CEA Chief Criticizes Spending Bill, Protectionism, Unionization Mandates, and Anti-Immigration Policy

February 17, 2009. Gary Shapiro, head of the Consumer Electronics Association (CEA), gave a speech to the Media Institute in Washington DC in which he condemned in blunt language the just enacted spending bill, HR 1 [LOC | WW], and the news media's failure to report on it.

  Photo of Gary Shapiro, copyright CEA.
  Gary Shapiro
Copyright CEA

Shapiro said that the bill will create an immense debt to be paid by future generations; he also questioned whether it will stimulate the economy. He said that "The irresponsibility and the lack of discussion are breathtaking."

He also criticized the bill's protectionist language, arguing that it will invite retaliation from trade partners, and thereby create the same harm that resulted from the depression era Smoot Hawley bill.

Shapiro excoriated the news media at length for its failure to accurately report on the content and consequences of this bill. He said that "Our national conspiracy to ignore financial reality will doom us to second class status and we will all be responsible for our silence."

He also condemned a legislative proposal and an executive order that contain unionization mandates, stating that they will drive jobs abroad.

He also condemned the Bush administration's post September 11, 2001, restrictions on immigration. He expressed hope that the U.S. will now be more welcoming to innovators, entrepreneurs and students.

He also condemned the proliferation of innovation inhibiting intellectual property based litigation.

Trade group officials tend to have well developed understandings and opinions regarding laws and policies. However, they rarely disclose these in public with the frankness demonstrated in this speech.

Shapiro conceded that "I am taking an unusual tack for an association executive."

The CEA is a trade group with over 2,200 companies as members. These include developers, makers and distributors of a wide range of consumer electronics products. The membership also includes many companies whose primary activities are phone service, cable service, VOIP service, software, retail stores, online retailing, and online services.

Trade Protectionism. The CEA states in its web site that "High tech is America's largest export sector ($220 billion), making up 21 percent of total U.S. exported goods in 2006." (Parentheses in original.)

Shapiro said in his February 17 speech that "we have been successful innovators and creators because we have been leaders in trade and in IP protection. We have opened our borders and traded freely with other nations. This has allowed us to export our innovations and our content and stand up in a principled way to those who sought local content restrictions."

He continued that "free trade is under attack as agreements that would create U.S. jobs are left to languish."

He did not elaborate on specific free trade agreements (FTAs). However, after Democrats gained control of the House in the 2006 elections, the Congress all but stopped approving FTAs. In particular, the Congress did not approve concluded FTAs with Korea, Columbia, and Panama. The U.S. has yet to negotiate mutually beneficial FTAs with Taiwan, Indonesia, and other trade partners.

"Worse", said Shapiro, "in the stimulus package we saw Buy America provisions enacted into law which ironically hurt the American companies they seek to protect."

HR 1, at Division A, Title XVI, Section 1605, provides that "None of the funds appropriated or otherwise made available by this Act may be used for a project for the construction, alteration, maintenance, or repair of' a public building or public work unless all of the iron, steel, and manufactured goods used in the project are produced in the United States."

Shapiro expressed relief that HR 1 did not also require "that medical IT exclusively use American companies. These same American companies will tell you that they are almost certain to win any fair competitive process. Yet, insisting that such competitions be limited to American companies would have encouraged other countries to impose similar requirements in their software procurements -- thus blocking American companies from competing."

He concluded that "the protectionist provisions which remained in the stimulus package are precisely the Smoot-Hawley type of efforts that led to the Great Depression."

Unionization Mandates. He said that "we have been successful because we rely on a marketplace which rewards successful innovators. Until recently, it was considered good to be a successful entrepreneur. The distaste for Wall Street excess is quickly creeping over to other areas and risk-taking entrepreneurs are being punished. Anyone can be an entrepreneur, an innovator or creator and we should not begrudge those who succeed in the free market."

He added that "risk takers create jobs and innovation flourishes if risk takers can ramp up and ramp down quickly."

