OPINION:
Nothing is more important to America’s future than leadership in artificial intelligence.
It is driving growth, will staff factories and is critical to national security. Yet the ideas of regulating and taxing AI to slow its pace are gaining political salience.
Local officials who recognize the tax revenue and jobs new data centers will add and support their construction are being voted out of office.
The backlash against AI is understandable. Midcareer workers fear being replaced by AI agents, and recent graduates fear that AI is eliminating entry-level jobs.
Affluent parents are paying career coaches up to $50,000 to help their offspring land promising positions.
Overregulation and taxation would only make these problems worse.
Drones are revolutionizing warfare.
Ukraine’s outnumbered army has gained the initiative by penetrating the Russian army’s ranks and, with autonomous drones, smashing its logistics lines many miles behind the front lines.
Now consider an army equipped with tens of thousands of cheap, lethal drones, directed in real time by AI agents that use satellite positioning to pinpoint targets. No system guided by humans could compete.
If an enemy puts that capability into jet fighters first, American air superiority is finished.
If we do not develop those capabilities first, the Chinese and Russians will.
However, we cannot limit AI development to just the military and cordon off the civilian economy. It is simply too expensive to develop just for defense purposes.
AI-enabled robots will replace most factory workers.
American industry cannot compete if AI use is taxed while China subsidizes the development of robots and AI. Just as important, the U.S. economy can hardly grow without AI.
This year, fixed business investment is projected to increase to $4.7 trillion from $4.3 trillion in 2025.
Alphabet, Meta, Microsoft, Amazon and Oracle are expected to increase their AI investments to nearly $800 billion in 2026, up from approximately $380 billion in 2024.
That jump represents all the growth in fixed business investment expected across the entire economy and excludes capital spending at Nvidia and chipmaking foundries.
Across the country, communities are opposing new data centers, and plans for many of them are being scrapped. The constant hum of compute can be maddening. If connected to the grid, data centers require new investments that raise electricity rates for everyone.
However, these problems can be mitigated through proper zoning and marginal cost pricing for power.
The potential impact on labor markets is hardly unprecedented.
In the 1950s, businesses employed armies of bookkeepers, file clerks, typists and other clerical workers. Those positions have since been eliminated by desktop computers, accounting and word processing software, and the like.
The original Luddites were British weavers and other textile workers whose jobs were threatened by mechanized looms and knitting frames.
Investments in AI agents to do bankers’ work are not all that different from factory automation. Such investment creates more value with fewer people.
It is not cost-cutting; it is replacing payroll expenses with capital expenses to free up workers for other purposes. Still, the adjustment process entails layoffs and workers retraining for new roles.
For example, workers who design, manage and create AI agents, and forward engineers who assist businesses in installing and learning to use the new technology, are finding robust demand.
A LinkedIn analysis found that AI-related job postings in the U.S. grew by 639,000 from 2023 to 2025.
Until this spring, the problem was that AI-related layoffs were happening in a stagnant job market for other reasons.
Tariffs and the war with Iran create enormous uncertainty and discourage hiring and investment outside AI, related activities and their supplying industries.
The crackdown on immigration has not created additional opportunities for native-born workers, and, by slowing growth, it has often reduced those opportunities.
This is not surprising because immigrant labor usually complements native-born workers by doing jobs Americans are reluctant to take or cannot do because the right skills are lacking in sufficient numbers.
In recent months, overall hiring has picked up, and in a survey of 1,500 employers, the Strada Education Foundation found that nearly three times as many firms were looking to increase hiring of recent graduates as to reduce it.
This is logical for growing firms that will use AI to leverage human resources, but they are seeking candidates with AI literacy and more maturity.
In the consulting industry, AI agents increasingly handle the grunt work of collecting, synthesizing and analyzing information to create slide decks.
Instead, new hires increasingly function like middle managers, overseeing the work of several agents and interacting with clients early in their tenure to determine needs and preferences for final work products.
Incumbent workers risk layoffs if they do not acquire those skills, and for many, that task is daunting.
However, as Federal Reserve Chairman Jerome Powell said in a 2020 address on the COVID-19 economy, “None of us has the luxury of choosing our challenges; fate and history provide them for us. Our job is to meet the tests we are presented.”
• Peter Morici is an economist and emeritus business professor at the University of Maryland, and a national columnist.
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