The forever AI wars

SPEAKER_1 (0:00)

At Edward Jones, we believe rich is about taking care of what gives your life meaning. That's why your financial advisor personalizes your plan to help you preserve your progress and create something that lasts. Let's find your rich. Edward Jones, member SIPC.

Christine Moy (0:19)

Hello, and welcome to Decoded by POLITICO. I'm Christine Moy.

Sam Sutton (0:23)

And I'm Sam Sutton. It's election day. We'll be discussing how the AI industry is transforming this midterm season. Plus, we have some exclusive polling on how voters feel about data centers, which has been a key issue in many states.

Christine Moy (0:38)

We wanted to spend the first half of the show talking about the different ways AI is going to shape this election cycle. I wonder if we should start about what comes next for AI leaders after the midterm season.

Sam Sutton (0:48)

Yeah. I think one of the things that I was thinking about going into today is the degree to which AI is here to stay, and is going to be impacting the broader economy moving forward.

And just within the industry, the impacts that we're going to see are going to be pretty significant. I mean, later this month, we're expecting to see Anthropic Day be on the NASDAQ. It's widely expected to be the largest initial public offering of all time. Even in the third quarter, we saw AI-related investments outpace consumer spending as the biggest driver of economic growth in the US economy. That is a really, really striking development. And the fact that that was happening at a time when we're seeing a lot of concerns being raised about a financial bubble, yesterday, when NASDAQ fell into correction territory, which is not a good thing, and usually a sign that maybe some of those fears might have something to them, is really notable to me. So that's what's happening in AI industry, but we're also seeing some pretty striking developments around AI policy and AI politics. Our colleague, Owen Dahlkamp, scooped recently that OpenAI's top lobbyist, Chris Lehane, has been pitching some of the Democratic Party's presidential aspirants on how they should be talking about tech. And I think that there are a lot of folks in industries outside the tech world who are now starting to wrestle in real terms with how they're going to have to engage on AI related policy issues moving forward.

Christine Moy (2:04)

You're a finance guy, and I know you spent a lot of time talking today about how AI is showing up in different parts of the economy from our journalists across the newsroom who are covering this issue across different industries. What did you hear from them?

Sam Sutton (2:18)

Yeah, so the first person I reached out to is Victoria Guida, who's obviously our economic correspondent and my former colleague on the econ team.

And what she and I talked about was how this is going to impact the Federal Reserve. Now, Kevin Warsh, who's the Fed chair, has made the argument that AI is going to boost the economy in the long term, that it's going to lead to more productivity, and that that is going to help fight inflation and boost growth. All of that is a good thing. Unfortunately, right now, what we're seeing is that AI is creating a lot of inflation, and that's largely because AI requires a tremendous amount of physical infrastructure, it requires a tremendous amount of capital, that's creating demand within the economy, and that is pushing up prices. So that's happening at the same time we are also starting to see evidence emerge that AI is having a negative effect on employment in key sectors that are highly exposed to the technology, and more broadly within those sectors, that it's pushing down wages. So really, what Victoria told me is that that creates some pretty real political dangers for the central bank and for Warsh, because it could fracture the Fed's ability to actually help workers by lowering interest rates, and it could further erode trust in the institution. And this is an institution that's been attacked repeatedly over the years by President Donald Trump for not doing what he pleases when it comes to interest rates and not doing enough to fight inflation at different points in time.

Christine Moy (3:37)

And we'll get into some more Sam Lor in this episode. Sam, before you were our finance guy, you were also a health care reporter. Can you talk about how you see these AI issues interacting with health care policy?

Sam Sutton (3:49)

So I spoke to Simon Levin, who is one of our many health care reporters and a great one at that, who covers providers, which includes doctors, hospitals, urgent cares. And he pointed out to me that hospitals have been increasingly using AI in clinical settings, but that patients aren't always in the loop when those decisions are made. So that raises some serious questions about data privacy that may draw the attention of policy makers down the road. But more importantly, health care is not breaking any news here, but health care is one of the most highly regulated industries in the US. And the fact that we are seeing health care providers come under pressure on the cost side to engage AI, to use AI, to try to find software or hardware solutions that address some issues that they're seeing around shortage of workers and higher wages in health care, is colliding with the fact that there's not clear, specific rules of the road on how they can deploy that in a clinical setting. That potentially raises liability issues. But I think just as importantly, it raises questions about how policymakers are going to respond to those issues once they become politically salient.