"Recent proposals by unions to allow sudden unionization without a private ballot and then have government arbitrators set work conditions threaten the ability of any business to innovate. More, such unwise proposals could perversely provide an incentive for companies to move jobs overseas", said Shapiro.

The Congress has not yet enacted this proposal.

Shapiro continued, "And sadly recent executive orders barring government contractors from discouraging unionization and requiring that government projects use only union workers not only adds costs but discourages entrepreneurial companies from selling to the government."

He did not elaborate. However, on January 30, 2009, Obama signed an executive order titled "Economy in Government Contracting". It disallows disbursements to federal contractors if they communicate with their employees about their views during a labor organizing drive. Shapiro did not note this order's limitation of First Amendment rights.

IT Litigation. Shapiro also addressed policy issues that predate the Obama administration, including litigation. He said that "We have maintained a strong system of intellectual property rights and have rigorously opposed commercial piracy. And although we have our differences on private copying, these are differences at the fringe as we have all learned that we need each other and that new technologies can be embraced for profit."

But, he argued that "Huge penalties on innovations based on speculation of infringement have restricted product introductions and decimated startup companies."

Immigration Policy. He called for changes in Bush era immigration policy. "Sadly, after September 11 we flipped a switch and discouraged immigration", including by people who would "have studied or created in America".

So, "other nations welcome these students, entrepreneurs and engineers. Our reputation for unfriendliness creates an impression of xenophobia and increasingly repels the best and the brightest."

Shapiro said that this "is harmful to our future."

He continued that "I am also hopeful that the Obama Administration reverses course and affirmatively tries to attract the best and brightest. Even if we start modestly, just at the University level, we are creating ambassadors of goodwill when they leave. But if we are strategic, we will not insist they leave when they get their degree, but encourage them to stay. More, if we care about our competitiveness we will expand the H1B visa program and get the highly skilled talent here rather than forcing our companies to locate their facilities elsewhere in the world."

Deficit Spending Bill. Shapiro complained that the US is "racking up over $800 billion" in debt with HR 1, and spending "trillions bailing out companies that made poor decisions".

He added that war spending adds to the national debt. He also warned that while the interest rates at which the government borrows are now low, "Sometime soon, those that we owe money to are going to look elsewhere or insist on higher interest rates."

"Our generation will be noted for two things. We are the generation that embraced digital technology, not only the cell phone, the HDTV and digital music, but the Internet and all the glory and richness it provides. But we also will be forever known as the generation which saddled our children with a debt which will take generations to pay. The irresponsibility and the lack of discussion are breathtaking."

He concluded that "we are in a recession and people are losing their jobs and every inclination is to do something. But we are also in a free market system which has a business cycle. In the late 70s we had gas rationing, double digit employment and interest rates approaching 20 percent. We survived without panicking. By comparison, today we are on path to increase public debt by some 3 trillion dollars in the next 3 years alone -- more than we added in the 50 years from 1940 to 1990."

News Media. Shapiro then laid much blame upon the news media for their failure in reporting on HR 1.

He criticized CNN for giving its platform to "xenophobic and protectionist Lou Dobbs".

He also asked, "as we add trillions of dollars of debt where is the media scrutiny?"

He noted that while proponents of HR 1 label argued that it is a "stimulus" to the economy, "many economists disagreed and argued that there is little or no evidence that government spending can make a difference before the business cycle turns".

He asked, "Has the media been so decimated by the economy and new media that thoughtful analysis of these immense proposals is off the table? And where was the outcry over this shift from immediate stimulus and job creation to massive government employment and industrial policy?"

And, "Where were the news stories when the Congressional Budget office recently reported that the stimulus package would have no positive impact on the economy? Has the media simply lost interest in anything but the battle? Have the facts and substantive issues become irrelevant?"

He concluded that the new media "has failed us recently".

"If our ancestors were as passive as our citizens and press today, we would all still be sipping tea and paying for it in pound notes", said Shapiro.