How the recession affects technology policy

Gary Shapiro

President and CEO of Consumers Technology Association

I hope that the economic headwinds will keep politicians from rushing to pass legislation that would destroy our globally dominant technology companies. These companies drive our stock market and provide free and low-cost services to millions of Americans. Legislative proposals racing through Congress could take away services Americans love — including Amazon Prime free shipping and Google Maps in search results — and allow bad actors to infiltrate our devices. More importantly, tech startups and VCs fear that investments in tech will dry up if big companies fail to buy or invest in smaller companies.

Whether or not this is called a recession, average Americans are hurting. They want the government to keep costs down, not create policies that make it difficult or expensive to use useful technology. That means removing the tariffs instead of the new requirement protecting existing companies and insisting the FTC return to time-tested standards of consumer safety. Innovation is our competitive strength. It will make our country great and our economy strong. The economic challenges we face should refocus policymakers on issues of our economic future, such as reforming our immigration system to attract the best and brightest and enacting national privacy laws to provide businesses with certainty.

I hope that the silver lining of a strong economy will push Congress in an effective direction for our economy, our stock market, our competitive leadership, and access to the technology products and services that Americans love.

Sarah O’Lam

Senior Fellow at Technology Policy Institute

A recession shifts policymakers’ priorities toward encouraging economic growth and regulating business activity. This change would be a logical response to changing economic conditions. For example, instead of more restrictive merger guidelines or lowering the Hart-Scott-Rodino thresholds, antitrust regulators may decide that the time is not right to make it difficult for firms to acquire horizontal or vertical mergers.

In recent years, technology companies have been leading the way as growth engines for the US economy, generating cash flows and profit margins that lead to investment in research and development and shareholder value. Near-zero – or in some cases, negative – interest rates have made it easier for companies to access capital in financial markets with high price-to-earnings ratios and optimistic expectations of future growth rates. In an economic downturn, however, tech companies scale back their growth and face more challenging capital conditions and depressed stock market prices. Economic headwinds will make it harder for tech companies to grow as consumer spending slows, lenders will be more vulnerable to expanding businesses, and consumer loans and venture capital will become more expensive for startups. Technology companies with weak earnings are reducing the rate of hiring new employees and reducing current wages. As the cost of capital increases with interest, the expansion of new products and services stops.

In Congress, congressional committees, the Federal Trade Commission, the Justice Department’s Antitrust Division, and the Department of Commerce focus their attention and resources on helping businesses and consumers survive the turbulent business cycle.

Wayne Bro

Director of Policy, Technology and Innovation at R Road Institute

The tech sector is facing economic downturns like many others. Recent hiring freezes and tightening budgets serve as a gut check for technology, and we see unprofitable or speculative projects fall by the wayside as companies focus on core competencies.

Large technology companies are better suited to withstand economic downturns than small or medium-sized companies that lack capital. This is especially true for startups, which often focus on exit strategy rather than bringing a product to market. Venture capital will be scarce, making it difficult to raise money.

From a policy perspective, the proposed antitrust bills currently under debate in Congress exacerbate the problem. Proposed restrictions on mergers and acquisitions make it more difficult for large technology companies with the resources to develop new technologies and products. If acquisition is difficult or impossible due to new regulations, the pace of innovation can slow down, making it difficult for consumers to raise the necessary capital.

The current slowdown is regrouping the tech sector to identify a clear path forward; Sweeping new antitrust laws will hamper the ability to make the adjustments needed for a quick recovery.

Betsy Cooper

Director of the Technology Policy Center at the Aspen Institute

We can face the dot-com bubble 2.0. If tech companies lose much of their value, public policymakers will face some dire choices. Is Amazon “too big to fail” and worthy of the auto industry’s bounty? Will startups start selling consumer data to stay afloat? Should the government allow this to happen? I wrote a scenario to explore this issue and while the timeline is wrong, I worry that many of the predictions will come true in the fall ahead.

Jason Oxman

President and CEO of the Information Technology Industry Council

The strength of the US economy is based on consistent job growth and a competitive approach that ensures the US remains an economic powerhouse. The technology industry is very important to bring prosperity in all economic situations. Especially during economic downturns, business investment in new technologies can improve efficiency and strengthen supply chains. Policymakers can take concrete steps to ensure that innovation fuels the economy.

Tech is a critical nexus for economic ups and downs, as demonstrated by its critical role during the Covid-19 pandemic. Technology products and services enable Americans to work and study remotely, facilitate activities online, and maintain the connections necessary for governments and businesses to connect and operate securely. Therefore, policymakers should promote policies that promote broadband deployment and modernize public and private sector infrastructure.

Tech is empowering the U.S. infrastructure system through innovative design and deployment of projects to reduce costs, improve safety, mitigate negative environmental impacts, and create jobs in the process. Through investments in research and development, and the semiconductor and advanced manufacturing sectors, the industry is fueling America’s global competitiveness. Through digital commerce and smart supply chain policies, the government can ensure global market access for American companies, create jobs across the country, and expand technology options for American consumers and businesses.

Finally, technology is promoting educational access and opportunities for individuals of all backgrounds, especially in STEM fields. By advancing sensible immigration policies that bring innovators to America to create companies and jobs, policymakers can grow the American workforce by attracting the best and brightest from around the world to grow the American economy.

Bruce Mehlman

Founding partner at Mehlman Castagnetti Rosen & Thomas

In general, there is much less incentive to hire, regulate, or fire healthy employers during an economic downturn caused by a boom in business (such as the tech bubble or the Great Financial Crisis caused by Wall Street). Many techlash features can ensure a healthy economy luxury with less comfort in lean times.