The Distressing Truth of Why Big Tech Is Lobbying for Regulation, Not Against It
Just like Monsanto, they're "locking down" their markets & Americans are falling for it
In a daily rant a few weeks ago I mentioned how I’ve been running a contest for 15+ years on my radio program for anybody who can identify one single piece of legislation proposed by a majority of Republicans, passed through Congress by a majority of Republicans, and signed by a Republican president that’s principal goal and outcome was to help the American middle-class rather than rich people or giant corporations.
Nobody had ever won before. But last week a listener called and said he had it: it was the bill that “regulated” telemarketers. Turns out, my contest still stands. Here’s why, and how Big Tech is not getting in on the game.
Most Americans think that when government regulates giant corporations, it constrains their worst behaviors and keeps the marketplace open for competitors, aiding average people instead of the corporate behemoths. But, frequently, the exact opposite is the case. It’s almost certainly playing out right now with Big Tech.
For example, Mark Zuckerberg, founder and CEO of Facebook, recently wrote an op-ed for The Financial Times specifically asking for regulation of his business. At the time, he and Facebook were receiving a lot of heat for having helped Donald Trump win the 2016 election, and for hosting what was almost certainly the world’s largest collection of discussions about the wonders of white supremacy, white nationalism, and calls to replace democracy in America with a strongman authoritarian state run by white guys with guns and Trump himself.
And, while being able to say that Facebook was now “regulated” might have taken some of the heat off Zuckerberg, a far more common reason big companies who’ve pioneered new technologies actually ask for regulation is to lock down their markets even more tightly than they already are.
An easily understood example is poison. If a company is running an industrial operation and emitting, say, 8 parts per billion (PPB) of arsenic into the local water supply, people harmed by that arsenic (which, even at levels well below that, can cause everything from birth defects to cancers) can sue and use the courts to hold the company accountable.
But if the industry were to lobby the federal government to regulate arsenic in the water at a level of 10 PPB, knowing they’d always be just below that, then their pollution just got “legalized.” Lawsuits would be impossible, even when harm could be proven, because they were “within the regulatory limit.” (Ten PPB, by the way, is the federal EPA standard today, the result of heavy industry lobbying after the EPA proposed 3 PPB back in 2002.)
A second reason very large companies seek out regulation is to block smaller competitors from the marketplace. If they can make the regulatory schemes sufficiently complex that a smaller company wouldn’t have the financial or staff power to comply, the regulation itself works as a barrier to market entry for potential competitors.
To use the arsenic example, if the regulation were to require that discharges and dozens of downstream water supply points be sampled using equipment that costs millions and takes an expensive technical team to administer, even if that regulation represented substantial overkill, it actually works to keep competitors out of the way.
Or, as Zuckerberg himself wrote in his op-ed for the Financial Times:
Regulation can have unintended consequences, especially for small businesses that can’t do sophisticated data analysis and marketing on their own. Millions of small businesses rely on companies like ours to do this for them. If regulation makes it harder for them to share data and use these tools, that could disproportionately hurt them and inadvertently advantage larger companies that can.
And, of course, any such advantages for big companies or disadvantages to small companies would be “inadvertent.”
Which may account for why George Soros — who knows a thing or two about how big businesses game regulators — published a reply in the Financial Times that simply noted, before calling for Zuckerberg to step down as Facebook CEO, that, “Mark Zuckerberg should stop obfuscating the facts by piously arguing for government regulation.”
While this game is relatively new for tech giants, they’re following a well-trod path blazed by others.
Way back in the 1980s during the Reagan administration, Robert Monks and Nell Minow worked with the Presidential Task Force on Regulatory Relief. Monks noted in the book Power and Accountability they published in 1991, “We found that business representatives continually sought more rather than less regulation, particularly when [the new regulations] would limit their liability or protect them from competition.”
This, they write, is the biggest of big ways to win the process of actually controlling the government regulators who everybody else thinks are “controlling” the corporation.
“The ultimate commercial accomplishment is to achieve regulation under law that is purported to be comprehensive and preempting and is administered by an agency that is in fact captive to the industry.” In this way, corporations find an actual government shield for their actions. For example:
Tobacco companies point to the government-mandated warnings on their labels, successfully arguing in court that the labels relieve them of responsibility for tobacco-related deaths because they’re obeying government rules.
