Commentary / Coronavirus / Opinion / Politics

Proposed Merger Moratorium Would Jeopardize U.S. Recovery

merger warren backs ocasio-cortez plan economic inequality climate changeThanks to the deregulatory effort pursued by the Trump Administration since entering office in 2017, the United States possessed the strongest economy in human history when the coronavirus pandemic hit.

By reducing government intervention in the private economy rather than maximizing it, we finally reached escape velocity from the Obama malaise, which was the objectively worst cyclical economic “recovery” in recorded U.S. history.   Markets jolted upward under Trump after they’d flatlined for two years as the Obama Administration concluded, and private businesses hired to such a degree that the number of available jobs exceeded the number of unemployed Americans for the first time ever.

From internet service to energy exploration to labor policy, getting government out of the way once again proved the most potent stimulant for economic growth and job creation.

In welcome news this week, President Trump accelerated that deregulatory thrust by signing an executive order directing federal agencies to “combat the economic consequences of COVID-19 with the same vigor and resourcefulness with which the fight against COVID-19 itself has been waged”:

Agencies should address this economic emergency by rescinding, modifying, waiving, or providing exemptions from regulations and other requirements that may inhibit economic recovery, consistent with applicable law and with protection of the public health and safety, with national and homeland security, and with budgetary priorities and operational feasibility.  They should also give businesses, especially small businesses, the confidence they need to re-open by providing guidance on what the law requires;  by recognizing the efforts of businesses to comply with the often-complex regulations in complicated and swiftly changing circumstances;  and by committing to fairness in administrative enforcement and adjudication… 

The heads of all agencies shall identify regulatory standards that may inhibit economic recovery and shall consider taking appropriate action, consistent with applicable law, including by issuing proposed rules as necessary, to temporarily or permanently rescind, modify, waive, or exempt persons or entities from those requirements, and to consider exercising appropriate temporary enforcement discretion or appropriate temporary extensions of time as provided for in enforceable agreements with respect to those requirements, for the purpose of promoting job creation and economic growth, insofar as doing so is consistent with the law… 

While the Trump Administration was further unleashing economic vigor, however, a predictable chorus of leftists continue to pursue the opposite approach, seeking to tighten government control and strangle market forces.  Per Rahm Emanuel’s adage, they’re unwilling to let this crisis go to waste.

Specifically, noted economic sages Senator Elizabeth Warren (D – Massachusetts) and Representatives Alexandria Ocasio-Cortez (D – New York) and David Cicilline (D – Rhode Island) are introducing legislation imposing a wholesale “moratorium on mergers until the pandemic ends” as part of any new Congressional coronavirus relief legislation.

Think about that.  They seek to halt the free, voluntary, mutual agreements between private parties to combine their efficiencies amid an already-fraught economic environment.

Although they claim that their proposal is “desperately needed” due to the “national emergency,” their rationalization is belied by the simple fact that they were advocating the same sort of moratoria before the world even became aware of coronavirus.

Additionally, the economic reality is that economic downturns already tend to dampen merger activity, not increase it.  In the last recession, for instance, Department of Justice (DOJ) and Federal Trade Commission (FTC) data show that merger activity plummeted by 59% from 2008 to 2009 alone.

Accordingly, it’s clear that the coronavirus crisis doesn’t justify the Warren-AOC-Cicilline moratorium, it simply offers them a convenient excuse to pursue their big-government ideological agenda.

But as National Taxpayer Union (NTU) Policy and Government Affairs Manager Thomas Aiello explains, private merger agreements offer enormous benefits for both consumers and the larger economy, which is even more critical during a moment like this:

Economists generally agree that mergers can increase efficiency, a vital economic metric for all businesses, both big and small.  Permitting businesses to consolidate has the potential to increase economies of scale, which causes the average cost of production to fall while the output volume rises.  Reductions in the cost of inputs and the elimination of redundancies will lower average cost, with those savings being passed onto consumers in the form of lower prices. 

Merging also allows businesses to allocate greater capital into innovation instead of dedicating resources toward undercutting competition.  Because the new firm will earn more profit, more resources will be used to finance risky (and often expensive) research and development that wouldn’t have otherwise happened.  Experts continuously cite that “mergers and acquisition activities have a positive and significant effect on innovation and have found no support for the argument that mergers are detrimental to innovate.” 

Lower prices for consumers, more investment and innovation and elimination of inefficient business redundancies?  That’s precisely what the economy needs right now, not the Warren-AOC-Cicilline suffocating regulatory approach.

That approach also parallels the Trump Administration’s broader pro-market economic policies, which brought us record prosperity and offer the optimal course for restoring it as quickly as possible.

