Why This Topic
In the largest power market in the United States, the independent market monitor attributes 6.3 billion dollars of the latest 16.4 billion dollar capacity auction to data centers. Households in Ohio are paying about 16 dollars more a month. In seven states, 4.3 billion dollars of grid connection costs were assigned to ordinary ratepayers in a single year.
That is one half of the evidence. The other half says the opposite. A national laboratory study found that states with the fastest growth in electricity demand saw real prices fall between 2019 and 2024. Another analysis found rates about 6 percent lower where data centers grew.
This is the second of six debates on whether data centers could pay their own way if the law treated them like plain warehouses. Episode 1 asked whether states should pay industry to come. This one asks who is actually paying now. We gave the question to William Graham Sumner and Andrew Carnegie, because underneath the power bill is an older question. When two parties make a deal and a third party gets the invoice, was it ever a deal?
Why William Graham Sumner
William Graham Sumner taught political and social science at Yale from 1872 to 1909. Before that he was an Episcopal priest. In 1883 he gave the lecture that made his name, “The Forgotten Man.” The idea is simple: A notices something he wants fixed, talks it over with B, and the two of them get a law passed. The cost falls on C, who was never consulted.
Sumner’s line about C is the spine of his case in the debate: “He works, he votes, generally he prays, but he always pays.” Put a governor in for A, a hyperscaler in for B, and a household on the same grid in for C, and the lecture needs almost no updating.
He also matters here because he was not a reformer. Sumner was a laissez-faire man who attacked protective tariffs as fiercely as he attacked socialism. His 1885 book is titled Protectionism: the -ism Which Teaches that Waste Makes Wealth. He opposed subsidies to business for the same reason he opposed most regulation of it.
Why Andrew Carnegie
Andrew Carnegie started as a bobbin boy in a cotton mill at 1.20 dollars a week, built the dominant American steel company, sold it in 1901 for a personal fortune of more than 300 million dollars, and spent the rest of his life giving it away. He is the best available spokesman for the idea that a great enterprise repays the place it lands in.
He is also vulnerable in exactly the way this topic needs. In July 1890, writing in the North American Review, Carnegie argued that the steel industry was not yet fully grown and would have to be protected by tariffs until it was. By then he was the leading steelmaker in the country. Sumner had been writing against that argument for years. We have found no record that the two men debated each other directly, so we are not claiming a personal feud. The quarrel between their positions is well documented.
Carnegie’s library program supplies the other half of the fight. To receive a library, a town had to own the site and pledge annual support, through taxation, equal to 10 percent of the gift. His explanation was blunt: “the community which is not willing to maintain a Library had better not possess it.”
Who Else We Considered
Sumner vs Alexander Hamilton. Sumner wrote a critical biography of Hamilton, and Hamilton’s Report on Manufactures is the original American case for supporting industry. We held Hamilton for the series finale, where the question is whether the industry can stand on its own at all.
Frederic Bastiat vs Andrew Carnegie. Bastiat’s essay on the seen and the unseen is the French cousin of the Forgotten Man. He would have been funnier than Sumner. Sumner won because his formula names the payer directly, and because he sets up a rematch with Henry George in Episode 5.
Adam Smith vs Andrew Carnegie. Smith argued that public works should be paid for by those who use them. It is a natural fit, and Carnegie admired Smith. We passed because it would have been too polite.
Sumner vs Henry Clay. Clay’s American System is the tariff-and-improvements program Sumner spent his career attacking. It was a strong historical match that would have pulled the episode toward the nineteenth century and away from the power bill.
Why Each Man Takes the Position He Does
Sumner’s position is the Forgotten Man applied to a utility bill. The household did not ask for the data center, did not negotiate the rate, and cannot leave the grid. He also has the better explanation for why the evidence conflicts. When a power system has idle capacity, a big new customer spreads the fixed costs and everyone’s rate falls. When the system is full, the same customer forces new construction and everyone’s rate rises. The favorable studies cover years when the grid had slack.
Carnegie’s position is the mill owner’s. Run the works full and the cost of every ton comes down. A steady, enormous customer is the best thing a utility can have. And the local numbers back him: Loudoun County, Virginia reportedly spends about four cents serving a data center for every tax dollar it collects, against twenty-five cents for ordinary commercial property.
Carnegie gets the best counterpunch of the night, and it is accurate. The sixteen dollars on an Ohio power bill is a capacity payment. It goes to the owners of power plants, many of them already built. The data center never receives it. Sumner concedes the point because he has to, then argues it makes things worse: two parties arranged a transfer and neither can be made to give it back.
The historical record also limits Sumner’s remedy, and we kept that limit. He would not have supported a cap on what data centers may draw, and he would not have wanted a commission setting prices. What he can credibly demand is a contract. Ohio supplies the example. One utility required data centers to pay for 85 percent of the power they reserved for up to twelve years, whether they used it or not. Its forecast of new demand fell from 30,000 megawatts to about 5,700.
Sumner’s two sharpest lines use Carnegie’s own words. The first is the 1890 infant-industry claim. The second turns the library rule around: an industry not willing to maintain its own power line had better not possess one. Carnegie’s answer is that he gave the building and asked only that the town keep the lamps lit.
Both men admit what nobody knows. Much of the capacity bill is for data centers that have not been built. If the demand arrives, Carnegie’s arithmetic holds. If it does not, households have paid for power plants to serve a forecast.
A Note on the Sources
Sumner is quotable and consistent, which makes him easy to write. The Forgotten Man lecture, What Social Classes Owe to Each Other, and the book on protectionism cover everything he says. We wrote him as abrasive and humorless because the record supports it. One detail we could not resist: he was a clergyman before he was a professor, and it shows in the cadence.
Carnegie’s own words do most of his work too. “The man who dies rich dies disgraced” comes from his writing on wealth. The tariff quotation comes to us through David Nasaw’s biography, and we have marked it for checking against the original article. One line in the script, where Carnegie says he built with his own money “once the tariff was paid,” is invented for the joke and flagged as such.
The commentary booth returns with its habits turned up. Samuel Johnson quotes his Dictionary at people, including the entry on oats, “a grain, which in England is generally given to horses, but in Scotland supports the people.” That one is aimed at Carnegie. Niccolo Machiavelli answers with The Prince and reminds Johnson that he defined a pension as pay for treason and then accepted one.
The modern figures come from the PJM market monitor as reported by Utility Dive, the Institute for Energy Economics and Financial Analysis, the Union of Concerned Scientists, and studies from Berkeley Lab and EPRI. The EPRI report was supported by Google, and Sumner says so on air.
What Comes Next
Episode 3 goes underground. John Locke and Jeremy Bentham argue over who owns the aquifer and the air. After that come William Blackstone and Otto von Bismarck on eminent domain, Sumner against Henry George on the remedy, and Walter Bagehot against Alexander Hamilton on whether the whole thing can pay its own way.
If you want the rest of the series as it drops, subscribe here and on YouTube.
Sources
Utility Dive: Data centers drove $6.3B in PJM capacity auction costs
IEEFA: Projected data center growth spurs PJM capacity prices
E&E News: Data center boom sparks sticker shock for PJM ratepayers
AI for AI: Optimizing Additional Infrastructure Build-out (arXiv)
POWER Magazine: Regulator approves AEP Ohio’s data center tariff
Ohio Capital Journal: AEP Ohio says new data center tariff is working
Carnegie’s infant-industry argument for steel tariffs, citing Nasaw
National Park Service: Carnegie Libraries, The Future Made Bright
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