Maine is set to pass legislation that would make it the first state to ban the construction of new data centers in 2027. Unfortunately, they are not alone. At the federal level, Senator Bernie Sanders has proposed legislation to enact a federal moratorium on the construction of new data centers. Eleven states have brought similar legislation to enact a moratorium on data center construction.

America’s innovation requires infrastructure. Trillions of dollars in investment are flowing into the construction of data centers. Opponents of this buildout point to the potential impact of data centers’ energy and water consumption on consumer utility costs. But banning the construction of data centers is the modern equivalent of threatening to ban the construction of railroads because the trains might drive up the price of coal. 

Legislators at both the state and federal levels should instead consider how to better enable the market to adapt to existing energy constraints. They should also consider the broader impact that data centers have on innovation and the local economy. 

What Would It Mean to Ban Data Centers

Data centers are necessary for both emerging innovations and established technologies. These facilities help power not only emerging technologies such as AI and quantum computing, but they also provide the cloud computing powering everything from our credit cards to our streaming services. 

The highly sophisticated corporations constructing new data centers are responding to the growing demand for computing through investment in state-of-the-art technology. The resulting centers have benefited both the average consumer and the regional economies that have embraced them. Data center tax revenue helped residents of Loudon County, Virginia, see lower car tax bills. Mississippi’s Governor Tate Reeves has sought to create a “Digital Delta,” recognizing that while some individuals “would rather not have any industrial project in their backyard… being the hub of the world’s most awesome technology will inevitably bring prosperity and authority to our state.”

But banning data centers is about more than losing economic opportunity. It sends a concerning message that the future is not welcome by denying the necessary infrastructure to support it. To ban data centers would be to ban the next great technological revolution already improving the lives of countless Americans. AI is being integrated into our medical system to supercharge drug discovery, allow doctors to spend more time with their patients, and help speed and improve diagnoses. In our day-to-day lives, AI is being used to filter spam calls, break down language barriers, and speed up emergency services. It has also made it easier than ever to start a business, develop a new product, and make our voices heard. 

A Better Approach to a Data Center’s Energy Needs

The regulatory structure of our electric grid is a core driver of increased electric costs and concerns about data center demand. Rather than banning data centers, alternative approaches would allow a state to embrace energy abundance, benefiting both our increasing technological demands and our overall energy policy approach.

Our electric grid was established over the course of the 20th century and enabled universal service at low and stable rates for consumers. However, the regulated system emphasizes reliability and consumer protection while effectively barring competitive entry, thereby incentivizing caution over speed and innovation. While this system may be appropriate for most consumers, data centers have drastically different needs. They require a constant stream of electricity and emphasize speed to power. Instead of gradual growth of 1–2% of electricity consumption per year, utilities are now facing the equivalent of plugging in a new city every time a data center is constructed.

Traditional electric utility companies are not built for this type of demand. Yet, our current regulations keep both residential consumers and the fastest-growing segment of industrial demand—data centers—tied to an industry heavily insulated from competition. This leaves homes and local businesses facing electric rate hikes. Meanwhile, data centers are forced to turn to inefficient, noisy generators to augment electric generation when the grid is stressed. By chaining the new industry to the old, existing regulations create a scenario where everyone loses.

Our Cato colleague Travis Fisher has proposed consumer-regulated electricity as a policy solution that would balance concerns about data center demand with the needs of this infrastructure for the future. His approach would free up a new market for sophisticated, well-resourced firms constructing data centers to be supplied by new, off-grid utilities able to dynamically adapt and innovate. At the same time, it ensures that none of the power required by data centers is subsidized by existing consumers, leaving traditional utilities to continue their work of providing reliable, low-cost energy.

Some states have already taken steps to implement this solution. In Ohio, the 2025 state law HB 15 has enabled developers to pursue the construction of new industry and data centers on timelines that would have been unlikely otherwise. New Hampshire’s HB 672 has fully enacted CRE, allowing independent entities to generate and sell electricity without state approval. Similar measures have been taken in Utah, Oklahoma, and West Virginia. Each showcases the promise of CRE as a serious solution to lawmakers’ concerns over rising energy prices without stifling innovation.

Conclusion

States can be laboratories of democracy, but not all experiments yield beneficial results. Artificial Intelligence represents the next great wave of American innovation. To ban or bar the infrastructure needed for the advancement of this technology is not only economically shortsighted; it is antithetical to human progress and the principles upon which America was founded. 

