Top Democratic and union leaders play host this week to prospective 2012 Congressional candidates, highlighting labor’s status as a critical cog in progressive campaigns. Some observers believe that, in the aftermath of Wisconsin Gov. Scott Walker’s efforts to strip the state’s public unions of collective-bargaining rights, labor has found both renewed public sympathy and political momentum.
It’s not clear, however, that such attitudinal shifts will be enough to reverse the steady erosion of union membership, and the voting power that goes with it. That’s the fundamental reality progressives must reckon with as they ponder how to forge electoral majorities.
To offset labor’s declining share of the electorate, Democrats logically must do one of two things: do better among union households or do better among non-union households. As it happens, the key to both is the same – winning more moderate voters.
Will Marshall explains why Gingrich should leave the race now in Politico’s Arena:
If Newt Gingrich quits the race now, he just may escape with his dignity intact. He can take pride in the fact that his chaotic campaign sparked several times, even if it never caught fire anywhere but South Carolina. Not bad for a guy whose been out of politics for more than a decade, and jumped into the race with no money, no organization and no clear plan to capture the GOP nomination.
The longer he stays in, the greater the risk that his campaign degenerates into an exercise in self-parody. Gingrich, the GOP’s certified Deep Thinker in the race, is now pushing the dumbest gimmick – $2.50 per gallon gas – since Herman Cain’s skeletal 9-9-9 plan.
In the minds of many Americans, “government” is synonymous with “red tape,” “bureaucracy” and “paperwork.”
And no wonder.
According to the government’s own estimates, American people and businesses collectively spent 8.8billion hours dealing with federal paperwork requirements in 2010. That’s equal to nearly 367 million days and more than one million years.And while this figure is down from 2009, it’s still 1.4 billion hours more than what people and companies spent on government paperwork in 2000.
Make no mistake: Paperwork is absolutely essential to the basic functions of government. It ensures compliance with health and safety regulations and the proper collection of taxes. It’s the only way for the government to gather information about its citizens and determine who is eligible for such crucial programs as Medicare and Social Security. It’s also an important avenue for Americans to get more information about the services and benefits government provides. As a consequence, policymakers should avoid the “meat cleaver” approach to reducing paperwork.
Nevertheless, there’s a difference between “smart” paperwork (paperwork that is as painless and efficient as possible) and plain old red tape. And too much of the latter still exists. The amount of time demanded from companies and citizens for paperwork compliance should be as precious to the government as the tax dollars it collects.
Modern technology can provide more effective, efficient and tree-friendly means for government to communicate with citizens or for companies to comply with regulatory requirements. As an example, allowing the “e-delivery” of just some annual retirement plan documents would conservatively save as much as $60 million in printing costs a year, in addition to 11,600 trees.
Fortunately, the Obama administration recognizes the problems posed by burdensome paperwork, and in January 2011, the president issued an executive order aimed at reviewing and pruning paperwork requirements.
To supplement that effort, this memo offers up five ideas for reforming paperwork—not only to save work and paper, but to improve the effectiveness of how government, people and companies interact with each other so that the public benefits.
Five ideas for a more modern government with less paper and less hassle:
Removing obstacles to small business success. Waive the first year of quarterly tax filing requirements for start-ups and small businesses.
Helping savers make better retirement decisions. Allow default e-delivery of 401(k) statements and retirement plan documents.
Helping taxpayers understand their benefits. Resume delivery of Social Security Statements by email and add a “Medicare Statement.”
Facilitating job creation. Fast-track paperwork reduction efforts with the best potential for job creation and require estimates of economic impact.
Building a more responsive government. Create a “silver scissors” challenge to solicit and reward citizens’ ideas for creative (and effective) paperwork reduction strategies.
