AI policy's new power center

"The biggest question is: What kind of business partner does the government want to be? They need the AI companies. The government's a superpower but here it's trying to jam a lot of policy. This reflects tension between government dependence on private AI firms and its desire to impose regulatory requirements through procurement mechanisms rather than traditional legislative channels."

"The Trump administration has touted an anti-regulation, pro-AI innovation stance. But it has still regulated AI, just in a different way through intensive state intervention operating via industrial policy, trade restrictions, immigration controls, equity stakes in private firms selected by the state, redirection of research funding, and strategic preemption of state authority."

"The Pentagon's designation of Anthropic as a supply chain risk, which means companies must stop using Claude in cases directly tied to the department, is usually reserved for foreign adversaries. Anthropic is suing on grounds that the Pentagon is violating its free speech rights and lacks congressional authority."

The Defense Department, the federal government's largest tech buyer, wields significant influence over AI development through defense contracts that function as regulatory mechanisms. The Pentagon designated Anthropic as a supply chain risk, restricting Claude's use in department-related cases—a designation typically reserved for foreign adversaries. This action contradicts the Trump administration's stated pro-innovation, anti-regulation stance while demonstrating how government procurement requirements become de facto industry rules. Anthropic is challenging the designation on free speech and congressional authority grounds. The Pentagon's approach raises questions about regulatory consistency and extends beyond military systems, affecting over 100 private sector customers across pharma and fintech industries seeking to pause Claude usage.

Read at Axios