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Election Special-The Real Tech Issues, from Privacy to Copyright to Sales Tax


Hillary Clinton and Rick Lazio were rudely ushered into the Information Age, when the moderator during their second debate asked them their position on federal bill 602p, which she explained was pending legislation that would allow the U.S. Postal Service to charge five cents tax on every e-mail sent. This would make up for all the lost revenue from people who have been e-mailing to each other instead of mailing letters.

Lazio was downright emotional. "I am absolutely opposed to this," he said. "We need to keep the government's hands off the Internet." Clinton was also opposed. "Well, based on your description, I wouldn't vote for that bill," she said. "It sounds burdensome and not justifiable to me."

There was just one problem. There is no such bill. There never has been; "602p" is not even a valid name for a congressional bill. The question was sent into moderator Marcia Kramer of WCBS News from a New York voter and Internet user, who obviously had picked up word of the bill from the Internet itself. It is just one of the many false, dopey rumors that spread quickly in cyberspace and live a vibrant virtual life completely resistant to three-dimensional reality.

The incident says just about everything about where we are as a Tech Nation. Politicians and journalists are no further along on this stuff than the average Internet user.

But rather than see this as disappointing or even scary, think of it as an opportunity, a time for informed citizens to organize into a movement that Stanford Law Professor Lawrence Lessig likens to a kind of "environmentalism for information policy." Just as Rachel Carson's Silent Spring kicked off the environmental movement in 1962, we are now at the beginning of a new journey in building public awareness for the digital age.

There are some real technology issues facing New York and the nation, for some of which the candidates offer positions that are not just off-the-cuff.

PRIVACY AND SECURITY

Amazon.com and other Internet companies have been changing their online agreements with their customers, in preparation for the sale of information they have gathered on them. These agreements are often written in cryptic legalese displayed in tiny type in a small box that prevents a customer from reading the whole document without scrolling down. Most consumers just click 'I Accept' without fully understanding the ramifications of what they are agreeing to. However, in an age when medical and financial information is increasingly stored online, consumers may be taking an unnecessary risk. According to a poll taken by the Internet Policy Institute, over three quarters of New Yorkers want federal laws to restrict what kinds of personal information can be collected online about them.

In June, Clinton addressed this issue at the New York State Broadcasters Association where she announced that she is a strong supporter of individual privacy rights, including the right to know if, how, when and how much personal information is being sold. Clinton pledged to give priority to medical and financial privacy, and protection against identity theft.

Lazio has said relatively little on the issue.

DIGITAL DIVIDE

Government officials, industry leaders, academics and non-profit groups alike worry that rapid changes in information technology, including the introduction of broadband or high-speed Internet access technology, will make the gulf deeper between those who have access to such technology and those who don't. This is commonly called the digital divide. New Yorkers are very concerned about the gap in Internet use between higher and lower income Americans; well over three quarters believe that the government should subsidize Internet access for underserved populations, according to the Internet Policy Institute poll. To this end, the New York City Economic Development Corporation aims to capitalize on the growth of Silicon Alley by promoting high-tech economic development with its Digital NYC initiative, a program that offers affordable, Internet-ready office space in new high-tech districts.

Clinton has shown support for initiatives that help to bridge the digital divide such as increasing spending on new technology for public libraries, increasing economic and educational opportunities for minorities through tax credits and government guaranteed loans to new businesses in economically depressed areas, and increasing specialized technology training programs for teachers. In April, Clinton attended the Women of Silicon Alley Summit where she introduced a new initiative to increase funding for women-owned businesses and teach women how to take their businesses online including the establishment of Women's Business Centers to provide support for these new businesses. Clinton has three proposals in this area that will finance and deploy technology in poor urban and rural areas and help small businesses upgrade their technology. Clinton also proposes increasing funding for wireless research and development for rural areas. She supports a variety of initiatives to increase the technology skills of New York's workforce including doubling federal funding for Regional Skills Alliances (RSAs), helping to foster school-business partnerships, making the Research and Experimentation Tax Credit permanent, and increasing the number of business incubators nationwide.