By my reckoning, Mitt Romney lost his fourth opportunity yesterday to all but end the GOP presidential nominating contest (previously once after New Hampshire, once after Nevada, and once after Michigan). Had he won in Alabama and Mississippi, as much of the commentariat predicted and several polls suggested might happen, he would have banished the “Mitt can’t win in the South” meme, killed off Gingrich’s southern-based campaign, and left Santorum gasping for oxygen. But it was not to be, and now Santorum may have the long-awaited one-on-one contest with Romney as, finally, the “conservative alternative to Mitt” that so many opinion-leaders and voters alike have been seeking for more than a year.
Yesterday’s Super Tuesday primaries and caucuses, stretching across ten states from Vermont to Alaska, did not resolve the GOP presidential nomination contest, but did place Mitt Romney in a position where probably the most he has to lose going forward is time and money.
Romney won four primaries (Vermont, Massachusetts, Virginia and Ohio) and two caucuses (Idaho and Arkansas), and looks sure to win a majority of delegates at stake last night. According to 538’s Nate Silver, the cumulative delegate totals at this point are 332 for Romney, 139 for Santorum, 75 for Gingrich and 35 for Paul. 1144 are needed to win the nomination. So Romney is clearly on a pace that will, if continued, carry him to the nomination.
PPI President Will Marshall breaks down the merits of the Wyden-Ryan plan for Medicare reform in Politico:
An honest debate over Medicare’s future may be too much to hope for in an election year. But candidates should think twice before staking out positions that could tie their hands in next year’s unavoidable showdown over public debts and Medicare spending.
After all, 50 percent will win and actually have to govern. That’s why it’s a big mistake to allow the leading bipartisan proposal for Medicare reform — the Wyden-Ryan plan — to fall victim to election-year Medagoguery.
It’s the brainchild of Democratic Sen. Ron Wyden, a progressive Medicare champion who once led a Gray Panthers chapter in Oregon, and Rep. Paul Ryan (R-Wis.), chairman of the Budget Committee and darling of tea party conservatives. If this political odd couple can agree on a balanced way to slow the unsustainable growth of Medicare costs, there may be hope for real entitlement reform yet.
PPI President Will Marshall explains the significance of Senator Snowe’s surprise retirement for Politico’s Arena:
“The decisions by Sen. Olympia Snowe and Rep. David Dreier to quit Congress are part of a broader trend: the ideological “purification” of the Republican Party at all levels. Moderates have become persona non grata in the GOP, with a whopping 71 percent of Republicans now identifying as either very conservative or conservative.
“This explains why the avowedly moderate Jon Huntsman never got traction in the GOP nominating race, and why the erstwhile moderate Mitt Romney is now pretending to be “severely” conservative. The absence of moderates’ restraining hand is evident in Virginia, where the GOP-controlled legislature has passed a bill forcing pregnant women to get ultrasound procedures before they can have an abortion.”
In 2010, the Supreme Court’s landmark decision in Citizens United v. Federal Election Commission forever changed the landscape of political spending.
The Court’s ruling to allow virtually unlimited contributions to outside political groups1 unleashed a record $290 million in outside spending in 2010 (not counting spending by party committees).2 According to the Center for Responsive Politics, total outside spending in 2010 on congressional races was more than four times the total outside spending in the last mid-term elections in 2006. And as the torrents of super PAC spending in the GOP presidential primaries attest, outside spending in 2012 is on track to break all records.
But does outside spending really “work” to put a favored candidate in power? With the jury still out on 2012, this memo looks to the Senate races in 2010 for some clues.
The answer? Maybe.
Because 2010 was a “wave” election that rode on Tea Party rage, it’s almost impossible to disaggregate the impact of outside spending from prevailing electoral trends. In addition, many other factors—such as the strength of a particular candidate’s appeal and organization—cloud the picture.
Nevertheless, in some campaigns, a big unmatched advantage in outside spending seemed to help tip the balance in a candidate’s favor. In 2010, this worked to the advantage of Republicans—conservative outside groups spent about twice as much on Senate races as liberal groups. Even though conservative groups spent millions of dollars more on losing races than on winning ones (e.g., in Nevada and Colorado), the sheer volume of conservative outside spending meant that their overall “batting average” was nearly twice that of liberal outside groups.
