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Should government revive the New Economy?

Layoffs, shutdowns and smaller orders may suggest it will be some time before high-tech sectors turn around, but opinions differ on what role government should play.

    FAIRFAX, Va.--Continued layoffs, shutdowns and smaller technology orders may suggest it will be some time before the Internet and high-tech sectors turn around, but opinions differ on what role government should play.

    President Bush's initial federal budget, released last week, contains cuts and even some outright elimination of telecommunications subsidy programs. But some technology industry executives believe there are other ways Washington could help boost the Internet economy, create more jobs and increase exports--a departure from a traditional dialogue that often found technology executives telling Washington to mind its own business.

    One step toward increased government involvement could be ensuring more people have access to broadband, Cisco Systems Chief Executive John Chambers told an Internet gathering just outside Washington on Tuesday.

    "The U.S. should be a leader in getting broadband connections to everyone who wants one," Chambers told a large crowd of policymakers at the 2001 Global Internet Summit at George Mason University.

    Industry representatives in Washington have proposed a variety of roles for the government in addressing the New Economy malaise.

    "Policy and economics, you can't separate the two," said Grant Seiffert, vice president of government relations for the Telecommunications Industry Association (TIA). "Washington has to understand there's a connection here."

    Budgetary belt-tightening
    The budget outlined by Bush last week suggests that, if anything, the White House is going to stop playing venture capitalist. The 205-page budget blueprint calls on Congress to reduce or eliminate funding for several high-tech programs, "particularly those that provide subsidies to private corporations."

    "Ours is a philosophy that says we know government's role is not to create wealth, but to create an environment in which entrepreneurs and small businesses can realize their dreams in America," Bush said at a rally in Omaha last week.

    Several cuts speak volumes as to where the Bush administration's emphasis lies. One item that stands out in the budget blueprint is a call for the suspension of the Advanced Technology Program under the Department of Commerce for two years. The program supports R&D programs conducted by private companies.

    At the Department of Energy, its Office of Science could face a cut of up to 13 percent, depending on how spending is allocated across varying departments, which critics suggest might lead to federal laboratory closings.

    Bush asked Congress not just to suspend but to eliminate the New Markets Venture Capital (NMVC) program of the Small Business Administration, which offers tax credits and technological assistance to Internet-based start-ups. "Economically distressed communities and individuals have access to a wide range of private for-profit and non-profit micro enterprise organizations," Bush's budget blueprint said in justifying the elimination of the NMVC and related programs for a savings of $100 million.

    Bush is also looking at seriously reducing a program created by the previous administration under the Commerce Department, now known as the Technology Opportunity Program. The program, designed to close the so-called Digital Divide, has inherited as a champion the new Chairman of the House Commerce Telecommunications Subcommittee, Fred Upton, R-Mich.

    Education an emphasis
    But there are exceptions to Bush's technology cost cutting. The National Science Foundation would see a $56 million increase in its 2002 budget to $4.5 billion, although R&D would be trimmed by about 1 percent, with more focus on technology education.

    Still, Chambers--a Republican and contributor to Bush's campaign--saw the merit in education programs. "The government has to get its act together on (technology) education," he said.

    "Even if the government stays on track of getting broadband to every household, they also have to know how to use it," Chambers said. "It would be like building a six-lane highway to your home and having a bicycle to ride on it.

    "I don't think there's any government that's going to dramatically spend more now," Chambers said. "We're going to have to do more with less now," just like in the private sector, he said.

    There are ways the government can do just that, trade association officials said. One is closing the digital divide with which Chambers and Upton are so concerned.

    Both TIA and the Information Technology Industry Council are backing a bill originally introduced last year by now-retired Sen. Daniel Patrick Moynihan, D-N.Y. and reintroduced this year by Sen. Jay Rockefeller, D-W.Va., and others. The bill uses tax incentives to encourage telecommunications installation in rural and low-income areas.