Lazio does not address the "digital divide" as such. Instead, his efforts in this area focus on technological economic development initiatives that will increase educational programs and employment opportunities. As congressman, Lazio supported the expansion of the term "computer professional" to include high income Internet professionals under the Fair Labor Standards Act (FLSA) so that companies are no longer required to pay overtime to these workers, thereby boosting the economy. He also introduced the Small Business Tax Fairness Act to increase the minimum wage and give tax breaks to small businesses. The Information Technology Industry Council gave Lazio a score of 100 percent for favoring policies that promote economic development and innovation. On the education front, Lazio helped secure funds for a youth computer-training program and for the Center for Emerging Technology at the engineering school of the State University at Stony Brook. He also pushed for U.S. Department of Commerce funding for a new technology incubator, established a high-technology "Working Group" for executives and served as a member of a roundtable of high-tech chief executive officers in Long Island.

E-GOVERNMENT

In the next few years, more and more government services will be available online. We will be able to pay our taxes, register for government programs and maybe even vote online. This year, Arizona became the first state to conduct electronic elections. Currently, the New York City Department of Information Technology is working on improving its e-government interactive services. Right now, New York is testing CityAccess, a kiosk that allow citizens to interact with city agencies and obtain information on job and housing opportunities, food and public assistance programs, adult and child services, health awareness bulletins, parking rules and regulations and senior citizen benefits and entitlements.

Neither candidate has addressed this issue publicly.

INTELLECTUAL PROPERTY AND COPYRIGHTS

Is it legal to 'share' digital music and movies by copying files onto your computer, or are you violating copyright laws? Recently, the Napster case, in which the music industry is suing a now hugely popular site that was started by a teenager to share music with his friends, brought this issue into the public eye. Some have argued that programs like Napster actually increase music sales, and allow some artists to circulate their music to millions of new listeners. But the music industry, afraid of losing billions of dollars, is determined to enforce their copyrights. In general, American law is biased towards the protection of intellectual property and copyright laws, but denial of rights to circulate files could be also seen as an attack on free speech. Intellectual property issues are also important because technology companies compete with one another to patent as many of their inventions as possible. Conflict often arises between companies over the legitimacy of their patents and their resulting position in the market as a result of the patents that they hold.

Neither candidate has addressed this issue publicly.

E-COMMERCE

Similar to mail-order catalogues, on-line purchases have not been subject to taxation unless the seller has offices in the state where the buyer resides. However, many people feel that Internet businesses have an unfair advantage against main street businesses in part because they can offer goods tax-free. The government also has lost substantial income due to the rise of e-commerce. Over half of New Yorkers feel that they shouldn't have to pay sales tax for purchases they make over the Internet, according to the Internet Policy Institute poll.

Neither candidate has addressed this issue publicly. However, we might infer from their comments on the fictional bill 602p that they would both be opposed to taxation of the Internet.

Laura Forlano is a doctoral student studying communication technology policy at Columbia University.

NYC's New Budget and Kids


New York City's new budget, which went into effect July 1st, has real goodies for kids in it, for the first time in years. Some examples:

  • $20 million to the Board of Education to put gym classes back into elementary schools for the first time in 25 years, when they were eliminated during the 1975 fiscal crisis.
  • $25 million for construction of new day care centers
  • $34 million to expand, by 15 percent, the Department of Health's Early Intervention program for at-risk infants.

    "We started in the seventh circle of hell and six or seven years later we're in a city that has a completely different view of its obligation to children and families," says Gail Nayowith, executive director of the Citizens' Committee for Children, a group that lobbies City Hall on behalf of kids. "There's still a long way to go - it's not a perfect situation, but it's significantly better than it was for children and the people who care for them."