Given this mixed record, there’s only one real certainty about the impact of outside money on Senate races in 2010: Running for Senate is a lot more expensive than it used to be.
In our policy brief, “Reviving Jobs and Innovation: A Progressive approach to Improving Regulation,” we describe how such a Commission could work. Neither Congress nor the executive branch currently has an efficient, streamlined process for eliminating outdated regulations that stifle innovation and growth. The Regulatory Improvement Commission could fill that void.
IDEA #2: Starting up start-ups–Improving access to credit and access to capital for smaller businesses
In “Underwater: Home Values in 2012 Battleground States,” we looked at home values in 16 potential battleground states from 2008 to 2011. We find both an enormous loss of middle-class wealth and a potentially potent political issue. We also offer up some practical first steps toward restoring home values.
In our memo, “It’s About (the) Time: Ending the Nonstop Campaign,” we propose changing congressional ethics rules to ban members from directly accepting campaign contributions except during election years. This proposal would free up members to spend more time making policy instead of raising money.
In our memo “Defense and Deficits: How to Trim the Pentagon’s Budget–Carefully,” we propose a floor of 3 percent of GDP beneath which defense spending should not be allowed to fall. Such a level would ensure that investments in R&D and procurement are sufficiently robust to maintain America’s superior industrial base and high-tech weaponry.
That was the first line of Newt Gingrich’s explanation of how he would create jobs, given at the December 10 Republican debate in Iowa. Gingrich talked about his desire to end the capital gains tax and cut the corporate income tax to 12.5%. In addition, Gingrich has proposed a 15% flat tax as an option for all Americans, going further than the 20% flat tax advocated by Rick Perry.
On one level, Gingrich’s intense focus on lower taxes fits current dogma in the Republican party, which puts tax cuts above almost everything else. He is playing to the conservative base, as a way of counteracting some of his other personal liabilities.
If enacted in their entirety, Gingrich’s proposed changes would turn the U.S. tax system from progressive to regressive. Someone earning $40,000 in wages could pay a higher tax rate than another person who made $400,000 a year in capital gains.
This shift from progressive to regressive is not acceptable, of course. The tax system should be a tool for reducing the stresses of inequality in the economy, not increasing it. That’s especially true now, coming out of such a devastating recession where so many American are unemployed or underemployed.
The official failure of the congressional “supercommittee” came and went without much hand-wringing in Wingnut World; indeed, the prevailing sentiment was quiet satisfaction that Republicans had not “caved” by accepting tax increases as part of any deficit reduction package. It was all a reminder that most conservative activists are not, as advertised, obsessed with reducing deficits or debts, but only with deficits and debts as a lever to obtain a vast reduction in the size and scope of the federal government, and the elimination of progressive taxation. For the most part, the very same people wearing tricorner hats and wailing about the terrible burden we are placing on our grandchildren were just a few years ago agreeing with Dick Cheney’s casual assertion that deficits did not actually matter at all.
It is interesting that throughout the Kabuki Theater of the supercommittee’s “negotiations,” the GOP’s congressional leadership came to largely accept the Tea Party fundamental rejection of any compromise between the two parties’ very different concepts of the deficit problem. From the get-go, Democrats were offering both non-defense-discretionary and entitlement cuts in exchange for restoring tax rates for the very wealthy to levels a bit closer to (though still lower than) their historic position. The maximum Republican offer was to engage in some small-change loophole closing accompanied by an actual lowering of the top rates in incomes, plus extension of the Bush tax cuts to infinity. Conservatives are perfectly happy to let an on-paper “sequestration” of spending take place, with the expectation that a Republican victory in 2012 will put them in a position to brush aside the defense cuts so authorized and then go after their federal spending targets with a real vengeance.
