Tech To Obama: Fund Innovation, Not Bridges - InformationWeek

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1/7/2009
12:25 PM
Alexander Wolfe
Alexander Wolfe
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Tech To Obama: Fund Innovation, Not Bridges

I've got nothing against infrastructure projects as a way to stimulate the economy. However, it's becoming clear that one constituency's argument is being largely ignored in the rush to money-print our way out of the recession. Namely, the technology industry's. Read on for details of how a legitimate "innovation stimulus" could both drive tech spending and create jobs.

I've got nothing against infrastructure projects as a way to stimulate the economy. However, it's becoming clear that one constituency's argument is being largely ignored in the rush to money-print our way out of the recession. Namely, the technology industry's. Read on for details of how a legitimate "innovation stimulus" could both drive tech spending and create jobs.The most cogent explication of this view was laid out in a Nov. 29 New York Times Op-Ed piece by Nobel Prize-winning economist Joseph Stiglitz. Here's his proposal:

"The government could, for instance, temporarily pay (through a tax credit) part of the cost of new private investment for companies that are spending more than, say, 80 percent of what they have spent annually in recent years on equipment like computers and machinery. This would be a high-powered, low-cost stimulus."

This is a great idea, because it's not a hand-out but rather a sensible (low) tax policy aimed at spurring businesses to purchase the technologies they'll need -- like servers -- to position themselves for both survival now and prosperity when the economy rebounds.

There's an additional angle in another Times piece entitled Innovation Should Mean More Jobs, Not Less. Precisely! The piece makes the point that you can boost employment through deployment of cutting-edge hardware and software. This is something that's been sorely underplayed (I haven't heard it mentioned anywhere) in the current debate about stimulus packages. Here's how Kevin Efrusy of venture capitalists Accel Partners puts it:

"If you invest in a technology that makes something more efficient, the fear is that people will be put out of work. But it's just the opposite. When anything becomes cheaper, we consume a lot more of it. The overall economic effect is, you create and expand entire new industries and employment goes up."

David Thompson, CEO of Genius.com, nails it when it adds: "I think it's great that they want to build more highways and bridges, but if you really want to invest in long-term job viability you need to invest in the innovation economy."

Here's hoping that the increasingly well-intentioned tax incentives taking shape in President-elect Obama's stimulus package include stuff which addresses the technology buy-side imperative, which would do so much to help us innovate our way to a resurgent economy.

Where do you stand on the stimulus package? Please leave a comment below, or shoot me an e-mail directly at [email protected].

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Alex Wolfe is editor-in-chief of InformationWeek.com.

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