On Saturday, the U.S. Senate parliamentarian cleared a proposed measure discouraging states from placing safeguards on artificial intelligence and Big Tech for the next decade. It could be included in the reconciliation package which the Senate is expected to consider as early as this week.
To overcome the Senate’s arcane rules, the Commerce Committee rewrote a House-passed version of the measure to condition $500 million for AI projects on states’ compliance with the moratorium.
But the measure goes further by creating triggers that would enable the Department of Commerce to “deobligate” additional broadband dollars already promised to states if they don’t stand-down.
Branded a 10-year “temporary pause” on state AI rules, this approach remains deeply flawed. Not only would it fail to rein-in California’s woke AI overreach and jeopardize broadband funds for conservative states and rural communities—it also poses concerns for state sovereignty.
Once a state is subject to the moratorium, they risk losing the ability to enforce laws related to everything from kids’ online safety and data privacy to safeguards on mental health chatbots.
Under the measure, if even one dollar of Broadband Equity, Access, and Deployment—or BEAD—funding is “obligated” to a state or locality on or after enactment, it becomes subject to the moratorium per subsection (q).
Here’s the kicker. Once a state triggers subsection (q), it cannot enforce any law that even arguably violates the moratorium without running the risk of losing all BEAD funding—much of the $42.5 billion provisionally approved.
That’s because Commerce can claw back BEAD funding previously obligated under subsection (g)(3)(B)(iii) of the measure, which authorizes them to “deobligate grant funds awarded to an eligible entity that” is not in compliance with subsection (q).
According to researchers at the Institute for Law and AI, “[t]his deobligation provision clearly and unambiguously applies to all $42.45 billion in previously obligated BEAD funding, in addition to the new $500 million.”
Proponents stress that the conditions only apply if states opt to draw from the new $500 million dollar pool.
But it’s more complicated.
As the Institute for Law and AI points out, Commerce could deobligate previously obligated funds for reasons such as “an insufficient level of performance, or wasteful or fraudulent spending.” But then “re-obligation of the clawed-back funds would require compliance with the moratorium.”
Since Commerce changed the Biden-era guidance for BEAD grantees and is prompting states to request amendments to their award agreements, it seems at least conceivable that much of the $42.5 billion could technically be re-obligated.
At that point, states have a choice. Risk potentially forfeiting BEAD dollars already promised, or stop enforcing laws on AI and Big Tech.
Smaller conservative states with limited budgets and large rural populations need these funds. But wealthy progressive states like California and New York can afford to take a pass and just keep enforcing their tech laws.
That’s a fatal flaw.
Proponents of the moratorium have largely staked their case on preventing California and New York from imposing European-style AI regulation on the rest of the country. That’s a laudable goal, but this measure almost certainly wouldn’t achieve it.
Relative to their budgets and economic footprint, the BEAD awards allocated to those two states are fairly minor.
California’s BEAD award is $1.9 billion and New York’s is only $664.6 million. By contrast, California’s annual budget is around $327 billion, and New York’s is roughly $254 billion. Both states can easily afford to simply pass on the BEAD funds altogether and ignore the moratorium.
Even if every other state took the BEAD funds and did away with enforcement—California and New York could eat the costs and move forward with enforcing European-style tech laws with ripple effects for the whole country.
Worse still, linking BEAD funding to the moratorium risks discouraging innovative states like Utah, Florida, and Tennessee from checking the woke policies of California and New York.
Rather than unleashing “permissionless innovation,” the moratorium could instead lead to rule-by-Sacramento and Albany—a scenario that should put fear in the heart of even the most ardent techno-libertarian.
BEAD has already been plagued by delays and red tape. This just adds one more layer of uncertainty.
It also leaves California and New York unimpeded while holding broadband funds for small conservative states and rural communities hostage.
Stepping back to consider the matter in broader terms, the proposed moratorium takes a profoundly wrongheaded attitude towards American federalism. Proponents of the moratorium see state regulations purely as impediments to heroic innovation.
But the advent of AI technologies presents a situation that as much as any calls to mind Justice Louis Brandeis’ dictum that the states are the laboratories of American democracy. New technologies, along with their benefits, have always created serious, destabilizing consequences.
Why not allow states to experiment with different means of addressing or mitigating the collateral costs that innovators would impose on society? Must we wait 10 years while these evils manifest before administering a remedy?
State regulation can be a necessary spur to innovators, forcing them to consider values outside of technical functionality and profitability. Some state regulations will be bad both in terms of their efficacy and in terms of the values they encode. Still, states should not be precluded from acting on behalf of their citizens, especially when Congress has no plan of its own.
Moreover, what Congress proposes to do by jeopardizing funding that states have received and relied on poses questions about the lawfulness of the moratorium. As the Supreme Court said just today, spending legislation like this takes the form of a “contract” with the states, not a “command.”
Federally funded programs like BEAD are agreements “between two sovereignties,” and when Congress offers states these or any other federal funds, what it is purchasing is a portion of the states’ sovereignty. Thus, the terms on which the money is offered must be clear, and the state’s consent truly voluntary.
If Congress is allowing funds to be de-obligated at the discretion of the Commerce Department and then subjecting their release to new, onerous terms, one might question whether the states’ consent to the new moratorium is truly voluntary.
At bottom, the moratorium would fail to achieve its primary goal of freeing AI from the clutches of large progressive states while also posing legal and constitutional challenges.
It’s time for Congress to see the light.