in some localities.
4. I can’t speak to economic incentives being offered. But these data centers are throwing off an awful lot of property taxes. Its up to local governments to see to it that they stay local and for the benefit of affected parties.
5. I don’t know that data centers are any more ugly than any other commercial building or manufacturing facilities.
6. I think the hardest issue may be eminent domain. Its a fact that people are either being driven from their homes or having their homes co-located with these centers. On the other hand, eminent domain is a well worn issue, and not unique to centers. Just a few miles from me a 4 lane road is being constructed, either displacing people, or placing a road in their front yard. Are they being fairly compensated for the home, moving and transaction costs, hassle? I don’t know. Tough issue.
I do know I am not hearing a lot of rational debate.
Data centers are being built in many areas. In many areas they make sense. If it’s in a suburb at the edge of a city it’s likely that of those 100-200 workers many of them could be local. If it’s a data center in rural PA none of them are going to be local. In theory they generate a lot of taxes. However, Cohen cited a woman who has been covering these in some detail. A lot of these centers were offered tax breaks by the state and so the local communities arent going to see much revenue for a long time. One of the most common complaints is the tax breaks being given these places. They seem to believe that since WalMart and Cabela’s got tax breaks they should also. Of course locals are going to get many of the jobs those kinds of places offer.
If those companies have a lot of money to build these places then I dont see they necessarily need tax breaks. Let them pay like everyone else. If these companies engage in transparent negotiations and pay full taxes and are still resistant then maybe we need some collective action legislation.
As an aside, there is a lot of misinformation about many of these centers and a lot of the problems are overblown in many cases. Having gone through this with covid I do have some sympathy for them.
Steve
On Iran, one has to be very careful due to a lot of Iranian propoganda that gets regurgitated by Western news sources.
My take is Trump already got what he thought was the “minimum acceptable outcome” when he ordered a pause/stop to major operations in April; the assassination of Khamenei (Senior), and whatever degradeation of Iranian military capabilities that the air force / Israeli air force was capable of.
What’s happening since April is Iran is trying to “win” by leveraging the Strait of Hormuz and cause chaos in global energy markets — to get either the US or the Arab states to “concede” Iranian dominance. Here is where it gets murky, the propoganda says the strait is closed but its clear a very substantial amount of crude is transiting the strait.
The accomplishments and up to April and defeating Iran’s attempt to use the strait of Hormuz victory is not victory, but probably enough if you told Trump back in February that was the result. But the tact Trump is focusing on now (by necessity) — leveraging economic pressure — is the one I thought he should have done all along. Its far more likely to get Iranians to compromise on the things US policy is concerned about; its attempts to extend its dominence in the MENA region and nuclear program. Even enforcers need money (not wrecked by hyperinflation) to feed their families.
“If those companies have a lot of money to build these places then I dont see they necessarily need tax breaks.”
Some may. Some may not. Here in GA (the second largest number of centers after VA) local govt has offered re-zoning and tax incentives. And they get the property taxes. When you consider the minimal draw on govt services for DC’s it seems a pretty good trade-off. But I’m not on the planning commission.
No GA historically has been farms and tourists for the mountains and lakes. And the usual support businesses. I know local government views it as a rare opportunity to make some hay. They don’t build skyscrapers, stock exchanges, steel mills or chip manufacturers here……..
Amazon got breaks to build a hub here. In any event, it seems the eminent domain issue is the one worrying most people.
I think last month NPR Illinois reported that the only data center projects that have been rejected were from noise issues in locations near residential subdivisions. There may have been more recent developments, and rejection probably does not include projects in which the developer rejected a process and switched locations.
I’ll note that in a strong property rights legal regime, federal, state and local laws aren’t going to preclude individual property right claims based upon common law nuisance.
The Illinois legislature was not able to pass a comprehensive bill for data centers, and the Democrats have a supermajority. (The Governor was notably quiet, he’s hoping someone notices him as a Presidential aspirant and is avoiding controversy) Seems less likely that Congress would act, particularly given that slight control rests with the party less favorable to regulation.
The Governor responded to the lack of legislation by suspending state tax incentives. I’ve seen no explanation of his authority, but it seems like the main issue at the state level is the increased energy use that runs counter to state goals to become carbon neutral. (The data centers are using up all the clean energy!) If the policy is essentially to make data centers (and no other new businesses) pay for or produce clean energy so the state can have some sort of bragging rights, I don’t see any problem with the subsidies. The State should pay for things it wants.
“outside people moving into their areas who are likely culturally different”
You can just say ‘Indians’, Steve.