Competitiveness Can’t Compete With Politics

Times Staff Writer

To Silicon Valley engineers, the physics of politics is a strange science in which the momentum of a plan to make high-tech companies more competitive is halted by seemingly unrelated debates over the estate tax and illegal immigration.

President Bush unveiled the so-called American Competitiveness Initiative during his State of the Union address in January. Since then, though, the ambitious plan with bipartisan support has been stalled by election-year politics.

The initiative is a top priority for high-tech executives alarmed by the bumper crops of engineers and scientists produced in China and India. After pressing since 2004 for legislation to help the United States maintain its technological dominance, the tech industry thought everything was aligned for action this year.

“These CEOs aren’t Washington guys, and in their minds, when everybody agrees that something’s necessary ... they just can’t see why action is so difficult,” said Bruce Mehlman, executive director of the Technology CEO Council, a public policy association of nine top high-tech chief executives.


The experience has provided another lesson in Silicon Valley’s political education: how the crosscurrents of a high-stakes election can derail even broadly popular legislation.

The 10-year, $136-billion plan would combine increased federal science and education spending with tax breaks for research and easier access to highly skilled foreigners. Leading lawmakers from both sides of the aisle who had already made or were drafting similar proposals enthusiastically vowed their support.

But little of the multifaceted initiative has been approved. And two key components are on their deathbeds.

A proposal to increase the number of specialized visas for technically trained foreign workers has been held up by the partisan stalemate over illegal immigration. Legislation to extend and expand an expired tax credit for research and development costs was derailed this summer, when Republican leaders included it in a contentious plan to cut the estate tax.


“We’re sorry that some of the important provisions got tied up in much more controversial issues,” said White House science advisor John H. Marburger III. “We can’t just give up after a year. The stakes are sufficiently high to view this as a multiyear campaign.”

Tech executives thought the whole package would be wrapped up in months, not years, and warned that the United States risked falling behind in the global economy unless Congress acted quickly.

“We appreciate the broad bipartisan, bicameral commitment ... but we believe the time for words has passed,” the CEO Council -- which includes Mark Hurd of Hewlett-Packard Co. and Paul Otellini of Intel Corp. -- wrote to congressional leaders last week. “It’s time to act.”

There’s little time left, though, as lawmakers rush to hit the campaign trail. Supporters have reconciled themselves to starting over next year.


Lobbyists said the initiative was hindered because its varied components required approval from several congressional committees, a tall task in a shortened election-year session.

“It was a multifaceted approach that had so many pieces it was hard to manage, and it was hard to put one person in charge of managing it,” said Ralph Hellmann, senior vice president for government relations at the Information Technology Industry Council.

Although Bush has given at least seven speeches on the competitiveness initiative since unveiling it Jan. 31, “it just didn’t get the highest-level oomph” behind the scenes at the White House and in Congress, Hellmann said.

Some victories may be coming soon.


The House has passed two 2007 spending bills that included research funding called for in Bush’s initiative, including a $439-million boost for the National Science Foundation. The Senate is trying to finish work on its version of the bills, which also fully pay for Bush’s initiative, and they are expected to be approved by the end of the year.

“We’re on the path to get the money, and that’s what counts,” said House Science Committee Chairman Sherwood L. Boehlert (R-N.Y.). “We’ve got more to do, but thus far, it’s going well.”

That funding, however, is focused on long-term basic research at universities. The two main priorities for the high-tech industry were an increase in the annual number of H-1B visas for highly skilled workers from abroad and a permanent extension and expansion of the R&D; tax credit.

Complaining that there aren’t enough top-level U.S. engineers and computer scientists, the tech industry often looks abroad to fill technical jobs. Those workers must first obtain special six-year H-1B visas. At the peak of the dot-com boom, Congress temporarily increased the annual number of those visas to a high of 195,000.


But in 2004, the limit dropped to 65,000, with an additional 20,000 available to foreigners who earned advanced degrees at U.S. universities. The tech industry says it needs a lot more. The program is in such demand that U.S. immigration officials received enough applications to cover the 2007 allotment in May, more than four months before the fiscal year begins.

The Senate immigration reform bill includes an increase in the annual H-1B limit to 115,000, but the House’s immigration bill has no increase. The broader immigration issue is so contentious that no compromise is expected this year.

The tax credit, which saves U.S. companies about $7 billion a year by offsetting about 6% of their research and development expenses, expired on Dec. 31. Bush’s initiative called for a permanent extension and expansion of the credit, at a cost of $86 billion over 10 years.

Permanence is off the table for now. The tech industry is scrambling simply to get the credit reinstated for two years, which is expected to happen by the end of the year. A short-term extension of the tax credit is popular with both Republicans and Democrats, but that allowed it to be used as a political bargaining chip this summer.


GOP congressional leaders removed it from a bill headed for passage and attached it to another that contained a controversial cut in the estate tax, hoping the tax credit would lure support.

That bill didn’t pass the Senate. The maneuver infuriated high-tech executives and Democrats backing competitiveness legislation.

“It’s not unreasonable to say that when you’re in charge of the White House, the House and the Senate, that you produce the things you promise to produce,” Rep. Zoe Lofgren (D-San Jose), who helped craft the House Democrats’ competitiveness plan in the fall, said of Republicans.

“All they want to do is talk about it. They don’t really want to do anything.”


Sen. John Ensign (R-Nev.) hasn’t thrown in the towel.

He’s been working to combine all the components of Bush’s initiative and other legislation addressing the issue into one bill that could move through Congress more easily. Ensign thinks there’s still enough time to get his last-ditch attempt passed this year.

“I’m hoping,” he said, “it doesn’t get caught up in election-year politics.”