Democrats have unabashedly used the COVID-19 pandemic to push unrelated, partisan policy priorities. Throughout the crisis, House Speaker Nancy Pelosi and House Democrats have called for $1 trillion in bailout funds for high-tax states, have proposed preferential green energy tax credits, and have demanded funding for the Postal Service and the National Endowment of the Arts.
Not to be outdone, Sen. Elizabeth Warren and Rep. Alexandria Ocasio-Cortez are now pushing the “Pandemic Anti-Monopoly Act,” a radical proposal to ban mergers and acquisitions in response to the pandemic. This would restrict any mergers and acquisitions involving a company with more than $100 million in revenue, private equity firms, and businesses that have an exclusive patent on personal protective equipment.
This is a terrible idea and a clear attempt to exploit the crisis to push the liberal agenda.
Although Warren and Ocasio-Cortez claim this legislation is needed to stop big businesses from “taking advantage” of workers and small businesses, they have the situation entirely backward.
First, their entire premise is wrong: Mergers and acquisitions are not a bad thing. They play a vital role in the economy by encouraging efficiency and innovation by allowing businesses to deliver goods and services to consumers at lower costs and higher quality.
Second, there is no evidence that large companies are taking advantage of the pandemic to acquire smaller businesses. Nor is there any evidence that anything illegal is happening or that the laws on the books are failing. Mergers are still being reviewed by the Department of Justice and the Federal Trade Commission as normal.
Instead of protecting businesses, the Ocasio-Cortez/Warren legislation would deprive small businesses of an important source of private capital.
Businesses seeking financing can typically go into debt or sell equity. But under the Ocasio-Cortez/Warren proposal, the ability of businesses to receive equity would be severely limited. Most, if not all, entities with capital would be restricted from transactions.
In turn, this would leave struggling small-and medium-sized businesses with one of two outcomes: either fail outright or be forced to become even more highly leveraged. While debt is not a bad thing for businesses, Warren and Ocasio-Cortez would be forcing distressed companies into this position, leaving their long-term prospects bleak.
This proposal is particularly ill-timed because businesses are struggling to keep their doors open and continue paying their employees.
More than 33 million people have filed for unemployment in the past seven weeks, and the Congressional Budget Office projects that GDP will decline by 12% during the second quarter of 2020. In the last few months, the unemployment rate has increased from a 50-year low of 3.5% to almost 15%.
Industries such as retailers and restaurants are seeing revenues decline by 80% to 90% and have been forced to lay off the majority of their workforce. Many have predicted a “flood” of bankruptcies in the coming weeks and months as businesses continue to struggle with liquidity.
We should be doing everything we can to help these businesses. Instead, this proposal could actually accelerate the number of businesses that go under, costing jobs and imperiling the ability of the country to recover.
Not only is this proposal a terrible idea, but it could also be a Trojan horse to expand the power of the federal government permanently.
Under the legislation, the ban would not be lifted until the Federal Trade Commission unanimously agrees that small businesses and workers are no longer under severe “financial distress.”
If Warren and Ocasio-Cortez had any control over this standard, the ban would be made permanent under the guise of “helping workers.”
Just consider their record. Last year, workers saw one of the strongest economies ever, with record-low unemployment of 3.5% and wage growth of more than 3%. Blind to this reality, Warren was arguing that we needed trillion-dollar climate policies that she described as “aggressive intervention on behalf of American workers.”
We should not be fooled into believing the liberal narrative that small businesses and workers need protection from private capital.
If enacted, the Pandemic Anti-Monopoly Act would only serve as incremental reform toward stifling government control over private investment.
Moving forward, we should instead be promoting private investment to strengthen and speed up the post-coronavirus economic recovery and safeguard jobs and small businesses.
Alex Hendrie is director of tax policy at Americans for Tax Reform.
