What Will Re-election Mean for High Tech?

By Chris Nolan  |  Posted 2004-11-04

What Will Re-election Mean for High Tech?

Is the re-election of President George W. Bush good or bad for high tech?

In strict business terms, its good. Very good. Seen from a longer-term economic policy standpoint, the benefits are less clear.

Check out Chris Nolans column "Is Bush Good for the Tech Worker?"

If youre a high-tech entrepreneur, CEO or venture capitalist, Bushs re-election and his promise—made in his victory speech Wednesday afternoon—of tax reform and Social Security changes should put more cash in your wallet.

The details of the Bushs plans will probably have to wait until his State of the Union address in January. Hes been clear about wanting to simplify the nations tax system, which he called "outdated" in his Wednesday speech. Thats something that many self-employed people and small businesses—startups and their backers—have been urging Congress to do. Also, its generally thought that a tax code clean-up will mean changes in corporate tax structures, which are, again, good for the folks who run and back companies.

If youre reasonably well off—making $150,000 a year or more or in a household with more than $200,00 a year in gross income, the Bush administration will be good for you, too. Youve already had your taxes cut. Bushs "ownership society" is also expected to mean more tax relief for individuals who can defer income—in special medical savings, IRAs and other accounts—until retirement. Again, wealthier taxpayers do better because they are better able to find the money to set aside.

The theory is that these savings programs and reduced tax burdens will encourage investment and investment, in turn, will create jobs. Again, good for entrepreneurs, venture capitalists and CEOs. And, of course, good for tech workers, who will have more work at more prosperous companies.

Next Page: What it means for new workers.

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But if youre just starting out as an employee, if youre not making enough to save, or if youre not highly or uniquely skilled, its unclear how these policies will be as helpful. Employees who dont have equity or who have to struggle to find ways to save money will have a harder time taking advantage of the tax breaks the administration has envisioned. This, of course, is one of the reasons why Silicon Valley has opposed—without a lot of help from the administration—requirements to make stock options part of company expenses. Entry-level equity is a big part of the Valleys job-creation machine; its found support from Republicans in the House but has stalled in the Senate.

With or without stock, it is employees—newer tech workers, those doing the grunt work of coding—who are the ones who are the most likely to feel the brunt of the Bush administrations longer-range economic policies. With longer-term payouts, they are riskier for those who arent as wealthy.

Bush has stressed the importance of job training and re-education for workers whose jobs move overseas as part of the "ownership society" but seems to miss an important change in global economics, one that John Pardon, a lifelong Republican and Ohio resident, talked about with some trepidation earlier this year. Pardon worried that his American middle-class way of life was being threatened and he saw neither political party really working on his behalf.

Read also Chris Nolans column "Outsourcing Hits a Fault Line in Tech."

The Bush administrations attitude toward outsourcing—that it is, in the long run, not only inevitable but probably good for the U.S. economy—is, in this light, something of a gamble.

Its a bet that the innovation and thinking that create jobs will remain in the United States, providing higher-wage work for creative and well-educated thinkers. For company owners and operators, of course, this isnt, in the next few years, a deal. Money—to back companies or pay back investors—can flow across borders; it doesnt follow companies or jobs. People are less flexible.

But in the long run, for folks who run, manage and back companies—from large corporations to small startups—the movement of jobs outside the country isnt good. Thats one reason why Silicon Valley entrepreneurs and others worry that fewer engineers and scientist are coming to the United States to study and work. Its why the Valley led California in passing a $3 billion bond measure to fund stem cell research in the state. That measure will turn Silicon Valley into an international hot spot for high-tech biological research.

But the economies of India and China, like ours, are not static. A trained and skilled work force is on its way to building a more prosperous nation. And more prosperous countries—in this global economy—will be able to raise their own capital, fund their own ideas, and come up with their own products and innovations. In the short term, the United States has the upper economic hand, but many of those who will benefit the most with the changes envisioned by President Bush are those who also worry the most about the consequences.

eWEEK.com Technology and Politics columnist Chris Nolan spent years chronicling the excesses of the dot-com era with incisive analysis leavened with a dash of humor. Before that, she covered politics and technology in D.C. You can read her musings on politics and technology every day in her Politics from Left to Right Weblog.

Check out eWEEK.coms for the latest news, views and analysis of technologys impact on government and politics.

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