The policy response to AI’s energy should not be to ban the construction of its infrastructure, but rather to consider alternative approaches to our current grid system. Consumer-regulated electricity is one such alternative. Lawmakers seriously engaging with the issues surrounding data centers should consider it as a policy with a proven track record for rapid increases in generative capacity without hiking rates for the average constituent.

Our current AI products are the worst they will ever be. Future products, applications, and infrastructure will improve in a variety of ways, including not only technological abilities but likely also energy efficiency. Bans could have far more long-lasting impacts than policymakers realize. The states that choose to embrace energy reform and this unique technology moment may find themselves the beneficiary of others’ policy regrets.

Only a handful of members of Congress have tech experience. When Nick Begich earned the support of his fellow Alaskans to represent them in DC, he brought a background in software and entrepreneurship. He also brought the state’s commitment to being first to the frontier—exploring new ways to develop and deploy emerging technologies. That’s why his voice is an important one in ongoing AI policy debates. It’s also why I was so excited to interview Rep. Begich on the Scaling Laws podcast at the Cato Institute.

Our conversation covered a few key issues. First and foremost, we examined Congress’s institutional capacity to tackle something as complex and evolving as AI. Rep. Begich explained that his familiarity with tech has set his office apart. His staffers not only test new ways to integrate AI into their daily workflows but also train other offices to do the same. According to Rep. Begich, his colleagues would benefit from playing around with AI a little more before deciding whether and how to regulate it.

We also dove into the proper regulatory divide between the states and the federal government regarding AI governance. Perhaps unsurprisingly, given that he represents one of the more unique jurisdictions in the US, Rep. Begich acknowledged that some regulatory questions are properly left at the local and state levels. Still, we both expressed the importance of treating frontier AI as a national policy priority. Rep. Begich emphasized that if the US falls even slightly behind on AI progress, those losses may quickly compound. The two of us agreed that policymakers ought not assume that today’s AI architecture will be the one underpinning future models.

The upshot is that Congress’s allegedly slow reaction to the AI question is in some ways a feature, not a bug. Good policy takes time. Congress has conducted dozens, if not hundreds, of AI hearings since 2023. This slow but steady process has increased awareness of the issue and deepened the policy discourse. It’s somewhat unsurprising that a clear path forward has emerged, given that the nature and use of AI are themselves emerging topics. That said, the ongoing deluge of state proposals makes clear that Congress must at a minimum specify which areas must be addressed at the federal level. 

The conversation also took on the important topic of data centers. Rep. Begich made a strong case for why Alaska may be a hub for the necessary data center buildout. He highlighted the state’s vast energy resources, water supply, and cool temperatures. I pressed him on the point that local opponents may stand in the way of that vision. He noted that possibility but is confident that Alaska’s unique approach to resource-related governance may mitigate some of those concerns. 

My takeaway: Rep. Begich understands better than most that US leadership requires a national, long-term vision in which states row in the same direction rather than attempt to lay their own anchors. His own background provides unique insights into how AI policy matters to Americans and Alaskans, and into the importance of getting the policy approach right.

Most members of Congress, understandably, want to ensure that even people living outside of the biggest US cities have access to banking services. They see the “big banks” as a threat, especially amid the banking industry’s long-term trend toward consolidation. In fact, politicians from both parties regularly express concern about the small number of new bank formations since 2010. They also worry that people are leaving smaller banks because they believe larger banks will always be bailed out in times of trouble. (Incidentally, that’s not what happened during the 2023 bank failures.) 

While many members of Congress have worked to fix these problems by reducing burdensome regulations for the smallest banks, regulatory costs remain high. Aside from the additional expenses associated with the 2010 Dodd-Frank Act, compliance with the 1970 Bank Secrecy Act has been especially costly for community banks. (Bank Secrecy Act regulations have even driven the growing phenomenon known as debanking.)

Other members of Congress have sought to bolster community banks by increasing the limits on deposit insurance provided by the Federal Deposit Insurance Corporation (FDIC). While this approach may seem reasonable, especially since small rural banks were the main supporters of creating federal deposit insurance in the first place, many community bankers have come out against the latest efforts to raise the FDIC insurance caps. Increasingly, they’re coming to grips with the fact that FDIC insurance was the original sin in the banking sector. Over time, the regulatory burden that came with federal backing proved more costly than the protection it provided.