The GOP presidential candidates have offered two opportunities during the last week for wingnuts of a particular flavor to assess their views and character. The much-awaited Thanksgiving Family Forum in Des Moines was perhaps the first candidate forum of the cycle in which no one even pretended to set aside cultural issues in favor of an obsessive focus on the economy or the federal budget. The format, involving not a debate but a serial interrogation of candidates by focus group master Frank Luntz, was explicitly aimed at getting to each contender’s “worldview,” the classic Christian Right buzzword for one’s willingness to subordinate any and all secular considerations and choose positions on the issues of the day via a conservative-literalist interpretation of the Bible (i.e., one in which phantom references to abortion are somehow found everywhere, and Jesus’ many injunctions to social activism are treated as demands for private charity rather than redistributive efforts by government).
According to The Iowa Republican’s Craig Robinson in his assessment of the event, Rick Santorum, Michele Bachmann and Rick Perry were the only candidates who succeeded in articulating a “biblical worldview” under Luntz’s questioning. Newt Gingrich got secular media attention for his Archie Bunkerish “take a bath and get a job” shot at the dirty hippies of OWS, but inside the megachurch where the event was held, the star was probably Santorum, whose slim presidential hopes strictly depend on Iowa social conservatives adopting him as their candidate much as they united around Mike Huckabee in 2008.
It is interesting that immediately after the event, Rick Perry joined Santorum and Bachmann as the only candidates willing to sign the radical “marriage vow” pledge document released back in July by the FAMiLY Leader organization, the primary sponsor of the Thanksgiving Family Forum. This makes him eligible for an endorsement by FL and its would-be kingmaking founder, Bob Vander Plaats. It appears a battle has been going on for some time in Iowa’s influential social conservative circles between those wanting to get behind a “true believer” like Santorum or Bachmann and those preferring to give a crucial boost to acceptable if less fervent candidates like Perry or Gingrich. The outcome of this internal debate, which was apparently discussed in a private “summit” meeting on Monday, will play a very important role in shaping the endgame of the Iowa caucus contest—as will the decision by Mitt Romney as to whether or not he will fully commit to an Iowa campaign (he is opening a shiny new HQ in Des Moines, which some observers are interpreting as an “all-in” gesture).
Without question, it became abundantly clear during the last week that the “Gingrich surge” in the nomination contest is real, or at least as real as earlier booms for Bachmann, Perry and Cain. The last five big national polls of Republicans (PPP, Fox, USAToday/Gallup, Quinnipiac and CNN) have all showed Gingrich in the lead. The big question is whether and when his rivals choose to unleash a massive attack on the former Speaker based on their bulging oppo research files featuring whole decades of flip-flops, gaffes, failures and personal “issues.”
Interestingly, though, Gingrich may have already opened the door to suspicious wingnut scrutiny without any overt encouragement from his rivals. During the last week’s second major multi-candidate event, the CNN/AEI/Heritage “national security” debate last night, Gingrich may have ignored the lessons of the Perry campaign by risking his own moment of heresy on the hot-button issue of immigration, calling for a Selective Service model whereby some undocumented workers with exemplary records could obtain legal permanent status if not citizenship. He was immediately rapped by Romney and Bachmann for supporting “amnesty.” We’ll soon see if Newt’s long identification with the conservative movement and his more recent savagery towards “secular socialists” will give him protection from such attacks, or if his signature vice of hubris is once again about to smite him now that he’s finally become a viable candidate for president.
AT&T is a big company, which perhaps explains why federal regulators are ganging up to block its proposed merger with T-Mobile. Big must be bad, right?
That’s certainly the view of consumer advocacy groups, which routinely oppose business mergers as threats to competition. They seem to have the ear of the Federal Communications Commission, which announced last week that it would join the Justice Department in opposing the deal, citing concerns about job losses and higher consumer prices.
But there’s another important group of stakeholders that regulators should be listening to: AT&T’s workers. They are urging the government to take a broader view of the merger’s potential impact on U.S. investment and competitiveness.
At a time of shrinking private sector union membership, it’s worth noting that the company’s 42,000 wireless workers are represented by the Communications Workers of America (CWA). The union issued a report this month strongly supporting the company’s acquisition of T-Mobile as a spur to innovation and a job-creator.
