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Morning Brief: Bipartisan Attacks on Facebook IPO

by Renewing America Staff
June 21, 2012

A television reporter talks about the Facebook IPO at the NASDAQ Marketsite in New York prior to the opening of trade on May 17, 2012 (Keith Bedford/Courtesy Reuters). A television reporter talks about the Facebook IPO at the NASDAQ Marketsite in New York prior to the opening of trade on May 17, 2012 (Keith Bedford/Courtesy Reuters).

Lawmakers from both parties are pressuring the SEC to scrutinize Facebook’s IPO (WSJ). In a letter to the head of the Securities and Exchange Commission (SEC) on behalf of the House Oversight and Government Reform Committee, Rep. Darrell Issa, (R-CA) wrote “[The Facebook deal] taught us that, at a minimum, the IPO process suffers substantial flaws…[federal law is] fraught with conflicts of interest and incentives to misprice shares.” Sen. Jack Reed (D-RI) said that “The perception today, and perhaps in too many cases the reality, is that the retail investor comes in at a disadvantage [in IPOs].”

In the face of persistently high unemployment, policymakers and workers look to innovation and entrepreneurship, the primary engine of U.S. job growth over the past thirty years. This CFR Backgrounder by Steven J. Markovich discusses how entrepreneurs create and finance startups and the ramifications of policies such as the JOBS Act.

Companies That Thrive Without Bosses

While many firms pursue flat hierarchies, a few successful firms have eliminated bosses entirely (WSJ). The article profiles two firms: W.L. Gore, the maker of Gore-Tex, and Valve, a videogame maker, that have practically eliminated formal hierarchy. At these firms, employees engage and motivate each other to work on projects they deem important. Promotions are meaningless, and wages are set according to rankings provided by all employees. A flat structure may spark innovation and many workers enjoy a sense of the freedom and empowerment. Downsides include difficulty removing poor performers, and sometimes slow decision making.

Innovation. Read more on how the U.S. capacity to innovate could play a chief role in economic growth.

Infrastructure

Creating a Level Energy Playing Field

Jigar Shah, the founder of SunEdison, argues that wind energy can succeed without renewal of the federal production tax credit (PTC), but only if taxpayer support for non-renewable energy is also eliminated (AOL Energy). He argues that while opponents of PTC renewal cite its $3.5 billion annual cost, taxpayer payments to oil, gas, and coal producers will cost more than $110 billion over the next decade. He also points out that state renewable portfolio standards are often more decisive for wind development than PTC.

What Congressional Politicians Really Think

Bloomberg Businessweek interviewed Sens. Snowe (R-ME) and Conrad (D-ND), and Reps. Ackerman (D-NY) and Davis (R-KY), all of whom are retiring. The quartet spoke candidly about Congress and its increasing inability to bridge the partisan divide. Conrad said: “Look, last year I had a senior colleague say, ‘Your problem, Conrad, is you are too solutions-oriented. You have never understood that this is political theater.’ I thought, Wow, it is time for me to leave.” Snowe pointed out that “The American people have to really weigh in and demonstrate that there is a political reward and incentive for working across party lines.” Ackerman may be pessimistic on that front: “Society has changed. The public is to blame as well. I think the people have gotten dumber.”

CFR Senior Fellow and Renewing America Director Edward Alden recently discussed political dysfunction in Washington, including the inability of Congress to expand infrastructure investment despite the support of labor unions and business groups.

Infrastructure. Read more on how upgrading the nation’s aging network of roads, bridges, airports, railways, and water systems is essential to maintaining U.S. competitiveness.

Debt and Deficits

Medicare and Medicaid Don’t Fight Fraud Together

While providers who serve Medicaid patients usually also serve Medicare patients, the two programs do not cooperate when fighting fraud (Stateline). Only a small portion of providers commit fraud, but those that do often attack both programs; Medicare and Medicaid estimate their losses due to improper payments run into tens of billions annually. Cross-checking would allow states to more quickly identify increasingly elaborate schemes to defraud Medicaid, though it would require amending current limits on the use of federal Medicare data.

Spiraling federal health care costs are projected to rise as a percentage of GDP for decades, making them an important issue as politicians debate different plans to reduce the budget deficit. This CFR Backgrounder by Jonathan Masters outlines the competing policy paths on federal fiscal reform, and the global consequences for failing to bring down U.S. debt.

Debt and deficits. Read more from experts on the challenges in reducing U.S. debt.

Corporate Regulation and Taxation

Comments May Chill Transatlantic Regulatory Cooperation

Comments by U.S. regulators and politicians about British counterparts may harm efforts to cooperate on financial regulation (Reuters). Congressional testimony about JP Morgan’s multi-billion dollar trading losses due to positions taken by employees in London has included criticism of UK regulators. The research director of the International Centre for Financial Regulation said: “You would hope that regulators would be working in a more cooperative spirit, and that is difficult where there is any lack of trust.”

Corporate regulation and taxation. Read more from top economists and business experts on solutions for addressing corporate tax reform.

The Morning Brief is compiled by Renewing America contributor Steven J. Markovich.

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