Our current economic crisis requires pro-market policies, not the latest schemes from the minds of extremists like Elizabeth Warren and AOC, and their proposed merger moratorium must be swiftly rejected.

Reprinted with Permission from - Center for Individual Freedom by - Timothy H. Lee

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Pat R
8 months ago

As someone else has said, not all mergers are good. Two small companies join to make them stronger as one. But when big companies buy out their smaller competition, there is no more competitive pricing. Monopolies are not good for citizens because there is no more competition through lower prices. And as another mentioned, a big monopoly has already been deemed by gov’t as “too big to fail” and your tax dollars pay for their incompetence; and the big boys at the top get bonuses rather than paying consequences.

old fart
8 months ago
Reply to  Pat R

Case in point, Comcast or Cox, depending on where you live. Cable monopolies that overcharge customers because they can.

Joanned
8 months ago

SAVE AMERICA ???????? Vote the extremists, Left Radicals and crazy Dems out of office?

Emily3264
8 months ago

What a completely ignorant article. I suggest the author and anyone falling for this crap read “The Myth of Capitalism.” M&A’s are responsible for the death of capitalism and allow global corporations to purchase customers and employees like cattle. True capitalism requires businesses to earn their customers and employees through fair trade. Mergers are responsible for massive layoff’s, a decline in quality, a reduction in workers options to work for people who treat them fairly. They don’t care about anything but profits for themselves and shareholders.

Ivan Berry
8 months ago
Reply to  Emily3264

I’m with you Emily. The death of freemarkets was mega corps and crony capitalism–merchantilism. Once we could know quality by Brand. What ever happened to Dan River?

rvgrandma
8 months ago

Many mergers are good but some need to be stopped. As they let companies that provide phone, cable and internet service merger the prices go up, up and up while the service doesn’t change or gets worse.

Remember when the government force ‘Ma Bell’ to break up due to being a monopoly? Now the government has allowed it, monopolies, to be happening again.

Emily3264
8 months ago
Reply to  rvgrandma

Good point! Mergers are also where we got “too big to fail” and stat’s show that too many key industries are now oligopolies. It started when the objective of free & fair trade was replaced with “Economies of Scale” – which only benefited shareholders and executives. M&A’s are responsible for the massive shift in wealth to the wealthy.

Peter K
8 months ago
Reply to  rvgrandma

Your comments are especially true in the technology and social media sector and that is precisely why so many of us have been indoctrinated into the extreme ideology of the left. Most people do not separate a liberal, which is a dying breed, and a leftist, who are the dangerous ones. The problem is traditional liberals are caught in the middle and vote blue because they “think” Democrats are liberal also. True is today’s Democrats are no longer liberal, they are the progressive left. Traditional liberals need to rethink their loyalties. They are either loyal to their country or their political party. One simply can not vote blue and say they love the USA any longer because their representatives are anti-American in thought and action.

Think about putting those here illegally ahead of US citizens? That single act tells their entire story. Identify/Separate/Control with empty promises. Works great for the left.

Richard Hennessy
8 months ago

All that will be needed to stall the recovery is controls by Democrats like the proposed moratorium on mergers.

Wayne
8 months ago

“Specifically, noted economic sages Senator Elizabeth Warren (D – Massachusetts) and Representatives Alexandria Ocasio-Cortez (D – New York) . . .”

Referring to those two as “economic sages” is an affront to the English language (even on this side of the pond).

Joanned
8 months ago
Reply to  Wayne

Warren and AOC have absolutely no. Agenda, nor good intentions for America THEY are self serving, and small minded evil Radicals ?

Steve
8 months ago

Like the smartest guy in the room said , elections have consequences . Vote her OUT!! So the experts are a person who doesn’t even know her heritage and a bartender taking advice from bar fly’s is that about right ?? Let them run their states and anyone who has some brain cells and is sober will leave said such state problem solved no federal assistance !!

Joanned
8 months ago
Reply to  Steve

Vote out all bad Politicians who are against our Potus and policies of America??????????

Bryan Caspersen
8 months ago

Elizabeth Warren is a Fraud and should be removed from the senate as quickly as possible

Peter K
8 months ago

That is up to the MA electorate and they’ve already shown us how brilliant they are! It is not going to happen.

Gloria Hensle
8 months ago

And there is no description from ‘sage’ AOC!

Joanned
8 months ago

TRUE, SHE IS A HUGE FRAUD AS IS AOC She cannot even pay her own tax bills,! SHE IS NOT ACCOUNTABLE. NOR HONEST!

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