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Tech Industry

Perspective: Politics of high-tech pork

CNET News.com's Washington watcher Declan McCullagh explains why technology "pork" projects are quickly turning into one of the year's rare growth stories.

WASHINGTON--It's time to halt corporate welfare for technology firms.

Dozens of tech industry-friendly spending programs totaling billions of dollars are already on the books, and Congress is considering dozens more. Current proposals range from building discount broadband connections in rural areas to setting up "cybersecurity" boondoggles, often in a politician's home state.

A report that will be released this week by the hard-working policy mavens at the Cato Institute, called "Birth of the Digital New Deal," contains the first comprehensive survey of the fast-growing area of technology pork.

"Just as policymakers proposed a litany of New Deal programs and spending initiatives during the Great Depression era, lawmakers today are devising many new federal programs aimed at solving the supposed emergencies or disasters that will befall the telecommunications industry without government assistance," the report warns. "The recent troubles of the dot-com and telecommunications sectors have only added fuel to the fire."

Technology leaders sometimes make the mistake of concluding that these handouts are a good idea. After all, when bankruptcies are zooming and layoffs are in the news every day, it's tempting for a cash-strapped CEO to turn to the federal trough.

As science-fiction author Robert Heinlein once wrote, there ain't no such thing as a free lunch.
But when an industry goes to Washington for help, eventually Washington demands something in return. As science-fiction author Robert Heinlein once wrote, there ain't no such thing as a free lunch. With increased government spending come increased regulations, rules and red tape--all of which are exactly the opposite of what fosters an innovative tech sector.

T. J. Rodgers, the outspoken CEO of San Jose-based Cypress Semiconductor, got it right in an essay he wrote two years ago. "The political scene in Washington is antithetical to the core values that drive our success in the international marketplace, and risks converting entrepreneurs into statist businessmen," Rodgers wrote.

The sad thing is that Rodgers' view no longer seems to be the dominant one. "Just as the 1930s economy needed a New Deal, today we need a Technology New Deal," said Michael Price, vice chairman of Evercore Partners, a New York investment bank.

Cato's forthcoming report divvies up these government projects of dubious necessity--often called "pork"--into four categories: broadband, digital divide, cybersecurity, and research and development.

"Regardless of how you aggregate it, there's been an explosion of legislative activity," says Adam Thierer, Cato's director of telecommunications studies. "An increasing portion of (the activity) is promotional in character rather than regulatory."

In the cybersecurity field, the federal government is considering programs that the private sector would--and should--pay for on its own. For instance, the Bush administration's proposed budget for the 2003 fiscal year includes $4.2 billion for cybersecurity, including $202 million for improved medical communications and $60 million for better wireless networks.

Another problem with tech pork is that it puts the government in the position of choosing between winners and losers.
"Government regulation and oversight have little to offer with regard to the development of efficient, secure network arrangements and could instead lead to micromanagement, through measures such as mandates for network structure and security requirements on telecommunications and computer networks," Cato's report says.

Another problem with tech pork is that it puts the government in the position of choosing between winners and losers. Sure, sometimes the government picks a winner. But there are far more losers, such as Japan's government-sponsored Fifth Generation computer project--an idea that seemed enticing at the time but completely missed the rise of the Internet. TRON, the Japanese government's attempt to leapfrog Motorola and Intel in microprocessors, is another example of an embarrassing debacle.

We don't need to mimic this sort of bureaucratic meddling. We should remember that Silicon Valley, even with the economic downturn, became a success story because of engineers and entrepreneurs with good ideas who decided to take risks, not because of government handouts.

And we should recall that a government that's powerful enough to give you everything you want is powerful enough to take it away.