    New York City children can thank the robust economy. A large percentage of the $2.9 billion surplus in city coffers comes from income taxes on Wall Street bonuses. Overall, the new City expense budget, which runs from July 1, 2000 to June 30, 2001, increases City spending by $1.3 billion, to over $26 billion, according to an analysis by the Independent Budget Office, a government agency that provides non-partisan information on the City budget to the public. And a sizable portion of the budget is going to children's programs. According to figures provided by the Independent Budget Office and the Citizens' Committee for Children, nearly 20% of the increase, or about $256 million of the City's money, is earmarked for programs that directly benefit children, including tens of millions for summer school, for extended-day programs at the City's lowest performing schools, for new health initiatives and for child welfare services. This tally omits major institutions that kids use extensively but not exclusively, such as the Department of Parks and Recreation, the libraries, and the Department of Cultural Affairs. Kids also come out ahead in the City's four-year capital plan. The plan calls for $24.9 billion in investments over Fiscal Years 2001 - 2004. A whopping 22% of this budget is devoted to school construction. Only a package of environmental protection projects claims a larger share of the capital budget. For all the good news, the budget still contains major disappointments for frontline child advocates. Mike Arsham, for one, wishes the City had done something to address the huge disparity at the Administration for Children's Services between the amount spent on removing children from their homes and the amount spent on services to make removals unnecessary. The City added only $4.4 million for preventive services to a $2 billion child welfare budget. Arsham, director of the Child Welfare Organizing project, says, "Time and time again what we're saying to families is we know what you need, but all we have to offer is foster care placements." And Nayowith was happier before the New York State legislature got its hands on the City budget in late June. The City Council and Mayor Rudolph Giuliani wanted to give low-income New Yorkers a $73 million package of earned income and child care tax credits, but the legislature, which has final say on such matters, rejected the plan. "That would have been the best case scenario," Nayowith says of the budget before the legislature killed the tax package. "You would have seen strategic investment, and then you would have seen, through the tax system, some very enterprising ways of helping families. We're now in the next best scenario, where the mayor and the City Council did a very god job of thinking about the best way to take care of kids."

    Peggy J. Farber is freelance journalist specializing in children's issues. Her reporting on conditions of NYC children has appeared in City Limits Magazine as well as on National Public Radio.

A Trust Fund For America


From The Wall Street Journal, June 16, 2005

By FELIX ROHATYN
June 16, 2005; Page A16

 

Thomas Jefferson committed the U.S. to acquire the Louisiana Territory from France for $15 million. In so doing he doubled the size of the U.S., guaranteed navigation on the Mississippi, and opened the American West. But Jefferson, Madison, and Congress were understandably worried about the size of the commitment. After all, total revenues from import duties then were only $12,280,000. Nevertheless, Congress approved the purchase and the greatest investment in American history was completed when a British bank and a Dutch one underwrote the bonds required to pay Napoleon on schedule. In doing so, they were confirming America's creditworthiness and recognizing the huge present and future value of the assets acquired by America.

Under today's budget rules, the Louisiana Purchase would have been regarded as a budget-buster and the Congress might well have turned it down. As a result, Jefferson might have had to go to war with France to accomplish the same purpose, an alternative that was under consideration at the time. This may be an extreme example, but it illustrates a much-overlooked reality -- borrowing for investments is different from borrowing for recurring expenditure and should be treated as such. This fundamental reality is sadly missing in the current debate about deficits and economic policy.

The partisan crossfire over deficits has two poles -- the one marked out by Vice President Dick Cheney's remark that "deficits don't matter" -- and the position associated with former Treasury Secretary Robert Rubin, that current deficits are unsustainable and that drastic spending and tax changes are urgently required. Both sides are likely to remain firmly entrenched in their respective positions, despite the risk of a dollar crisis if current policies are continued over the next few years. However, regardless of which side of this debate you subscribe to, an even more fundamental crisis could grip our economy if we turn away from the investments that determine our future standard of living. We risk balancing the budget but leaving our long-term growth needs unmet.

