Nothing disrupts policy agendas quite like a recession. That’s doubly true for a recession taking shape six months before midterms. Politicians will be eager to quell the frustration that comes with inflation, diminishing job prospects and plummeting portfolios — all of which are converging in the aftermath of a two-year lockdown that eroded public trust in the media, elected officials and the scientific establishment.
The historic formula for addressing recession anger? Punch up. And by those standards, there’s no target more punchable than tech. Jeff Bezos, Mark Zuckerberg and Elon Musk all saw their wealth grow by tens of billions of dollars since March 2020. The pandemic minted a new billionaire roughly every 26 hours, with most of that wealth emerging from the tech sector. Meanwhile, most U.S. households are staring down bleak prospects: Their communities have been ravaged by opioids, home ownership is more elusive than ever and the remote-learning experiment deprived an entire generation of adequate socialization.
The tech policy environment is primed to undergo a fundamental shift — a vibe shift, if you will, only swap out the cig-smoking podcasters with Tesla-driving D.C. lobbyists. Government subsidies will receive more scrutiny than ever. The crypto lobby will need to pay closer attention to the optics of policy prescriptions. And with mounting anxiety around employment prospects, tech firms will face greater regulatory scrutiny over hiring practices.
One final note before diving into the specifics: The magnitude of these shifts depends on how much worse things get from here. Nasdaq still stands 80% higher than it did in March 2020. The markets rallied Tuesday morning with some investors ready to “buy the dip.” We aren’t anywhere close to dot-com territory yet, and a few notable bears warn that this recession could make the dot-com crash look rosy. Only time will tell.
Hiring under the microscope
Until recently, tech companies struggled to fill open roles. That translated into a golden era for software engineers, with the labor shortage driving up compensation by around 20%. Big Tech resorted to dishing out giant bonuses to retain talent. Apple reportedly gave some engineers “special retention grants” worth over $200,000 in RSUs. Amazon raised its cash-pay cap from $160,000 to $350,000.
But there are already signs of tech firms going in the opposite direction to instead trim labor costs. Last week, Meta CFO David Wehner sent an internal memo announcing hiring cutbacks that will impact “almost every team across the company" through the end of 2022. Days later, Uber CEO Dara Khosrowshahi sent an email announcing the company would begin treating hiring as a “privilege” in response to “a seismic shift” in the markets.
Slowing hiring is one thing, but tech companies also seem to be increasingly open to outsourcing employment to China and India. The increased prevalence of remote work, steep H-1B visa restrictions and the shortage of skilled U.S. workers are all driving this trend, according to the Wall Street Journal.
The optics of outsourcing are never popular domestically, but that could be particularly true in an economic recession that puts more Americans in precarious employment situations. Republicans are also primed for a sweeping victory in midterms, and the Trump wing of the party has placed a strong emphasis on domestic hiring and cracking down on H-1B workarounds.
The crypto lobby has a harder case to make
Six months ago, it would be much easier to argue bitcoin should be allowed in 401(k)s. With bitcoin losing around half its value between then and now, it seems like an obviously bad idea to put your retirement funds in a speculative digital asset. This isn’t a hypothetical debate — in April, Fidelity announced it would allow users to invest as much as 20% of their retirement savings in bitcoin, a decision that elicited condemnation from Sens. Elizabeth Warren and Tina Smith.
More broadly, crypto skeptics stand on firmer ground now that NFT and crypto markets have been battered. That puts a higher burden of proof on the industry and its lobbying group at a time when the regulatory environment is particularly malleable. New York, Texas and Florida have all been racing to set the tone for national crypto legislation.
This dynamic is even clearer once you consider specific issues. For example, the crypto lobby has been pushing New York to ease restrictions on BitLicense requirements, which limit the types of digital assets that centralized exchanges can offer. The lobby would have a much easier time arguing in favor of eased restrictions with asset prices up. But with many overzealous investors facing financial ruin from crypto losses, restrictions on asset types look like a responsible and perhaps even necessary guardrail.
Put the oversized checks in storage
Lobbying the government has reliably produced some of the world’s highest “investment” returns. The semiconductor sector, for instance, will likely see a 500x return on a $100 million lobbying budget.
Politicians have grown accustomed to touting these sweetheart deals as win-wins. Tech companies were handed hundreds of millions of dollars so that politicians could hold press conferences where they say things like, “For every six cents of capital investment Ohio will make, Intel will make a dollar.”
Of course, these deals don’t always go over well. In Georgia, for instance, the decision to lure EV maker Rivian with subsidies has become a highly contentious issue. If the recession hits hard, the subsidies-for-expanded-tax-base model will likely become less popular. The headlines practically write themselves: “Trillion-dollar company receives millions in taxpayer subsidies while everyone else suffers.” We’ve seen this narrative play out with the anti-bailout movement that came out of the 2008 financial crisis. It’s difficult to say whether this dynamic will translate into reduced subsidies — it could just mean fewer oversized-check photo ops at press conferences.
