How a recession could affect tech policy


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Gary Shapiro

President and CEO of the Consumer Technology Association

I hope economic headwinds will make politicians reluctant to rush through legislation gutting our globally dominant tech companies. These companies drive our stock market and provide free and low-cost services to millions of Americans. Legislative proposals racing through Congress would deny Americans the services they love – including Amazon Prime free shipping and Google maps in search results – and allow bad actors to infiltrate our devices. More, tech startups and VCs fear that investments in tech will dry up if big companies can no longer buy or invest in smaller companies.

Whether or not this is called a recession, average Americans are hurting. They want the government to lower prices, not create policies that make it difficult or costly to use important technology. That should mean removing tariffs and insisting the FTC return to its time-tested consumer welfare standard, rather than the new standard that protects existing companies. Innovation is our competitive strength. It makes our nation great and our economy strong. The economic challenges we face should refocus policymakers on issues that matter to our economic future, like fixing our immigration system to attract the best and brightest and passing national privacy legislation to provide businesses with certainty.

For the sake of our economy, our stock market, our competitive leadership and Americans’ access to their favorite tech products and services, I hope the silver lining of a tough economy is that it pushes Congress in a more productive direction.

Sarah Oh Lam

Senior fellow at the Technology Policy Institute

A recession would shift the priorities of policymakers towards stimulating economic growth and less on regulating business activity. This shift would be a rational response to changing economic conditions. For instance, rather than more restrictive merger guidelines or lower Hart-Scott-Rodino thresholds, antitrust regulators may decide that it’s not the right time to make it harder for firms to find synergies, horizontal or vertical.

In recent good times, tech firms have been leading the way as growth engines for the American economy, generating cash earnings and profit margins that have led to investment in research and development and shareholder value. Near-zero — or in some cases, negative — interest rates have made it easy for firms to gain access to capital in financial markets, with higher price-to-earnings ratios and optimistic projections of future growth rates. With an economic contraction, however, tech firms will scale back on growth and deal with more challenging capital conditions and depressed stock market valuations. Economic headwinds make it harder for tech firms to grow when consumer spending goes down, lenders become more risk averse to extend business and consumer credit and venture capital for start-up formation becomes more expensive. Tech firms with weak revenues then reduce the rate of hiring of new employees and current payroll through layoffs. Expansion of new products and services gets put on hold when the cost of capital rises with interest rate increases.

In a recession, congressional committees, Federal Trade Commission, Department of Justice Antitrust Division and the Department of Commerce will focus their attention and resources on helping businesses and consumers survive the business cycle of economic contraction.

Wayne Brough

Policy director, Technology and Innovation at the R Street Institute

The tech sector, like others, is retrenching in the face of an economic downturn. Recent hiring freezes and tightening budgets serve as a gut check for tech, and we may see unprofitable or speculative projects fall by the wayside as companies focus on core competencies.

The larger tech companies are better suited to weather an economic contraction than small- or medium-sized firms that lack the capital to ride out a downturn. This is especially true of startups, which often focus on an exit strategy rather than bringing a product to market. Venture capital will become more scarce, making it harder to raise funds.

From a political perspective, the proposed antitrust bills currently under debate in Congress would exacerbate the problem. Proposed restrictions on mergers and acquisitions would make it more difficult for the large tech firms that do have resources to invest in new technologies and products. Should acquisitions become difficult or impossible due to new regulations, the rate of innovation may slow, leaving consumers worse off while making it more difficult for startups to raise the necessary capital to turn new ideas into products that can enhance productivity and boost economic growth.

The current slowdown has the tech sector regrouping to identify a clear path forward; sweeping new antitrust laws would hamper the ability to make the adjustments needed for a swift recovery.

Betsy Cooper

Director at the Aspen Institute’s Tech Policy Hub

We could face the dot-com bubble 2.0. If tech companies lose a lot of their value, public policymakers will be faced with some unenviable choices. Is Amazon “too big to fail” and thus worthy of a bailout like the auto industry was? Will startups start selling off consumer data to keep afloat? Should the government allow that to happen? I co-wrote a scenario exploring this issue and worried that while we got the timeline wrong, many of the forecasts may come true in a future recession.

Jason Oxman

President & CEO at the Information Technology Industry Council

The strength of the US economy relies on consistent job growth and an approach to competitiveness that ensures the US remains an economic powerhouse. The tech industry is vital to prosperity in all economic circumstances. Particularly in times of economic slowdown, business investment in new technology can drive efficiencies and strengthen supply chains. Policymakers can take concrete steps to ensure innovation continues to power the economy.

Tech creates a critical link for the economy to weather ups and downs, demonstrated by its vital role during the COVID-19 pandemic. Technology products and services allow Americans to work and attend school remotely, facilitate activities online and maintain vital links to keep governments and businesses connected and operating securely. Policymakers should thus promote policies that make broadband ubiquitous and modernize government and private sector infrastructure.

Tech is enabling the modernization of the US infrastructure system with innovative design and deployment of projects to reduce costs, improve safety, mitigate negative environmental impacts, all while creating jobs in the process. By making investments in research and development, and semiconductor and advanced manufacturing, the industry is fueling US global competitiveness. Through digital trade and sensible supply chain policies, the government can ensure global market access for US companies, create jobs across the country and expand technology options for US consumers and businesses.

Finally, tech is promoting access to education and opportunities for individuals of all backgrounds, particularly in the STEM field. By advancing sensible immigration policy that brings innovators to the US to create companies and jobs, policymakers can up-skill US workers while attracting the best and the brightest from around the world to grow the US economy.

Bruce Mehlman

Founding partner at Mehlman Castagnetti Rosen & Thomas

Generally in a recession not caused by business excess (such as the tech bubble or Wall Street-induced great financial crisis), there is a lot less enthusiasm for taxing, regulating or breaking up healthy employers. Many aspects of the techlash may prove luxuries of a healthier economy we can less comfortably afford in leaner times.

See who’s who in the Protocol Braintrust and browse every previous edition by category here (Updated July 27, 2022).


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