States now require banks—even state-chartered banks—to have FDIC insurance before accepting deposits, and banks that provide customers with FDIC insurance opt themselves into the federal regulatory framework. (Having the federal government pick up the tab for bank failures gets states off the hook. For good.) For decades, Congress has used FDIC insurance to justify increased federal involvement in banking, and those regulations are now a complete nightmare. 

Simply put, FDIC insurance is a main reason banks are regulated to death. 

For whatever reason, the Trump administration has been fixated on raising the FDIC insurance cap, a policy directly at odds with its efforts to reduce regulation for community banks. In Congress, this effort started out with an attempt to raise the FDIC cap to $20 million. Failing to gain enough support, that number fell to $10 million. Now, members of both the House and the Senate are trying to force the FDIC itself to raise the cap (through official rulemaking) to no higher than $5 million. 

Aside from the precise figure, raising the cap is a solution in search of a problem, and Congress should let this idea die. Main Street depositors do not benefit from raising the cap because it is already so much higher than what even the typical wealthy American keeps in a bank account. Moreover, many of the problems making Congress nervous about the banking industry are longer-term trends, driven by regulation and technology. If anything, FDIC insurance has worsened the regulatory problem and slowed the rate at which banks can innovate. Raising the cap won’t fix these problems. 

Since the 1980s, banks have become “fewer in number and larger in size,” with the total falling steadily from its peak of more than 14,000 banks. (This figure represents FDIC-insured institutions.) By 2005, there were approximately 9,000 banks, and by 2020, the total was down to just 5,000. Between 2010 and 2020, only 48 new commercial bank charters were issued.

During this time, the number of bank branches followed a different pattern. Starting at roughly 39,000 branches in 1980, the figure peaked at about 82,500 in 2009. After the 2009 financial crisis, the number of branches started to decline, falling to a 2025 total of approximately 69,000. (As these changes occurred, the US population rose from 227.2 million in 1980 to approximately 340 million in 2025.)

There are many reasons for these changes, including the 1994 legalization of interstate bank branching (the Riegle-Neal Act) and technological improvements that enabled mobile and online banking. Regardless of the reasons, it makes perfect sense that these long-term trends—fewer banks but with more assets, along with fewer branches—tend to make people (especially politicians) nervous.

The banking industry faces many challenges, including consolidation, declining new bank formations, and branch closures in rural communities. These issues deserve serious solutions. But raising the FDIC insurance cap is not one of them. Raising the cap would deepen federal involvement in banking, pile on more regulations, and do nothing to address the underlying forces reshaping the industry. 

If Congress truly wants to help community banks thrive, they’ll trust that competitive markets—not government guarantees—are the best way to deliver banking services to Americans, wherever they live. They’ll roll back the regulatory burdens that are strangling banks and get the federal government out of the business of picking winners and losers.

Funding for the Transportation Security Agency (TSA) has lapsed, and airport screeners across the country are not being paid. Some are staying home, which is generating long security lines at numerous airports. This is not the first time that federal budget battles have created collateral damage to the aviation industry.

The solution is for Congress to hand over TSA’s screening operations to the nation’s airports, which could then contract them to expert private security firms. As discussed in this study, that structure would insulate air travel from partisan battles in Washington and allow for greater efficiency and innovation.

It would also solve a conflict of interest in the current system: TSA both performs screening and regulates and oversees its own performance. In most other high-income nations, the government sets the overall regulatory structure and oversees the system, while airports and private firms conduct security screening.

Marc Scribner at the Reason Foundation pointed out to me that Skytrax has ranked the world’s 10 best airports for security screening, and nearly all of them use either airport personnel or private firms for screening. The US system of using federal government employees is rare.

The table shows the Skytrax top 10 with my notes on the screening structures. In Japan, airlines generally contract with security firms for screening, although the government apparently will be moving the responsibility to the airports. In Europe, airports generally conduct screening in-house or contract with security firms. In Japan and Europe, many airports are partly or fully privatized.

Skytrax has been ranking the world’s airports for 25 years based on millions of air traveler surveys from 100 or so countries. These particular results were based on survey questions for screening wait times, courtesy of security staff, perception of safety standards, and other factors.

Once the current budget battle is resolved, Congress should examine options to move screening out of the federal bureaucracy. Both Scribner and Bob Poole at Reason have argued in favor of allowing airports to contract with certified private security firms for screening, with the federal government responsible for overall policy and regulation. They would also alter the current security fee assessed on airline tickets. 

Senators Mike Lee (R‑UT) and Tommy Tuberville (R‑AL) introduced the Abolish the TSA Act of 2025 to move airport screening to the private sector in a different manner.

