Federal Deficits Will Damage Tech Sector, CEA Chief Warns

Published March 13, 2010

The head of the Consumer Electronics Association was not shy about criticizing rising federal budget deficits and sticking up for free markets when given a chance to publicly chide a member of the Obama administration.

At a public forum at the Consumer Electronics Show (CES) in January, Gary Shapiro, CEO of the CEA, directed his most biting comments toward President Barack Obama’s chief technology officer, Aneesh Chopra, who was in attendance.

“When it comes to innovation, there’s a lot the government can do, and there’s a lot they should not do,” Shapiro said. “The government doesn’t spur innovation or entrepreneurship. The government often gets in the way,” said Shapiro, adding the ballooning annual federal deficits under Obama’s budget plans also threaten the technology industry.

Chopra Responds

Chopra, who was in the room when Shapiro made his comments, acknowledged the CEA chief’s criticisms were warranted.

“We don’t have to agree on every issue, but we can always say we have room for improvement to spur innovation and entrepreneurship,” Chopra told reporters at a press conference after Shapiro’s comments at CES.

“We have to eat our own dog food,” Chopra added. “Gary is right about the federal deficit. We are in an economic crisis, but we are going to tackle it. We have to get this right,” Chopra told journalists.

The U.S. government is making it difficult for skilled workers to come to the United States from China and India, Shapiro said. He also called for a change in trade policy to help American exports compete with goods from other parts of the world that are sold cheaper on international markets.

Stopping Government Meddling

Paul Masson, managing director for Starnet, LLC, a San Francisco, California-based firm that forms and operates research and development partnerships, largely agreed with Shapiro’s comments.

“In our system, our government is not organized to innovate,” Masson said. “Government, from the point of view of the private sector, only collects taxes and divides up power.”

Masson said although the government had a large hand in creating the Internet, it doesn’t need to take additional action to foster fairness and competition.

“In the mid-1980s the government provided the core infrastructure for semiconductors,” Masson said. “The private sector competes on top of that infrastructure. And we have antitrust laws so that one company doesn’t control the standards.”

Calling for More Immigration

Masson agreed with Shapiro’s comments that immigration rules make it difficult for technology firms to bring in and keep the technology expertise the companies need in order to be successful in a worldwide economy.

“We need to be able to bring in sufficient students for our overall needs,” Masson said. “We need to be able to bring in more people for some specialized areas. There is always demand for engineers.

“To maximize innovation, you can’t have a blanket policy on immigration,” Masson added. “The immigration policy has to be more targeted.”

Scott Testa, a professor of business administration at Cabrini College in Philadelphia, agrees tech companies want more immigration. “This is a great concern for technology companies,” he said. “Immigration is probably their No. 1 issue.”

More Regulation Likely

Steven Titch, a telecom policy analyst for the Reason Foundation in Los Angeles, says the federal government is poised to ratify Shapiro’s grim warning by letting the Federal Communication Commission push ahead with net neutrality rules regulating the Internet.

“That would be truly harmful in the long-term,” Titch said. “But there’s nothing wrong with telecom or the tech industry in the United States right now. It’s stayed healthier than the economy as a whole.

“Consumer prices are dropping, and the market continues to develop new devices and applications. Twitter came out of nowhere,” Titch added. “The government didn’t come up with it.”

Phil Britt ([email protected]) writes from South Holland, Illinois.