This fall should be a time to celebrate a bountiful harvest of good economic news and the smart decisions on both ends of Pennsylvania Avenue -- which, at the very least, kept Washington from smothering the seeds of robust job and productivity increases, not to mention surging GDP and healthy stock gains. The Tax Cuts and Jobs Act, regulatory reforms, and other initiatives have sent the right signals to markets that the economy can still have an expansion-oriented future.
But even a few bad apples can spoil a bountiful harvest. The Trump Administration unveiled yet another round of destructive tariffs aimed at China but that ultimately wound everyday Americans. Congress held hearings to grill tech companies – whose innovations have contributed massive, transformational value to the economy -- on their business practices toward competition, privacy, and political speech. And in the latest economic policy equivalent of a circular firing squad, the Department of Justice announced that it would gather with state Attorneys General (AGs) by the end of this month “to discuss a growing concern that these companies may be hurting competition and intentionally stifling the free exchange of ideas on their platforms.”
Advocates of limited, fiscally responsible government ought to appreciate more than anyone the potential for mischief in those words. Who, exactly, has the “growing concern”? Could it be state AGs who, besides the altruistic “consumer” motives they express on-camera, might have financial motives too? NTU’s research affiliate was a pioneer in spotting this insidious hidden agenda 18 years ago in an Issue Brief, whose findings concluded that “the states have used government lawsuits against large companies to supplement high state spending.” At that time, 9 of the 12 highest-taxed states in the nation were leading participants in the antitrust suit against Microsoft.
And while the (largely baseless) controversy over “stifling the free exchange of ideas” on platforms such as Twitter and Facebook has occupied headlines, the most troubling statement is the Justice Department’s implication that large tech firms may be “hurting competition.”
Had this salvo been fired by the Obama Administration’s Justice Department, conservatives would rightfully muster their best free-market arguments and return fire. They should be doing so now as well. That’s because taxpayers have much more at stake in these investigations than wasting federal money on a wild goose chase: legal implications of these investigations have major implications for the economy and for fiscal policy.
If federal and state authorities are indeed attempting to signal a new era of crackdowns, the currently-booming economy could suffer. Just last month NTU brought some of this evidence to bear through public comments filed in response to a comprehensive round of Federal Trade Commission (FTC) hearings on the future of competition policy. For example, economist George Bittlingmayer found that periods of heavy-handed antitrust enforcement in the late 1950s, early 1960s, and 1970s resulted in low levels of investment: precisely the opposite intent of the recently-passed Tax Cuts and Jobs Act. He also determined that from 1947-91, the economy-wide investment reduction from each single antitrust action ranged from $34 million to $110 million.
The collateral damage of these government raids will spread far beyond “big” business. During the Microsoft antitrust foray, Bittlingmayer teamed up with Thomas Hazlett to examine market data of 150 companies, and found that most computer companies’ stocks were negatively impacted. Today, more than 10 million Americans are directly or indirectly employed through the ad-supported Internet ecosystem. What will happen to TCJA’s promise of sustainable job growth if this ecosystem is attacked by overzealous government regulators?
This is no idle threat. As Eric Goldman, co-director of Santa Clara University’s High Tech Law Institute noted, the recent actions at the federal and state levels against companies such as Google, Facebook, and Twitter “could be a very serious broadside against the entire Internet industry coordinated by multiple layers of government.”
Equally important, how does stifled technological innovation prevent those layers of government from tapping discoveries that can make their operations more cost-efficient? NTU examined that question in its FTC comments as well. Among the instances we highlighted of private-sector developments with public-sector benefits were: cloud-based data email applications and data centers, more systematic detection of improper benefit payments, online service portals for citizens, including tax return e-filing, and better management of government supply chains. Indeed, thoughtful policies from the federal level can actually encourage states to embrace pro-taxpayer solutions as well. To a recent example of an actual public policy, the FTC’s Contact Lens Rule (which essentially freed markets to advertise new eyewear services and purchasing options) has a salutary impact on government employee insurance programs as well as health care programs for underserved Americans.
The entire free-market community should be reminding members of Congress and the Administration that light-touch regulation, not heavy-handed enforcement, is the best path forward. Anyone who needs a few pointers can consult dozens of tracts from NTU and others, the first dozen of which are here, here, here, here, here, here, here, here, here, here, here, and here. For readers with a little less time on their hands, perhaps the following is a good starting point:
The greatest threat to free competition comes not from aggressive businesses, but from government intrusions into the marketplace. By undermining competition through antitrust enforcement or subsidies for failing industries, government uses tax dollars to make consumers pay higher prices. … If any party is guilty of engaging in “conspiracies in restraint of trade” that keep costs high for consumers, it is government.
The principles behind those words, written some 20 years ago in an NTU Foundation paper, ought to be axiomatic among pro-taxpayer public officials rather than dusted off to be recited here. But based on this week’s disturbing developments, necessity is the mother of repetition.