Federal budget battles are likely to get worse in the coming years as government debt soars higher and rising interest costs squeeze out other spending. Now is the time for Congress to restructure airport security screening so that air travelers are not held hostage by increasingly dysfunctional federal budgeting.

Merchants pay swipe fees to credit card networks (also called “interchange fees”) each time a consumer uses a card. The Credit Card Competition Act (CCCA), which would impose price controls on interchange fees, is circulating on Capitol Hill after the abandonment of an attempt to add the text to draft legislation on digital asset market structure.

Congress should not cap interchange fees. History shows that fee caps harm consumers and serve no valid purpose. The CCCA caps would be a gift to large retail merchants at the expense of everyone else.

Fee caps hurt consumers

Caps on credit card interchange fees would be counterproductive: Cuts in interchange fees are rarely passed on to consumers and trigger increases in other fees. 

Most of the cost savings from interchange fee caps—though potentially limited by other merchant fee increases—would be enjoyed by large retail merchants. After the Durbin Amendment capped debit card interchange fees in the United States in 2010, 77 percent of merchants made no change to their prices, 22 percent actually raised prices, and only about 1 percent lowered them.

Furthermore, debit card issuers adapted to the Durbin Amendment caps by increasing minimum balances and maintenance fees on checking accounts and reducing offerings of free checking accounts. One study estimates that caps on debit card interchange fees cost consumers between $22 billion and $25 billion. Low-income consumers were disproportionately affected by higher minimum balance requirements. This experience alone is enough for Congress to think twice before imposing caps on interchange fees for credit cards.

Lessons from overseas

Other jurisdictions have had similar experiences with interchange fee caps. Australia capped credit card interchange fees in 2003 and allowed merchants to pass the fees on to consumers through surcharges. Consequently, annual card fees increased and rewards were reduced, with the average amount a cardholder must spend to earn a voucher worth AUD $100 rising nearly 50 percent by 2011. Australian consumers pay about AUD $1.2 billion annually in surcharges that did not exist before regulation.

Europe’s experience bears this out as well: The European Union capped interchange fees in 2015, but other merchant service charges then increased and now exceed pre-regulation levels. When Spain reduced credit card interchange fees between 2006 and 2010, average credit card annual fees spiked and interest rates rose, but merchants did not pass savings on to consumers.

More regulation is not the answer

Even if credit card networks were afflicted with market failure (which is doubtful), intervention would replace this with government failure, as politicians and influential firms can manipulate the regulatory process for their own gain. Furthermore, market conditions change faster than regulators can adapt, and it is unlikely that regulators would adjust interchange fees with the requisite precision.

Markets offer a far more powerful solution than regulation does, and the payments landscape is undergoing rapid transformation, placing meaningful competitive pressure on incumbent card networks. Among the compelling challengers are stablecoins, which support fast, low-cost transactions domestically and across borders. Stablecoin use is growing rapidly: Stablecoin transaction volume reached $33 trillion worldwide in 2025, up 72 percent from 2024. The recently enacted GENIUS Act will catalyze institutional adoption in the United States.

Other contenders include fast-payment systems, open interoperable platforms that enable instant account-to-account transfers at low cost. Brazil’s Pix and India’s Unified Payments Interface (UPI), for instance, have significantly encroached on credit cards’ market share in their respective jurisdictions. Although central banks played an important role in establishing the Pix and UPI infrastructure, the dynamism that makes these systems transformative came overwhelmingly from the private sector.

The Indian government’s app accounts for only a small fraction of UPI transactions, while private entities such as PhonePe and Google Pay together command over 80 percent of the market, winning users over with innovative features and comprehensive app ecosystems. In Brazil, digital-first players such as Nubank and Mercado Pago built their businesses around Pix’s open infrastructure, reaching millions of consumers and merchants that the country’s traditional banking sector had not served effectively. The decision to open these systems to nonbanks and fintechs “broke historical patterns where only banks could shape the digital payments landscape.”

Where the market is free to build competing payment rails, consumers and merchants will benefit from lower costs, faster settlement, and greater choice. Price controls such as fee caps, on the other hand, stifle the competitive and innovative forces that allow markets to provide these benefits. Congress should direct its efforts toward enabling competition and innovation for the payments system, not toward crude constraints on the internal pricing of incumbent card networks.

In Washington, there’s no shortage of bad policy ideas that just won’t die. The latest example is the “Deadpool-esque” quest to lift the cap for Federal Deposit Insurance Corporation (FDIC) deposit insurance.

