What the AI boom is doing for Americans
Short summary
Noah Smith pushes back on Paul Krugman's claim that AI creates no benefits for ordinary Americans, arguing the data center buildout is generating substantial construction jobs, tax revenue for local governments, and demand-side economic support that's offsetting Trump's disruptive policies.
- Data center construction has created measurable job growth for construction workers since late 2022, with real wage increases even as Trump deported undocumented workers from the sector, and Goldman estimates 500,000 additional construction jobs needed by 2030.
- State and local governments are collecting significant tax windfalls from data centers—property taxes, sales taxes, corporate taxes—that fund public goods like schools, roads, and libraries, with Loudoun County, Virginia as a concrete example of this payoff.
- The AI investment boom is functioning as a major positive demand shock to the economy, counterbalancing the negative effects of Trump's tariffs, deportations, and policy uncertainty that would otherwise have caused visible economic damage.
Full summary
Noah Smith pushes back on Paul Krugman's claim that AI technology delivers almost no benefits to ordinary Americans. Smith acknowledges Krugman's track record as an economist but notes he's been skeptical of transformative technologies before—most famously predicting in 1998 that the internet would have no more economic impact than the fax machine. Smith argues this blindspot extends to AI: while Krugman contends data centers create few jobs and concentrate wealth among oligarchs, the actual employment data tells a different story. Construction employment has risen since late 2022 when the AI boom began, and construction wages have climbed both in absolute terms and relative to national averages. This happened even as Trump deported 13% of the undocumented construction workforce, which would normally suppress job growth. Smith cites data showing that specialized construction workers needed for data center building saw the biggest gains, and Goldman Sachs estimates 500,000 new construction and trades jobs will be needed by 2030 to sustain the buildout.
Beyond direct employment, data centers generate substantial tax revenue for state and local governments. Property taxes, sales taxes, corporate taxes, and various fees funnel money into communities that host these facilities. Loudoun County, Virginia exemplifies this dynamic—its data center boom transformed it from a quiet bedroom community into a tech hub with improved schools, libraries, and infrastructure. Smith acknowledges real costs exist: strain on electrical grids and noise pollution. But he notes governments aren't passive recipients of these benefits. They can raise taxes and fees after facilities are operational, demand "community benefit" agreements that essentially function as additional taxation, and require infrastructure investments like road upgrades and water system improvements before construction even begins.
Smith doesn't argue that ordinary Americans couldn't benefit more from the AI boom—he actually agrees with some of economist Jared Bernstein's proposals for spreading benefits more broadly. His core point is simpler: Krugman has underestimated the direct employment gains from data center construction and largely ignored the fiscal and macroeconomic benefits flowing to regular people through wages, tax revenue, and improved public services. The article cuts off mid-sentence, but the argument is clear: counting these concrete benefits matters when evaluating whether AI technology is actually delivering value beyond corporate boardrooms.