State and local meddling threatens to undermine the AI revolution

While a dysfunctional and highly partisan Congress struggles to formulate policy for artificial intelligence (AI), policymakers in New York, California, and many other states are floating their own plans for the hottest technology in decades. Unfortunately, in their rush to stake a claim on AI policy, many state and local leaders are proposing ideas that would derail the next great technological revolution and undermine America’s global competitiveness. 

Everyone wants a piece of the AI action today. One industry trade association reported a 440 percent increase in the number of state AI-related bills introduced from September 2022 to September 2023. A steady stream of new bills have been floated by state and local leaders since then. 

These measures vary widely, with some simply proposing to study AI issues in more detail, while many other bills would impose sweeping new regulations on AI technologies and companies. With Congress dragging its feet on AI policy, this opens the door to this growing patchwork of parochial regulations, which could hold back America’s innovative potential in algorithmic and computational technologies at a time when China and other nations are racing ahead.  

Some states have proposed contradictory ideas, like lavish R&D spending on AI projects, but also many meddlesome new algorithmic mandates and even taxes. For example, in her recent “State of the State” address, New York Gov. Kathy Hochul proposed “Empire AI,” a $400 million university-based consortium to create a state-of-the-art AI computing center in New York. While grandiose industrial policy schemes have a poor record of success, Hochul’s proposal at least seeks to promote the development of AI systems in the state instead of restricting them. 

At the same time, however, three New York lawmakers have proposed restricting AI advancements through a new “robot tax act.” Under their bill, employers would face tax penalties if algorithms or computer applications were thought to have displaced jobs. Former New York City Mayor Bill de Blasio floated a similar idea when running for the Democratic presidential nomination in 2019. He called for a new Federal Automation and Worker Protection Agency to oversee any workplace automation decisions, which would let bureaucrats micromanage hiring decisions. Speaking of New York City and algorithmic hiring decisions, in 2021, the city implemented a new regulation that requires algorithmic fairness audits for digital hiring applications. 

On the other coast, similar regulations were floated in California last year proposing to regulate AI systems used to make hiring decisions. More recently, a new bill was introduced that would require California’s Department of Technology to “establish safety, privacy, and nondiscrimination standards relating to artificial intelligence services.” This bill and the many others introduced in California last year, would empower state bureaucrats to dictate AI policy for innovators across the nation. 

Indeed, with big states like New York and California moving fast to regulate, and many other state and local officials looking to stake their own claim on the AI front, algorithmic entrepreneurs threaten to get crushed by mounds of red tape and mounting compliance costs, which will distract them from devoting their energy to meeting the global competition. 

In a better federal legislative environment, Congress would establish some basic guidelines for national AI policy that limited the scope of state and local government regulation. After all, AI technologies have national reach and the free flow of computational commerce is essential for the development of a robust American marketplace for algorithmic services. Had the internet, personal computing, or e-commerce been burdened with such a contradictory and costly patchwork of technocratic state and local policies, it is unlikely the U.S. would have become the global leader in digital technology as it has over the past three decades. Luckily, bipartisan actions by Congress and the Clinton administration put America in the digital driver’s seat globally by creating a smart nationwide framework and positive innovation culture in which online commerce and speech could blossom. 

That same sort of principled, pro-innovation federal framework is needed now for AI, but Congress appears incapable of getting even basic things done these days on tech policy. State and local leaders are filling that policy vacuum with a flood of measures that, for better or worse, will create America’s new technology policy framework. If the U.S. hopes to continue to be a global leader in AI and advanced algorithmic technologies, state lawmakers will need to adopt better policies to promote innovation and investment in a sector that has profound ramifications for global competitive advantage and our geopolitical standing as a nation. But it would be better for Congress to take the lead to ensure that happens.