McCain’s Approach to Technology Policy Serves Public Better

Published August 28, 2008

When Sen. John McCain said recently that he used “a Google” to help screen vice presidential nominations, it was obvious the Republican presidential candidate is hardly tech-savvy. But he nonetheless has sharp advisors who have steered him toward wise, market-oriented technology policies.

Democratic presidential nominee Sen. Barack Obama–the hip, self-confessed Blackberry addict–has a better personal understanding of how the Internet is intertwined into most Americans’ daily lives. But it doesn’t necessarily follow that his technology agenda would best serve growth and innovation on the Web.

The centerpiece of McCain’s plan is a 10 percent tax credit for wages a business pays to employees dedicated to high-tech research and development. Obama also embraces this proposal. While such tax breaks are typically subject to annual renewal by Congress, McCain proposes to make the tax break permanent. Such a policy would end the days of R&D tax breaks being a regular bargaining chip on Capitol Hill.

An even better approach, however, is McCain’s plan to cut corporate taxes to 25 percent and set the capital gains tax rate at 15 percent. Tech firms, after all, know better than politicians where to invest their capital.

Obama, meanwhile, would impose higher corporate tax rates, ultimately draining capital away from the kinds of investments that will help American tech companies compete in the global market.

McCain also deserves credit for refusing to pour taxpayer money into promoting municipal wi-fi and broadband programs–a consistent drain on the public coffers. His tax breaks aimed at prodding the private sector to enter under-served communities are not ideal, but they are more sensible than direct corporate welfare.

McCain’s plan also solidifies his opposition to Internet taxes and indicates he would resist the urge to allow Congress to referee the net neutrality debate. He prefers a more hands-off approach, letting Internet service providers–and the market’s response to their decisions–dictate how content is sent over the Web.

It is difficult to say how dedicated McCain is to this principle, however, since he says he’d allow the Federal Communications Commission to mediate disputes. He should be firmer about keeping the government out of companies’ decisions about managing their network traffic.

Obama’s plan, by contrast, leans heavily toward government management of the Internet, which will slow innovation as businesses tiptoe through an expanding federal briar patch of regulation and oversight.

An Obama presidency would usher in the nation’s first “chief technology officer,” which is a reasonable idea on its face. The federal government notoriously lags behind the private sector in applying technology to communicate within and among various agencies. The idea would have a greater chance of success if Obama could attract a successful entrepreneur from the private sector for the post, instead of counting on a lifelong bureaucrat to tackle the job.

The Democratic hopeful, however, sends up red flags with his pledge to “step up review” of mergers among technology companies and “take effective action to stop” those the government determines would “harm consumer welfare.” The market is best positioned to determine what’s good for consumers, as they vote with their wallets by quickly rewarding good products and services while punishing bad ones.

Obama’s plan to encourage “public/private partnerships” in spreading and improving broadband access is simply a bad idea. It would only encourage the kind of poor business decisions that have left the “public” side of such partnerships increasingly holding the bag as the private partners move away from markets that are not yet viable.

Voters can certainly draw contrasts between the technology approaches of each candidate. For the sake of the healthy growth of the communications sector and the proper stewardship of public funds, McCain’s market-oriented approach is by far the better bet.

James G. Lakely ([email protected]) is managing editor of Infotech & Telecom News, a publication of The Heartland Institute in Chicago.