Keys to productivity and growth for companies in the Information Age are fiscal discipline and a focus on improving the skills and knowledge of the work force. Also, public and private investments in research and the encouragement of competition and innovation, in part through deregulation and expanded global trade, are important.
The critical question for the 21st century is which political party will be first to grasp the new economic realities and develop and promote a new economic policy.
This month's release of the paper, "E-Strategy for Economic Growth" points to Democrats leading the charge. Led by Senate Democratic Leader Tom Daschle and House Democratic Leader Dick Gephardt, congressional Democrats released a detailed set of legislative proposals to spur innovation, productivity and economic growth.
This agenda builds on the recommendations made by the Progressive Policy Institute's New Economy Task Force, which was chaired by Senator Daschle and Gateway Computer Chairman and CEO Ted Waitt. The task force was made up of Democratic elected officials and leading New Economy entrepreneurs from around the nation.
The "e-strategy," organized into four areas--boosting research and development, enhancing education, speeding the transformation to a digital economy and accelerating digital opportunities--lays out 10 proposals, each with specific legislative recommendations.
To support the building blocks of the New Economy, the agenda proposes to achieve a number of goals. It plans to double civilian research-and-development funding, reverse the slide in Defense Department research-and-development spending, and make a research-and-development tax credit permanent and explore its expansion. The group also proposes to require states to set science educational standards and make permanent and expand deductions for employee education.
Recognizing the key role the information technology revolution has played in spurring productivity, the agenda also focuses on helping to speed the transition to a digital economy. It focuses on boosting consumer trust in the Internet, including proposing reasonable and balanced legislation to stem the tide of unsolicited commercial e-mail, or spam, and protect users online.
It seeks to make the Internet a tariff-free zone, while liberalizing export controls on information technologies. It also seeks to have government practice what it preaches, by establishing the position of chief information officer for the federal government and a $200 million fund to invest in cross-agency e-government projects.
This Democrats' agenda represents a dramatic contrast to ideas put forth by the Bush administration. First, while it may not be publicly admitted, the Bush administration's ruling economic doctrine remains supply-side economics with an almost religious commitment to large, across-the-board cuts and elimination of most regulations.
But the administration also views the economy through an Old Economy lens that states that no economic sector is any more important than any other.
Just as former President George H. W. Bush's economic advisor once stated, "potato chips, computer chips, they're all the same," the current administration is also reluctant to view any one sector as strategic. As a result, Republicans have called for cuts in key investments such as research and development and technology programs to pay for sizable tax cuts--particularly for upper-income Americans.
In contrast, the Democratic agenda puts fiscal discipline first. It supports paying down more of the national debt to keep interest rates low, which is vital for business growth. That's why Democrats devote more of the surplus to debt reduction than the Bush administration and call for affordable and fairer tax cuts, and tax cuts (such as the research-and-development credit and taxes for broadband deployment) to stimulate investment in the New Economy.
But the Democrats' agenda also recognizes that the technology sector has been and will remain the driver of productivity growth for the foreseeable future. That's why it places such an emphasis on boosting science, research and technical education.
In the heady days of the late '90s the New Economy and the Internet looked like a juggernaut, in the face of which government needed to just get out of the way. As we see now, the reality is much more complex.
Sure, government should not put any roadblocks in the way, but it needs to provide the kinds of investments and tax incentives that will ensure that fast and broadly shared economic growth continues well into the next century. The Democrats' agenda does just this.