Who would’ve thought…

House Democrats say the government should let AI companies go bankrupt if the AI bubble pops. That is the right position, but they are not taking it for economic reasons. AI is becoming a core midterm issue.

A new House resolution from Rep. Greg Casar opposes any federal bailout of insolvent AI firms. No emergency lending from the Federal Reserve, no Treasury Exchange Stabilization Fund, no FDIC help, no capital infusions or debt guarantees. Failing AI companies would go through normal bankruptcy instead.

Letting businesses fail is the correct position, period. When the government picks winners and losers, it usually makes the problem worse, and both parties have historically been in on it. But do not mistake this for sound economics from the Democratic Party. The same resolution blames the 2008 crash on deregulation, and this is not a principle they apply anywhere else.

So why now? Because the economics of AI are still a question. Some of the biggest players are not profitable, their spending commitments are massive, and the companies doing fine are subsidizing AI with other businesses, like Google. Some kind of market correction is coming. That does not mean large language models go away. When the dotcom bubble burst, the internet did not disappear, but plenty of companies did not survive. Because so many industries now rely on this tech, a correction will hit every corner of the economy. It still has to happen.

The real reason is politics. A new ABC News, Washington Post and Ipsos poll found 57% of Americans say AI is bad for society and 42% say it is good. Only 2% say it is extremely good, while 17% say it is extremely bad. Democrats see an opening, and a Democratic super PAC is already running ads against Republicans in swing districts in Pennsylvania, Arizona, Wisconsin and Michigan over their 2025 vote to block states from regulating AI.

Republicans are more divided. The Trump administration is very friendly to AI and calls it a race we need to win, while some Republican lawmakers and governors are pushing back on data center development. Democrats look set to position themselves as the party for people who are skeptical of the technology.

The Rippaverse: https://rippaverse.com/

#AI #Midterms #Economics