The latest round includes a flurry of activity in the House and a new bill in the Senate, along with support from the Trump administration.

In the Senate, Senators Bill Hagerty (R‑TN) and Angela Alsobrooks (D‑MD) are set to introduce a new bill that would give the FDIC six months to choose “a deposit insurance cap between $250K & $5M instead of setting it at $10M.” 

Lifting the cap is bad enough, but setting those problems aside, this new bill is a retreat from last fall. Back then, Hagerty and Alsobrooks cosponsored a bill to raise the FDIC coverage limit from $250,000 to $10 million, with no choice in the matter for the FDIC, for noninterest-bearing transaction accounts. (The administration signaled support back then too.) 

Under the leadership of Representative French Hill (R‑AR), the House Financial Services Committee held a hearing, and it was clear that there was nothing close to a consensus for raising the cap. During the hearing, the chairman expressed the importance of only passing a bill through regular order, members introduced all kinds of other reforms, and it became crystal clear that many community bankers were against raising the cap. 

Now, four members of the Financial Services Committee have introduced bills, one of which, by Representative Frank Lucas (R‑OK), serves as the House companion to the Hagerty–Alsobrooks bill. The folks at the FDIC can’t possibly be happy with this approach, one that essentially punts the decision to them—they must raise the cap, but only after going through the rulemaking process to figure out how high. The only good thing to say about this approach is that at least the public will know exactly who wants the cap raised.

This policy issue is simple. Expanding FDIC deposit insurance does not help Main Street Americans, even if members of Congress call their bill the “Main Street Depositor Protection Act.”

Several members (and the administration) have tried everything imaginable to justify this increase, but nothing has stuck because hardly anyone needs a higher cap. Less than 1 percent of bank accounts have more than the current FDIC insurance limit. The typical American—even the typical wealthy American—simply doesn’t have anywhere near $250,000 in a bank account. 

And those who do have more can already avoid getting stuck with uninsured balances by spreading their accounts around, as well as by using reciprocal deposit networks and “sweep” accounts. So-called small businesses with payroll accounts have the same options.

The FDIC system was the original sin in the banking sector. It’s been used for decades to justify increased federal involvement in banking, and it crowds out private insurance solutions that could provide more widespread benefits to Americans.

Raising the cap is a solution in search of a problem. Main Street depositors do not benefit from raising the cap, and Congress would do well to finally let this idea die.

This was cross-posted from Norbert Michel’s Substack, Mind the Gap.

On Friday, March 20, in light of the Iran war, which has pushed up energy and other prices, Spanish Prime Minister Pedro Sánchez announced measures to lower the cost of living. Rent control was included among those measures, even though it is already failing in Spain. 

Reportedly under pressure from one of its left-wing coalition partners, Sánchez decreed a nationwide contract extension at current prices for rentals about to expire, effectively amounting to a rent freeze. He has also instituted a 2 percent annual cap on rent increases through the end of 2027, which will apply to existing contracts currently indexed to inflation.

Ironically, a report published by the Instituto Juan de Mariana the same week as Sánchez’s announcement shows the extent of the harm that various forms of rent control are already causing in Spain. Following the introduction of rent caps in the region of Catalonia in 2024, the supply of rental housing has declined by 23 percent. Even more dramatically, the city of A Coruña and the region of Navarra saw rental supply fall by 44 percent and 51 percent, respectively, only six months after they designated certain areas as “stressed” housing markets and also imposed rent caps. In a country with an estimated deficit of 700,000 housing units, rent control is making things even worse.

Rent control in Spain not only cuts supply but also fails to improve conditions for renters. As the Instituto Juan de Mariana shows, wherever rent control has recently been introduced, average rental unit space has decreased, and prices per square meter have either stayed the same or increased—in Barcelona, for example, prices reached a record high in the third quarter of 2025.

The Spanish experience contrasts sharply with Argentina’s, which has adopted the exact opposite approach since Javier Milei became president in December 2023. Before then, listings had plunged by 53 percent following the passage of a rent control law in 2020. But after Milei repealed it ten days after taking office, supplies rose by a staggering 180 percent less than a year and a half later. (My colleague Ryan Bourne and I documented that extensively here). As of December 2025, rentals in the city of Buenos Aires were still almost 30 percent down in real terms from two years before, and supply has not declined.

Rent control does more harm than good, as Ryan Bourne explains in The War on Prices. Hopefully, Spain will correct course as Argentina did before things get much worse.