Such arguments merit attention, if only because it’s not often that you find a successful U.S. company in synch with its unionized workforce. Beyond that, however, there are compelling economic reasons for regulators to start looking at proposed mergers through the eyes of America’s producers, not just its consumers.
President Obama, fresh from a tour of the Asia-Pacific, articulated them in a recent radio address. “Over the last decade, we became a country that relied too much on what we bought and consumed,” he said. “We racked up a lot of debt, but we didn’t create many jobs at all.” Reviving U.S. competitiveness, he said, will require Americans to focus more on building things than buying them. Obama also called for “restoring America’s manufacturing might, which is what helped us build the largest middle-class in history.”
Opponents say CWA backs the merger because it has its eyes on T-Mobile’s workers, who aren’t organized. But the union’s analysis of the $39 billion deal emphasizes AT&T’s plans to boost capital investment in the wireless broadband sector. It cites think tank estimates that such investment could produce up to 96,000 new jobs, not including another 5,000 jobs the company promises to bring back to the United States from overseas.
AT&T has said it will merge its networks with those of T-Mobile, and invest an additional $8 billion to expand its 4G LTE wireless broadband infrastructure. It also has pledged to retain T-Mobile’s non-managerial workers. The CWA report asserts that, absent the merger, T-Mobile is headed toward extinction. Having been cut loose by its parent company, Deutsch Telecom, it lacks the capital to acquire spectrum and build its own 4G network.
Opponents of the merger—including AT&T’s competitors as well as consumer groups—say the merger would give the telecom giant too much market power and lead to higher prices. Regulators ought to carefully weigh such claims. But as a forthcoming PPI report argues, mergers and acquisitions among dynamic, high-tech companies often have the effect of spurring more innovation. In the fiercely competitive telecommunications sector, prices for wireless services—voice, text, and data—have been trending downward, even as quality of these services has improved dramatically.
Even so, low consumer prices aren’t the only public interest at stake here. More important is expanding investment—in technological innovation, a highly skilled workforce and world-class infrastructure. This is the only way to make U.S. companies and workers more competitive in global markets that does not entail lowering our standard of living.
As the Progressive Policy Institute has documented here, the telecom sector is leading a dynamic wave of innovation in mobile telephony and broadband that is creating good jobs in the United States. That’s no mean achievement at a time when unemployment is stuck at 9 percent—and about twice that if you take into account people who have given up looking for jobs.
While other corporations chase cheap labor by moving production offshore, we have dubbed communications companies like AT&T, Verizon and Comcast “Investment Heroes” because they are making huge bets on the American economy. Surely that’s something government regulators ought to factor into their decisions.
Our country needs a new model for economic growth that emphasizes production over consumption, saving over borrowing, and exports over imports. Such a shift is essential not only to rebuild the great American job machine, but also to rebalance a global economy that has become overly dependent on U.S. consumers.
It’s time once again for America to be a global center for production—and we need federal regulators to get with the program too.
The end of the calendar year always means an assortment of “temporary” policies are approaching expiration, including some (e.g., upward revision of reimbursement rates for Medicare providers, and a “patch” to avoid imposition of the Alternative Minimum Tax on new classes of taxpayers) that happen every year. And then there are other expiring provisions central to the Obama administration’s efforts to deal with the recession, most notably unemployment benefits for the long-term unemployed, and last year’s major “stimulus” measure, a temporary Social Security payroll tax cut.
With the collapse of the deficit reduction supercommittee and an uncertain future ahead for the “automatic sequestrations” of spending that are supposed to subsequently occur, leaders in both parties are especially sensitive at the moment about taking steps on either the spending or revenue side of the budget ledger that add to deficits. But some of the “fixes” mentioned above are political musts, while others are highly popular or scratch particular ideological itches. It will be interesting to see whether conservative activists wind up taking a hard line against deficit increasing measures, and indeed, against any cooperation with Democrats so long as their own demands for “entitlement reform” and high-end tax cuts are ignored.
