What You Should Be Reading: January 2024

Welcome to “What You Should Be Reading,” a blog series from the Taxpayers Protection Alliance (TPA). Each month, TPA will promote three compelling new research papers from other organizations that contribute meaningfully to public-policy discussions from across TPA’s broad institutional bailiwick.

Fiscal responsibility, constitutional governance, tech and telecom policy, energy policy, antitrust, trade, law, economic freedom — “What You Should Be Reading” will explore all these topics, and many more.

Without further ado, TPA’s “What You Should Be Reading” for January 2024:

Broadband Pricing Under the Broadband Equity, Access, and Deployment Program

In a new report, the American Enterprise Institute’s Mark Jamison lacerates the National Telecommunications and Information Administration’s (NTIA) self-created telecommunications paradox. The NTIA, tasked with administering the $42.45-billion Broadband Equity, Access, and Deployment (BEAD) subsidy program, has two unreconcilable goals. It is working to universalize broadband access — to “close the digital divide” — yet it also intends to regulate broadband prices.

Jamison lays out the inconvenient economic facts: “States will provide their citizens with more and better broadband if they approach price restraints with a light hand,” yet the NTIA “has suggested heavy-handed approaches that will be costly, discourage customers and companies from innovating, and disrupt low-income consumers.”

Price controls most always fail to produce their stated goals. Conversely, they raise prices and cause shortages. But the NTIA, torn between price controls and the well-being of Americans who now lack broadband access (a near essential in modern life), thus far has chosen price controls. And the agency has done so in heavy-handed fashion.

The NTIA has imposed these in two ways — by requiring BEAD-subsidized broadband providers to offer low-cost-broadband plans; and by requiring individual states, which disperse BEAD funds, to implement middle-class affordability plans. While Infrastructure Investment and Jobs Act (IIJA) — the BEAD program’s mother statute — obliges the NTIA to promote low-cost plans, Jamison writes, the agency has overstepped. It foolishly has erased the states’ flexibility to tailor such plans to their unique economic considerations, Jamison argues. It “went beyond the statutory consulting role and ‘strongly encouraged’ states to impose a $30-per-month maximum price for eligible customers” among other requirements such as an anti-data-cap provision. All of these “would last for the duration of the broadband assets’ lives, about 20 years.”

The NTIA’s middle-class affordability mandates are entirely extra-statutory. “In contrast to NTIA’s forceful approach with the low-cost option, here NTIA requires states to have a middle-class program but does not strongly encourage a specific approach,” Jamison writes. “Instead, NTIA signals that it would like states to make middle-class households eligible for the low-cost service option, directly subsidize these households, or pressure companies by, for example, monitoring and evaluating prices.”

Low-cost options excepted, the IIJA states that “nothing in this title may be construed to authorize [the NTIA] to regulate the rates charged for broadband service.” As Jamison sums up, the “NTIA has exceeded what Congress authorized.”

Economically speaking, price controls by any other name — e.g., “affordability plan” — smell just as rotten. Legally speaking, they are just as impermissible.

Read Jamison’s full piece here.

Shareholder Engagement, ESG, and the Drift Toward Shareholder Activism

According to common-sense and fiduciary-duty requirements, publicly traded companies must maximize shareholder profits.

Progressives object. Instead, they argue, companies’ operations ought to benefit a smorgasbord of “stakeholders,” a vague category that can include essentially anybody remotely touched by a firm’s operation. The economic data show the deficiencies of this approach. The trinity of lefty corporate governance — so-called environmental, social, and governance (ESG) — has sapped businesses of their profits (particularly when promoted by ESG-friendly regulation).

The question raised is why so many corporations, most of whose stockholders presumably like profits, have embraced ESG. The American Consumer Institute’s Kristen Walker supplies a crucial answer in a new paper. As Walker lays out, a handful of activist investors (“corporate gadflies”) and a pair of dominant proxy advisory firms have manipulated shareholder-proposal processes at myriad firms to promote progressive causes. They have an ally in Gary Gensler’s Securities and Exchange Commission (SEC), which in 2021 updated guidance to allow shareholder proposals that “raise issues of broad social or ethical concern related to the company’s business.”

“Larger companies have become big targets of shareholder activism, receiving more and more proposals each year,” Walker writes. “Many of these proposals are increasingly focused on special interests, prioritizing climate change and racial justice over profits and rates of return.” These distractions produce ample opportunity costs quashing these proposals, she continues, “many of which are repeatedly submitted and/or voted down.”

Economics is, as the inimitable economist Thomas Sowell writes, the study of scarce resources that have alternative uses. Capital squandered on ESG cannot be put to more-productive uses elsewhere. As a rule, waste inflates business costs, and inflated business costs inflate consumer prices.

Read Walker’s full piece here.

A Global Antitrust Paradox?: The FTC is harming America’s race with China

An analysis from the Competitive Enterprise Institute’s Joseph Sullivan offers a helpful global view of the Federal Trade Commission (FTC) under Lina Khan. First off, he posits that the agency’s recent aggression has undermined technological innovation and, by extension, national security. According to his analysis, should U.S. regulators mimic other nations’ more-stringent styles of antitrust enforcement, consumers would suffer. For example, “if the US were to adopt the competition policies of Canada, US Gross Domestic Product (GDP) would be $134 billion lower and consumer prices would be between 0.5 and 0.98 percent higher,” Sullivan argues.

The paper argues that overeager antitrust enforcement and heavy-handed regulation could cripple American innovation in advanced computing, including in artificial intelligence (AI). Without leading in this sector, which promises to revolutionize both commerce and warfare, America cannot assure robust national security — particularly considering China’s investments in AI. Nonetheless, the FTC has chosen to hamstring American companies in the sector — the very companies on which America’s continued tech leadership depends. For example, the agency sued NVIDIA, an American company, to prevent its acquisition of Japanese chip-design firm Arm. “Within months,” Sullivan writes, “NVIDIA ultimately dropped its pursuit of Arm, citing ‘regulatory challenges.’”

This incident and others like it expose the essence of the FTC’s arbitrary rule. Khan & Co. knowingly and happily advance (often-poorly-founded) cases with little regard for how courts would receive them. It sues companies to stop mergers (causing many to abandon the deals rather than pay for costly litigation) then declares victory. Conveniently, this absolves the agency of the usual due-process requirement to convince a court that lawbreaking as defined by law and precedent has occurred.

Read Sullivan’s full piece here.

Note: TPA highlights research projects that contribute meaningfully to important public-policy discussions. TPA does not necessarily endorse the policy recommendations featured authors make.