Producers of toxic wastes can’t be sued or attacked if they are releasing their toxins within guidelines defined by a government agency.
Giant telemarketing companies pushed for laws and regulations that define their practice, thus legalizing it, pushing out smaller competitors, and providing them with huge loopholes.
Manufacturers of genetically modified products can bring them to market without labeling, as long as their products are made within the guidelines of the regulations.
The “big tech” of the 1980s was GMOs.
Before there was a single genetically modified food product on the market, Monsanto sent lobbyists to the White House in late 1986 to meet with Vice President George Bush.
“There were no products at the time,” Leonard Guarraia, one of the Monsanto executives at the meeting, told The New York Times in 2001. “But we bugged him for regulation. We told him that we have to be regulated.”
And so, the Times’ reporter notes, “the White House complied” and Monsanto got the regulations they wanted from the EPA, USDA, and FDA.
Those regulations evolved throughout the Reagan and Bush administrations into a regulatory policy, announced by Vice President Dan Quayle on May 26, 1992, when he said, “We will ensure that biotech products will receive the same oversight as other products, instead of being hampered by unnecessary regulation.”
Certainly there would be no “unnecessary” regulation, but the regulations that Monsanto asked for were exactly what they needed to both legalize their product and keep out smaller competitors. Said the New York Times, “the new policy strictly limited the regulatory reach of the FDA.”
Under the regulations shepherded through government agencies by the White House, the dangers of genetically modified foods would be determined by the manufacturers, not the government, and testing would occur only when the companies wanted it to. And consumers were not to be notified if their food contained genetically modified organisms (as does now a substantial percentage of the American food supply).
Bill Clinton was just as happy to go along with the regulation dance as were the Reagan and Bush administrations.
“Labeling was ruled out as potentially misleading to the consumer, since it might suggest that there was reason for concern,” notes Times reporter Kurt Eichenwald. In the meantime, gene-altered corn accounted for about 32 percent of the 1998 U. S. crop, 38 percent for soybeans, and 58 percent for Canadian canola oil.
In the summer of 2000, the Clinton administration had to select an American representative to the WTO talks on genetically modified foods. Ignoring the nomination of a scientist from the Consumers Union, they instead chose a former lobbyist for Monsanto, one of the largest companies in the business of genetically modified foods.
And in one of the most notorious cases, a Monsanto attorney quit his job with the company’s law firm, went to work for the FDA where he wrote a regulation that allowed that company’s product into the food supply, then quit the FDA and went to work for the USDA where he participated in writing regulations eliminating labeling of the product for consumers, and then quit his job at USDA and went back to work for the law firm representing Monsanto.
Although there have been multiple attempts over the years to “close the revolving door,” it’s still spinning like an out-of-control top.
By 2020, Facebook, Amazon, Apple and Google had become the major lobbying players in Washington, DC. As a report from Public Citizen noted: “Big Tech has eclipsed yesterday’s big lobbying spenders, Big Oil and Big Tobacco. In 2020, Amazon and Facebook spent nearly twice as much as Exxon and Philip Morris on lobbying.”
And, increasingly, they’re lobbying for regulation, not against it. Facebook recently launched a major online ad campaign arguing that the internet needs regulation now.
Thus, in late March of 2021, the CEOs of Facebook, Google and Twitter all showed up at congressional hearings to respond to “accountability” questions from the assembled members of Congress, almost all of whom were the recipients of those companies lobbying largess.
So much for “piously arguing for government regulation…”
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It would be good to send this column to your 2 senators and your representative. I am blessed to have 3 progressives, but I will do it anyway for the benefit of their staff that reads the emails. I can also pass it on to the forums I am involved in. Thank you Thom. You have once more pointed out how these giants and politicians try to confound "the little people". It's sickening.
I watched the recent hearing on the Capitol insurrection and how the social media moguls failed to police the various groups. They were in denial with the exception of Dorsey. Some congressional members basically said since you won't do it, we will. So stayed tuned.
If you want a look at how ineptly social media handled the obscene and violent footage, there was a 2018 documentary you can view called "The Cleaners". It shows a modern day version of people who are the sin eaters.