The payroll tax cut is an especially difficult subject for conservatives. While it will be easy for them to reject Senate Democratic proposals to pay for an extension of the cut with a surtax on millionaires, it is certainly possible, as Senate Republican leader Mitch McConnell has acknowledged, to “pay for” this tax cut with spending cuts, perhaps even some that Democrats would consider supporting.
Some conservatives, however, view any deal with Democrats on this and any other fiscal issues as a deal with the devil. One of McConnell’s deputies, Sen. John Kyl, has argued that the payroll tax cut hasn’t boosted the economy (i.e., it is not targeted to “job creators,” the wealthy) and should be subordinated to tax cut ideas that supposedly do. In an argument that is getting echoed across Wingnut World, RedState regular Daniel Horowitz suggests that GOPers make any payroll tax cut extension conditional on a major restructuring of Social Security, which of course ain’t happening.
Since virtually all the end-of-year measures under discussion will boost the budget deficit, and there are limited noncontroversial “offsets” available (mainly “distribution” of new savings attributed to the drawdown of troops in Iraq and Afghanistan), the key question will be which ones conservatives choose to pick a fight over and which ones slide quietly past the furor on unrecorded voice votes and last-minute agreements. If congressional Republicans seem to be acting in too accommodating a manner, it would not be surprising to see GOP presidential candidates using them as foils for their own claims to the “true conservative” vote as the January 3 Iowa caucuses grow ever nearer.
For the umpteenth consecutive week, the presidential contest remained full of surprises and volatility. Herman Cain’s campaign, already losing steam after his poor handling of both sexual harassment/assault allegations and the most recent debates, took perhaps a terminal blow from a new, credible-sounding allegation (made, interestingly enough, via a local Fox station in Atlanta, not some precinct of the “liberal media”) of a long-term adulterous affair. While Cain is again denying he did anything wrong, conservatives are not rushing to his defense this time, and the general feeling is that his campaign is done.
If Cain actually withdraws, it has long been assumed he would endorse Mitt Romney. But as a new analysis by Public Policy Polling showed, Cain’s supporters are very, very likely to move virtually en masse to Newt Gingrich, whose star continued to rise last week. His big news was an endorsement by the New Hampshire (formerly Manchester) Union-Leader, that sturdy right-wing warhorse of GOP politics. This step immediately makes Gingrich the most formidable rival to Mitt Romney in the Granite State: the Union-Leader does not simply endorse and ignore candidates; it can now be expected to undertake a virtually-daily bombardment of front-page editorials defending its candidate and treating his intraparty opponents (particularly Romney) as godless liberal RINOs.
But the impact of the endorsement goes far beyond New Hampshire, given the Union-Leader’s reputation for the most abrasive sort of wingnuttery. It materially helps him solidify his reputation for conservative ideological regularity, which is about to be brought into serious question by all the other campaigns, which are doubtless sorting through their bulging oppo research files on the talkative former Speaker, trying to decide which lines of attack are most lethal.
So far the he’s-not-a-true-conservative attack on Gingrich has been largely limited to his new, dangerous positioning on immigration, unveiled in a recent debate. Gingrich has been quick to stress that his proposal for a “path to legalization” for some undocumented workers does not involve citizenship, and denies its beneficiaries any government benefits whatsoever. But Iowa’s highly influential nativist champion Steve King has already branded Newt’s plan with the scarlet A-word of “amnesty,” and Michele Bachmann is trying to draw a new line in the sand suggesting that true conservatives favor deportation of every single “illegal.”
At this point, the presidential contest appears to be something of a race between Gingrich and his past words and deeds. There is a small window between now and the period immediately before and after Christmas (when something of a truce is imposed) when his opponents can try to bury him as a flip-flopper, an inveterate bipartisan, and a guy whose personal life (not just his marriages and divorces, but his finances) has been less than godly. If they don’t get their act together to do so, he’s looking very strong in Iowa, and even if he loses to Romney in New Hampshire, Gingrich is currently sporting large polling leads in South Carolina and Florida. Particularly for those candidates (Perry, Bachmann, Santorum; Ron Paul is in something of a class by himself) still hoping to seize the mantle of the true-conservative-challenger-to-Romney after Iowa, it’s getting close to desperation time.
