AeANET : AeA Executive Summary on a President-elect Obama Administration

Now that President-elect Barack Obama has completed his technologically savvy and highly-disciplined national election campaign, America and the world wait to see how he will govern. What will his presidency mean for the technology industry? More broadly, amid an economic meltdown and a variety of other strains including two wars, will Obama be able to transition effectively from a highly innovative, inclusive, and optimistic campaign to the actual process of governing? And, will this be the first post-partisan presidency after decades of counterproductive partisan dysfunction and government gridlock? While much is still uncertain, the theme of change that permeated the campaign will likely continue into the new administration.

Based on what the Obama campaign has said, this could be the most pro-high-tech president we have ever seen. An early indication has been the contact AeA has had with the transition team. Tom Kalil, the current leader of the Science, Technology, and Innovation Transition Task Force and one of the most respected members of the Clinton administration technology staff, met with more than fifty high-tech leaders at AeA�s Washington, DC headquarters along with three other members of his task force. Kalil was visiting AeA for an initial �listening session� during which he solicited comments on the industry�s policy agenda. He indicated his interest in a continuing dialogue with AeA and ITAA�s member companies throughout the transition and into the new administration. Kalil asked us to serve as the single point of contact for the transition team as the team communicates with the high-tech community.

Christopher W. Hansen, President & CEO, AeA; Thomas Kalil, Obama-Biden Transition Team; and Phil Bond, President & CEO, ITAA (L-R)

50+ high-tech and academic industry leaders meet with members of the Obama-Biden Transition Team at AeA

2. The Impact of Broad Economic Stimulus Plans on Tech

The President-elect is preparing a massive stimulus and infrastructure improvement program. The tech industry could see large federal expenditures in a variety of areas for which this Association has also advocated on behalf of its members. Among those proposed as part of a stimulus plan are broadband deployment, energy efficiency, and electronic medical records.

In order to extend broadband access, Obama is proposing a �no child left offline� plan to wire schools. To promote energy efficiency, he is proposing to decarbonize the U.S. economy with the �most sweeping effort to modernize and upgrade public buildings that this country has ever seen.� Lastly, he is proposing a campaign to ensure that �every doctor�s office and hospital in this country is using cutting edge technology and electronic medical records.�

The new administration will almost certainly need to deploy tax increases to raise federal revenues to offset this new spending. However, those tax increases may be delayed until the current economic situation improves. Ultimately, the major questions are how Obama will prioritize his initiatives and whether he will have the resources to follow through on what he wants to do on the scale he wishes.

The following are specific initiatives the campaign indicated it would pursue after taking office and the initial indications of how these will be addressed by the new administration.

Information Technology: Proposed greater deployment of next generation broadband, network neutrality, and appointment of the nation�s first Chief Technology Officer. The effectiveness of a federal CTO, however, will depend on adequate funding and a substantive mandate endorsed by the president himself.

Government-Funded Basic Research: Proposed doubling government funding for National Science Foundation, National Institute of Standards and Technology, National Institutes of Health, and the Department of Energy�s Office of Science over the next 10 years. Given the bailout and stimulus packages and other priorities, this will be a heavy lift in the coming months.

Health IT: Proposed investing $10 billion over the next 5 years to move the U.S. health care system to broad adoption of standards-based electronic health information systems. The new administration and Congress will almost certainly do something on healthcare. Health IT is the least expensive �fix� that is on the table, and it is likely something will happen on this.

R&D Tax Credit: Supported making it permanent. Everybody for the past 10 years has publicly supported making it permanent, but it has not happened. An extension of 2-5 years is more realistic.

Capital Gains and Dividends: Supported raising the top capital gains and dividends tax rate to 20% from 15% for people making more than $200,000 ($250,000 for families). In recent weeks, Obama has appeared more likely to allow the reduced rate to expire at the end of 2010, as opposed to repealing the current rate.