Just as the Biden administration is pushing to raise taxes on corporations, a new study finds that at least 55 of America’s largest firms paid no taxes last year on billions of dollars in profits.
The sweeping tax bill passed in 2017 by a Republican Congress and signed into law by President Donald Trump reduced the corporate tax rate to 21% from 35%. But dozens of Fortune 500 companies were able to further shrink their tax bill — sometimes to zero — thanks to a range of legal deductions and exemptions that have become staples of the tax code, according to the analysis.
Salesforce, Archer-Daniels-Midland and Consolidated Edison were among those named in the report, which was done by the Institute on Taxation and Economic Policy, a left-leaning research group in Washington.
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Twenty-six of the companies listed, including FedEx, Duke Energy and Nike, were able to avoid paying any federal income tax for the last three years even though they reported a combined income of $77 billion. Many also received millions of dollars in tax rebates.
Companies’ tax returns are private, but publicly traded corporations are required to file financial reports that include federal income tax expense. The institute used that data along with other information supplied by each company on its pretax income.
Catherine Butler, a spokeswoman for Duke Energy, responded in an email that the company “fully complies with federal and state tax laws as part of our efforts to make investments that will benefit our customers and communities.”
She pointed out that the bonus depreciation, intended to encourage investment in areas like renewable energy, “caused Duke’s cash tax obligations to be deferred to future periods, but it did not eliminate them.” According to a filing at the end of 2020, Duke has a deferred federal tax balance of $9 billion that will be paid in the future.
DTE Energy, a Detroit-based utility that was also found to have paid no federal taxes for three years, said major investments in modernizing aging infrastructure and new solar and wind technologies were the primary reasons last year. “For utilities, the benefit of these federal tax savings are passed on to utility customers in the form of lower utility bills,” it said in a statement.
A provision in the 2017 tax bill allowed businesses to immediately write off the cost of any new equipment and machinery.
The $2.2 trillion coronavirus relief act, passed last year to help businesses and families survive the economic devastation wrought by the coronavirus, also contained a provision that temporarily allowed businesses to use losses in 2020 to offset profits earned in previous years, according to the institute.
DTE used that provision to get an accelerated refund of credits representing $220 million of previously paid alternative minimum taxes, the company said.
FedEx, too, took advantage of provisions in the relief act, using losses in 2020 to reduce tax bills from previous years when the tax rate was higher.
The report is the latest fodder in a debate over whether and how to revise the tax code. Policymakers, business leaders and tax experts argue that many deductions and credits are there for good reason — to encourage research and development, to promote expansion and to smooth the ups and downs of the business cycle, taking a longer view of profit and loss than can be calculated in a single year.
“The fact that a lot of companies aren’t paying taxes says there are a lot of provisions and preferences out there,” said Alan D. Viard, a resident scholar at the American Enterprise Institute, a conservative research group. “It doesn’t tell you whether they’re good or bad or indifferent. At most it’s a starting point, certainly not an ending point.”
He pointed out that the Biden administration itself supported tax credits for green energy investments.
The Institute on Taxation and Economic Policy has been issuing a form of its report on corporate taxes for decades. During the 2020 presidential campaign, its findings grabbed center stage, with Democratic candidates citing it to argue the tax code was deeply flawed.
Tax avoidance strategies include a mix of old standards and new innovations. Companies, for example, saved billions by allowing top executives to buy discounted stock options in the future and then deducting their value as a loss.
The Biden administration announced this week that it planned to increase the corporate tax rate to 28%, and establish a kind of minimum tax that would limit the number of zero-payers. The White House estimated that the revisions would raise $2 trillion over 15 years, which will be used to fund the president’s ambitious infrastructure plan.
Supporters say that in addition to yielding revenue, the rewrite would help make the tax code more equitable, requiring individuals and companies at the top of the income ladder to pay more. But Republicans have signaled that the tax increases in the Biden proposal — which Sen. Mitch McConnell of Kentucky, the Senate minority leader, called “massive” — will preclude bipartisan support.
Referring to the proposed revisions, Matt Gardner, a senior fellow at the taxation institute, said, “If I were going to make a list of the things I would want the corporate tax reform to do, this outline tackles all these issues.”
Deductions and exemptions wouldn’t disappear, but other changes like the minimum tax would reduce their value, he said.
This article originally appeared in The New York Times.
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