Can government policy encourage technology innovation in the short run? Probably not—while the government does have plenty of long-term levers, such as spending on basic research and investment in science and engineering education, there are few ways to speed up innovation over the next year.
Rather, government policy is actually quite capable of discouraging innovation in the short-run, through outdated regulation and restrictive antitrust policy that does not take the importance and uniqueness of the technology sector into consideration.
While innovation can come from any industry, the technology sector is particularly important, as it has been the main source of growth and innovation in the economy for the past 35 years. Technological advances over the last decade have facilitated the emergence of innovation “ecosystems,” or platforms on which many different companies can build products or provide services, in which mergers and acquisitions have played a large part. Moreover, a unique feature of the technology sector is that the constant innovation companies need to stay profitable creates new markets and keeps competition active.
However, antitrust policy its current form does not recognize these characteristics. Instead, current application of antitrust regulations can impede the virtuous circle of nurturing innovation through startups and acquisitions. By slowing down or blocking acquisitions, antitrust policy can limit the exit routes for startups, potentially reducing their value and making it less attractive for investors to put their money into the next round of innovative new companies. In this regard antitrust policy has the potential to slow the speed of technological innovation, even though the benefits to the rest of the economy are connected to the speed at which new innovations are moved to market and scaled up.
In Innovation by Acquisition: New Dynamics of High-tech Competition, we explore the role of technology acquisitions in encouraging innovation, facilitating economic growth, and stimulating jobs. Specifically, we examine the question of whether technology acquisitions facilitate innovation, and in particular high-impact innovations. We argue that, when done correctly, acquisitions in the technology sector can and have encouraged innovation by bringing new products to market faster and more effectively.
What’s more, we find that acquisitions and innovation in the technology sector are positively associated with economic growth and job creation, an important consideration as we struggle to devise new, cost-effective ways to stimulate the economy and create jobs.
Looking at technology acquisitions from this perspective provides a different framework from which to assess the potential implications of excessive antitrust regulations, and current antitrust policy.
In 2004, Google made headlines by “going public,” raising $1.7 billion in what was then the biggest initial stock offering since the heady days of the tech boom. Next spring, Facebook is expected to make its debut with a $10 billion initial public offering (“IPO”)—one of the largest ever.
Dreams of a splashy IPO may spur many entrepreneurs, but in reality, fewer and fewer companies are going public. While the stock exchange has long been the fastest and easiest way for companies to finance their growth, reaching the public market is getting tougher for emerging companies.
Thanks to a combination of legislative, regulatory, and technological changes, going public is more expensive, more burdensome, and less appealing than in the past—especially for younger, smaller, and less sexy companies that aren’t expected to become Google-sized blockbusters. One recent study puts the average cost of going public at $2.5 million, plus ongoing annual costs of $1.5 million a year to keep up with paperwork and regulatory requirements.
The result has been a drought in IPOs and a crisis in access to capital for young companies seeking to grow. From 1991 to 2000, the U.S. stock markets saw an average of 530 IPOs every year.Since then, the average annual number of newly-minted public companies has plummeted to about one-fourth that number.In 2009, just 61 companies went public.Moreover, the number of public companies listed on U.S. stock exchanges shrank from 8,000 in 1995 to 5,000 in 2010.
But at the same time that going public has become tougher for younger companies, outdated rules are forcing some firms to either go public prematurely—or else radically curtail their growth to stay private. The problem is an outdated cap on the number of shareholders that a company can have before it’s essentially required to go public. The so-called “500 shareholder rule”—first promulgated in 1964 to define the “public” companies in need of regulatory oversight—now poses a significant hurdle to growth for many companies. These firms may not be ready or don’t want to go public but have few other options for raising capital because they can’t expand their investor pool. Thus, some companies nearing the 500-shareholder threshold may face an unpalatable choice: either bear the financial and regulatory costs of going public or forego opportunities for growth.