Small Business: Supported making investments in small businesses and start-ups exempt from capital gains tax. The prospects for this proposal still are not clear.

Personal Income Tax Rates: Supported raising the top 33% and 36% income tax rates to 36% and 39% respectively. (Limited to individuals with adjusted gross income of $200,000, $250,000 for couples.) Right now, it does not appear that Obama will immediately raise personal income taxes. Instead, it appears likely that he will simply allow previous tax cuts to expire in 2010.

Trade: Opposed free trade agreements with Colombia and South Korea; proposed possible renegotiation of NAFTA. Trade may get little focus from the new administration until later in 2009. Obama appears to be skeptical about the currently negotiated free trade agreements. He purports to be a free and fair trader, but exactly what that means is not yet apparent.

China: Expressed willingness to crack down on China for manipulating its currency and then-Senator Obama co-sponsored this type of legislation in the Senate. Although there is concern that this would hurt the U.S. economy, there are still many proponents for penalizing China.

Energy: Proposed creating 5 million new jobs by investing $150 billion over the next 10 years to stimulate private efforts to build clean energy. It is likely Obama will announce a new energy policy early in his administration with clean energy as a key element.

Card Check: Supported national unions� top legislative priority which allows union organizers to deny workers secret ballots. This seems to be a high domestic priority for the new administration. Legislation passed the House last year. With a wider Democratic majority in the Senate, it has a stronger possibility of becoming law but will be highly contested.

It is not yet clear whether Obama will spend political capital early on to accomplish his goals quickly or whether he will move more cautiously to ensure the success of initiatives and maintain political capital over time. However, the transition that is currently underway appears to recognize the reality that a grace period after the election is not completely permissible in our current state of affairs. This means the President-elect must defer to the Bush administration when appropriate but also must clearly indicate what early actions need to precede the inauguration. Obama�s request to Congress to have a stimulus package prepared that can be signed into law immediately after the inauguration is such a case in point.

The President-elect�s early Cabinet and staff selections are pragmatists rather than ideologues. These choices demonstrate comfort with people who have substantial profiles and independent ideas such as Hillary Clinton or Robert Gates. Although the rollout of the new administration�s team and policy direction is still unfolding, the focus thus far has been on individuals with the ability and experience to govern, not individuals who possess any particular ideological purity.

Christopher W. Hansen, President & CEO, AeA; Doug Comer, Intel; Peter Rouse, then-Chief of Staff to Senator Obama and now Transition Team Co-Chair; and Karen Kornbluh, then-Policy Director to Sen. Obama, at AeA in July

Dan Tarullo, then-Senior Advisor on Trade and Economics to Senator Obama's Presidential Campaign, speaks at AeA in April.

On the other side of Pennsylvania Avenue, it should be noted that a new set of challenges for high tech may arise from the incoming Congress. One clear case in point will result from the Democratic Caucus�s decision to remove Chairman John Dingell from his traditional post as Chair of the Energy and Commerce Committee and replace him with Henry Waxman. This change is likely to spur far more active environmental regulation that will be less influenced by economic impact and business realities. Other organizational shifts may occur as well, and we will note them when appropriate.

With close to 60 votes in the Senate, Democratic leaders should be able to pass meaningful legislation for measures that enjoy even a modest level of bipartisan support. The technology industry should be prepared to see legislation move that may not have seen the light of day in previous Congresses.

The Republicans are in disarray. It is uncertain where their leadership will come from and who will emerge in that role. What also remains to be determined is whether Republicans will make a political calculus that cooperation is more in their interest than opposition. This would be a significant departure from recent practice over the last ten-plus years. Obama wants to be the first post-partisan president. He seems serious that he wants to transcend the partisanship that has consumed Washington over the last twenty years. To the extent he is able to do so, much more legislation is likely to be passed, regulations promulgated, and the impact on high tech will be considerable.

In summary, the old ground rules in Washington have been altered. At least for now, change abounds.