Tech caught in budget crossfire

The White House and the Republican-led Congress have almost reached an agreement on a $500 billion-plus federal spending bill but they still are haggling over the details, including technology industry-backed provisions and controversial Net content regulations.

The Workforce Improvement and Protection Act, a bill to increase the number of special visas for skilled foreign workers, has been added to the budgetary legislation. The Internet Tax Freedom Act has been tacked on as well.

As Congress closed in on its midnight deadline to adjourn yesterday, Republican leaders and the Clinton administration were wrangling over the inclusion of Rep. Mike Oxley's (R-Ohio) Child Online Protection Act (COPA), among other things. The controversial bill would require commercial Web site operators who offer "harmful" material to check visitors' identification and keep minors out or face up to $50,000 in fines and six months in prison.

Speaker of the House Newt Gingrich (R-Georgia) specifically identified Oxley's bill as one of a handful of sticking points in a nighttime press conference describing progress toward a budgetary agreement. "The administration has not yet approved that," he said of Oxley's bill.

But today, the White House may be backing down. And the retreat is expected in spite of the Justice Department's warning the bill's constitutionality will no doubt be challenged in court just like the provision of the Communications Decency Act that made it a felony to display or transmit indecent material on the Net if it could be accessed by minors.

"Net pornography is one of those issues that is still in the final phases. We believe we have an agreement and administration is reviewing the language," Senate majority leader Trent Lott (R-Mississippi) said at news briefing. "We think it's important that we not leave here with the ability to have this unbelievably gross pornography on the Net."

Negotiations over the "omnibus" spending bill are continuing today, with both sides of Congress now scheduled to work until midnight Friday. Lawmakers were scheduled to adjourn last night, but passed a resolution to stay in session to pass the critical budget bill, which is necessary to keep the government running.

"The budget deal is done, but as we speak COPA and the Internet Tax Freedom Act are being muddled over," said one Net industry lobbyist. "Either way, the political situation is such that we are likely going to get the Oxley bill."

As reported, the Clinton administration and civil liberties advocates worry that the Child Online Protection Act could hinder access to material protected by the First Amendment, and comes too close to the content controls within the Communications Decency Act, ruled unconstitutional last summer by the Supreme Court.

"This approach is extremely ineffective--there are filtering tools that can better help parents make decisions for their families," said Ari Schwartz, a policy analyst for the Center for Democracy and Technology, which would challenge the act in court if it becomes law.

"This is unconstitutional for several reasons. Under this legislation, a commercial Web site probably couldn't post the Starr report," he added. "All commercial and nonprofit sites have First Amendment protection. The standard is lower for nonpolitical speech, but newsworthy events like this are protected."

But proponents say the bill is narrowly tailored to limit underage surfers from viewing adult-oriented material, such as pornography, and have been persistent in their efforts. The "harmful" definition would apply to any communication, image, or writing that contains nudity or actual or simulated sex, or that "lacks serious literary, artistic, political, or scientific" value.

"We think what we have is constitutionally compliant," Lott said today.

The Child Online Protection Act may be a point of contention, however, the administration does support other Net legislation set to be a part of the spending bill,including the Net Tax Freedom Act. The bill passed both houses, but has not cleared the full Congress because the House and Senate are bickering over differences in their bills.

The Net Tax Freedom Act is seen as a boon to e-commerce because it would create a national three-year moratorium on "discriminatory" taxes on Net access and services. The Senate and House versions of the bill differ slightly, preserving or "grandfathering" taxes enacted before October and March of this year, respectively. Still, there wasn't enough time to resolve that issue, among other inconsistencies in the bills. So proponents want to see the Net Tax Act approved as part of the massive spending bill.

President Clinton had said he would sign the tax bill, although the version of the legislation passed by the Senate also carried proposals that aimed to regulate minors' access to "harmful" content.

Rep. Lamar Smith's (R-Texas) bill to nearly double the number of H1-B visas, often obtained by technology workers, is perhaps the highest-profile tech bill that didn't reach the other end of Pennsylvania Avenue as a stand-alone proposal.

Following negotiations between the administration and Sen. Spencer Abraham (R-Michigan), the White House had signaled approval of legislation that would boost the number of visas from 65,000 to 115,000 for 1999 and 2000 and then return it to the current level by 2002.

The bill also stipulates that some companies who employ H1-B workers would be subject to Labor Department monitoring, and imposes stiffer penalties for firing an American worker in favor of an H1-B visa holder and for paying foreign workers lower wages than their American counterparts.

But the bill was surprisingly blocked by Sen. Tom Harkin (D-Iowa) when the Senate was gearing up for a final vote on it. Proponents decided on Tuesday to incorporate Smith's bill into the spending package.

Despite the Friday deadline, there is no telling when lawmakers and the White House will approve the omnibus bill and the Net provisions.

"I think we're getting down to the wire, but we still have some issues that we've got to work out," White House Press Secretary Joe Lockhart said in a press briefing yesterday. "And it's just impossible to know until both sides slip across the table and say, 'We have an agreement,' how long that will take."

Although the budget crunch holds several high-tech bills in the balance, President Clinton is expected to sign the following bills, which passed Congress this week:

The Digital Millennium Copyright Act, which cleared Monday, would impose new safeguards for software, music, and written works on the Net, and would outlaw technologies that can crack copyright protection devices. One provision would require Webcasters--such as the budding group of Net radio stations--to pay licensing fees to record companies, which could take a large chunk out of their gross revenues.

The Securities Litigation Uniform Standards Act, which passed yesterday, would limit lawsuits against companies with volatile stock prices by requiring class-action shareholder suits brought against companies for failed earnings to be filed in federal court. Proponents say the statute will protect the slew of public high-tech start-ups from being sued in every state, arguing that such suits have the potential to stifle the growing computer industry.

The Child Protection and Sexual Predator Punishment Act applies stiff penalties for using the Net to sexually solicit minors or knowingly send "obscene" material to a person under 16. Violators could get up to five and ten years in prison, respectively, for the offenses.

The bill also sticks Net access providers with new liabilities for failing to report child pornography once they are made aware of the illegal material. ISPs could be fined up to $50,000 the first time they fail to report the activity and up to $100,000 for each subsequent time they don't contact law enforcement authorities.

Civil liberties groups say the ISP penalties could force providers to police their customers.

News.com's Kurt Oeler contributed to this report.