By raising the shareholder threshold to 1,000 or 2,000, as policymakers such as Sens. Tom Carper and Pat Toomey and Rep. David Schweikert have proposed, younger companies will have more room to grow, invest and create jobs, as well as more flexibility before making the plunge into going public. Coupled with other efforts to fix the broken IPO market, an amendment to this rule could give younger and smaller companies a much-needed boost toward growth.
Amending this rule would also be an important step in modernizing and reorienting the nation’s overall regulatory scheme toward promoting innovation—an effort that is crucial to America’s future economic renewal.
Can government policy encourage technology innovation in the short run? Probably not—while the government does have plenty of long-term levers, such as spending on basic research and investment in science and engineering education, there are few ways to speed up innovation over the next year.
Rather, government policy is actually quite capable of discouraging innovation in the short-run, through outdated regulation and restrictive antitrust policy that does not take the importance and uniqueness of the technology sector into consideration.
While innovation can come from any industry, the technology sector is particularly important, as it has been the main source of growth and innovation in the economy for the past 35 years. Technological advances over the last decade have facilitated the emergence of innovation “ecosystems,” or platforms on which many different companies can build products or provide services, in which mergers and acquisitions have played a large part. Moreover, a unique feature of the technology sector is that the constant innovation companies need to stay profitable creates new markets and keeps competition active.
However, antitrust policy its current form does not recognize these characteristics. Instead, current application of antitrust regulations can impede the virtuous circle of nurturing innovation through startups and acquisitions. By slowing down or blocking acquisitions, antitrust policy can limit the exit routes for startups, potentially reducing their value and making it less attractive for investors to put their money into the next round of innovative new companies. In this regard antitrust policy has the potential to slow the speed of technological innovation, even though the benefits to the rest of the economy are connected to the speed at which new innovations are moved to market and scaled up.
In Innovation by Acquisition: New Dynamics of High-tech Competition, we explore the role of technology acquisitions in encouraging innovation, facilitating economic growth, and stimulating jobs. Specifically, we examine the question of whether technology acquisitions facilitate innovation, and in particular high-impact innovations. We argue that, when done correctly, acquisitions in the technology sector can and have encouraged innovation by bringing new products to market faster and more effectively.
What’s more, we find that acquisitions and innovation in the technology sector are positively associated with economic growth and job creation, an important consideration as we struggle to devise new, cost-effective ways to stimulate the economy and create jobs.
Looking at technology acquisitions from this perspective provides a different framework from which to assess the potential implications of excessive antitrust regulations, and current antitrust policy.
Top Democratic and union leaders play host this week to prospective 2012 Congressional candidates, highlighting labor’s status as a critical cog in progressive campaigns. Some observers believe that, in the aftermath of Wisconsin Gov. Scott Walker’s efforts to strip the state’s public unions of collective-bargaining rights, labor has found both renewed public sympathy and political momentum.
By my reckoning, Mitt Romney lost his fourth opportunity yesterday to all but end the GOP presidential nominating contest (previously once after New Hampshire, once after Nevada, and once after Michigan). Had he won in Alabama and Mississippi, as much of the commentariat predicted and several polls suggested might happen, he would have banished the “Mitt can’t win in the South” meme, killed off Gingrich’s southern-based campaign, and left Santorum gasping for oxygen. But it was not to be, and now Santorum may have the long-awaited one-on-one contest with Romney as, finally, the “conservative alternative to Mitt” that so many opinion-leaders and voters alike have been seeking for more than a year.
Yesterday’s Super Tuesday primaries and caucuses, stretching across ten states from Vermont to Alaska, did not resolve the GOP presidential nomination contest, but did place Mitt Romney in a position where probably the most he has to lose going forward is time and money.
PPI President Will Marshall explains the significance of Senator Snowe’s surprise retirement for 
AT&T is a big company, which perhaps explains why federal regulators are ganging up to block its proposed merger with T-Mobile. Big must be bad, right?
