July 23, 2024
By: Ian J. Parry and Turner Loesel
Notably absent from the President’s One Big, Beautiful Bill was the proposed temporary pause, or “moratorium”, of state regulations on artificial intelligence. Following coordinated opposition from a diverse coalition including states’ rights advocates, the Senate voted 99-1 to strip the provision from the final package.
But a moratorium shouldn’t be off the table anytime soon. The opposition to the clause stemmed from a fundamental misunderstanding that there would be no guardrails on AI technology. Rather than violate state sovereignty, such a pause is the first step to ensuring American competitiveness on a national scale.
Federal legislation can still incorporate the many concerns that are shared among states, such as fraud, deepfakes, and user security. A national moratorium in line with the proposal in the Big Beautiful Bill wouldn’t disallow states from AI regulation, it would simply restrict them from directly targeting AI products or systems. But when a national consensus is not shared and AI regulations persist at the state level, American AI will struggle.
And it’s becoming increasingly important that an American struggle is avoided. While AI products like Google’s Gemini and OpenAI’s ChatGPT continue to lead worldwide in adoption rates and quality, products made by Chinese competitors like DeepSeek are quickly rising in adoption by worldwide organizations in education, finance, and even the oil industry.
This rise in adoption is happening because Chinese competitors can offer similar performances to American products, all the while undercutting American prices. This economic competition should be especially concerning.
This begs the question: why is a national moratorium the answer to China?
More than 1,000 AI-related bills flooded state legislatures in 2025 alone, up from nearly 700 bills in 2024. With each state moving forward with its own vision of how to regulate the burgeoning technology, they threaten to create 50 different incompatible standards for businesses to navigate.
Arguments are often made that a moratorium would only protect “Big Tech” companies: Google, Amazon, and the like. But this couldn’t be further from the truth. In an age of rising AI litigation rates throughout the U.S., a regulatory patchwork endangers smaller startups looking to expand across state lines. While Big Tech can afford to adhere to regulations across states, smaller companies have neither the revenue nor the resources to adapt their programs to 50 different systems of regulation. This wouldn’t just force out Big Tech’s competition and put people out of work, it would stifle innovation for years to come.
Less competition at home also means worse price points for consumers, making it harder for the U.S. to compete with China.
The lack of a moratorium or a national standard makes all of this possible. China continues to accelerate, and the U.S. continues to lose its AI potential as regulations develop. The longer the issue remains unanswered, the longer the U.S. will spend trying to catch up.
The unfortunate reality now faced is this: whether the U.S. wants to be or not, it is in a digital arms race with China. The U.S. is pitting 50 disjointed AI strategies against China’s unified, efficiently moving state. If American innovation slips, the U.S. is sure to lose the lead in this race.
An arms race sounds extreme. But don’t just take it from us. Take it from China.
In 2017, the Chinese State Council released the New Generation Artificial Intelligence Development Plan, outlining clear goals for China’s AI strategy. Chief among them was their intent to become the leader in AI technology by 2030, effectively unseating the U.S. in its current leadership role.
Why is outpacing China so important? The answer is the same as why the U.S. should outpace any other government. When a product like DeepSeek is employed in systems throughout places like universities, to use an example, they can at times alter the information being presented.
Sensitive questions can return much more censorship from DeepSeek as opposed to American AI alternatives. When institutions and industries around the world continue to adopt Chinese variants, the potential for Chinese information control spreads. This could lead to Chinese-favorable outcomes that parallel the results of election misinformation by the Russians. It’s not unreasonable to assume that people would prefer a world with Democratic AI over Authoritarian AI as the mainstay.
Ultimately, this competition is about more than technology. For China, AI is a crucial engine for economic growth and state control, particularly as its decades of double-digit GDP growth have come to an end.
And the economic race is much closer than the tech race.
Eventually, if the United States continues to lag in developing a coherent AI strategy, it won’t just lose the technological edge it prides itself on. It’ll lose influence over entire systems shaping global outcomes—and lawmakers should bear this in mind.
The question should no longer be if a national strategy is needed, but how quickly one can be built—and whether the U.S. is willing to act before it’s too late.
Turner Loesel is a policy analyst at The James Madison Institute.
Ian Parry is a research assistant at The James Madison Institute.
