House Democratic Leaders Defy Bush on Aid for Tech Firms

The House Democratic leadership, sensing that President Bush may be vulnerable on the issue, Wednesday endorsed a proposal for a sharp increase in federal aid to high-technology companies faced with growing overseas competition.

The House Democrats listed as a top legislative priority a plan to allocate $400 million during the next three years for grants to match funds spent by private technology firms to develop new products or manufacturing techniques.

The legislation is also backed by Republican lawmakers. In fact, it recently was approved 46-0 by the House Science and Technology Committee and is expected to be passed soon by the House with bipartisan backing.

The Bush Administration, however, has said that it opposes the proposed increase in funding for the Advanced Technology Program. The Administration has asked Congress to appropriate only $10 million for it.

The technology aid proposal is the centerpiece of a wide-ranging Democratic action agenda intended to make the private sector more competitive. The Democrats hope that the package will attract support from business interests that otherwise tend to line up with Republicans.

The Democratic legislative agenda includes a proposal that would earmark $80 million a year for defense-related projects to help firms make the transition to production of civilian goods as military spending declines.

The package also would increase grants for biotechnology research by about $100 million a year and set up a $125-million fund in the Export-Import Bank for loan guarantees to U.S. companies to promote exports of high-tech products to Eastern European democracies.

Other parts of the package would require the President to submit a five-year plan to support high-performance computer technology, change the law to allow joint ventures in production and take regulatory steps to encourage development of high-definition television.

House Republicans, in a response to the Democratic leadership, said the program is far too modest and called for adoption of massive new tax breaks to encourage private capital formation without the government setting high-tech priorities.

“The Democratic Party yells loud and does nothing,” said House Minority Whip Newt Gingrich (R-Ga.) in a news conference less than three hours after the rival party’s plan was unveiled by Speaker Thomas S. Foley (D-Wash.) and other House Democratic leaders.

But the GOP lawmakers acknowledged that they had differences with the White House over the federal role in assisting U.S. firms to compete against high-tech companies in Japan, Europe and elsewhere that have taken a large share of the American market.

“We would probably, as House Republicans, be more intense and more aggressive,” Gingrich said in discussing differences with the White House on technology issues.

Earlier, House Majority Leader Richard A. Gephardt (D-Mo.) said Congress had to act because the Bush Administration was indifferent to the issue.

“This Administration has no strategy for dealing with high technology or the global marketplace,” Gephardt said. “And this failure means we’re losing. It’s time that government offered a hand of cooperation to this important industry.”

Democratic congressional sources said the overall legislative package had been watered down significantly during the five months it was under consideration by a task force headed by Gephardt, and Republicans scoffed at the proposals as “run-of-the-mill.”

Rep. Tom Campbell (R-Palo Alto), who represents the Silicon Valley area with its heavy concentration of technology firms, said Republicans favor a tax credit for research and development, a cut in capital gains taxes and elimination of double taxation of corporate dividends.

“Capital formation is the key,” Campbell said.

Another Californian, Rep. Norman Y. Mineta (D-San Jose), who endorsed the Democratic program, agreed that more should be done, adding: “To be successful over the long term, we must establish a permanent research and development tax credit. . . . We must also reduce the cost of long-range, productive investments--and that means a lower capital gains tax.”

Campbell, who said he supports federal aid to high-tech firms because of their large capital costs and high risk, said the funding decisions should be made by scientists or engineers and not by Congress. But, he said, the partisan rhetoric would subside and added: “My hope is that after this, we can work together.”