Public investment has, by tradition, meant infrastructure: Roads, trains and bridges, public transportation, schools, etc., have provided the private sector with the complementary investments that improve business productivity and improve our standard of living. Largely the product of a federal-state-local partnership, it has been badly neglected over the years. A biannual "balance sheet" provided by the American Society of Civil Engineers, grading the categories of infrastructure from schools to sewers, indicates a need for $1.6 trillion over 5 years to bring national infrastructure up to reasonable standards; that need increases by $300 billion every two years.

In addition to traditional physical capital, an even more important component of our infrastructure is our intellectual infrastructure. In the last two years, Arnold Schwarzenegger has asked his legislature for $3 billion to finance stem-cell research and Jennifer Granholm has asked hers for authority to sell $2 billion of Michigan state bonds to finance research aimed at improving the competitiveness of its auto industry. By doing so, Govs. Schwarzenegger and Granholm are doing what the private sector does daily -- financing R&D. Corporate America does this mostly by equity; the governors, lacking the ability to issue stock, propose to do this with state debt. That is entirely appropriate. We cannot compete with China by making cheaper T-shirts or forcing them to revalue the yuan by 10%. We can only do so by fighting tooth and nail for supremacy in education, intellectual capital and R&D, and both the federal government and the States must play a role in that fight.

In 1865, when Lincoln created a system of land grant colleges (which ultimately totaled 213), he initially provided America with 75% of its engineers; when FDR proposed the GI Bill, he allowed millions of young Americans who would not have had a college degree to become the source of our technical and industrial power. Through the years, the Bill has provided $70 billion in aid to veterans. Can anyone doubt that the investment has been returned manyfold? Eisenhower continued the tradition of federal involvement in infrastructure with the Federal Aid Highway Act, which generated millions of jobs and created a suburban economy now basic to the U.S., with enormous incremental value.

Not much of this found its way onto a federal balance sheet. The budget does not recognize assets; it only recognizes expenditures and liabilities. The Louisiana Purchase would have been reflected by the debt issued to Napoleon and have resulted in a large deficit. Land grant colleges and the education of GIs were treated as simple expenses. It is bad enough to try to deal with large and growing deficits created by ongoing expenditures, but the process will produce even worse choices if important, albeit intangible, assets are carried as liabilities.

A federal capital budget would help correct this problem, but would be so fraught with political difficulties that it is not worth the attempt. Yet there is a recent development which suggests a remedy: the return of the 30-year Treasury bond. Long-term bonds should finance capital assets and their issuance should be dedicated to that purpose. Even longer maturities than 30 years can be envisaged; corporations and governments have issued up to 50-year bonds.

To help deal with our shortage of public capital investment, the Congress should authorize a trust fund of up to $100 billion, to be financed over a five-year period by special 50-year Treasury bonds created for that specific purpose. The fund should be used to co-finance high priority state and local investment programs, including physical infrastructure and projects to create intellectual property. Tight outside controls will be applied to the operations of the fund, and it should also be subject to the federal debt limit.

In addition to cutbacks on infrastructure, globalization puts pressure on domestic employment. This impacts heavily on certain industries like the auto industry, and on the states where they are concentrated. An infrastructure trust fund could be helpful in making investments on a regional basis where appropriate. Creating such a fund would also allow us to redesign programs that deliver these investments, balancing new construction with more effective life-cycle management. A special commission under the aegis of the Center for Strategic and International Studies is rethinking program delivery and should provide new directions soon. In the meantime it is counterproductive to starve long-term investment because of presently excessive recurring spending; over the long run it only makes our economic challenges worse by slowing the creation of national wealth.

Jefferson, Lincoln, FDR and Eisenhower proved that public investment could generate vast returns. The federal budget should be a tool to encourage national investment instead of writing it off. Let us adopt a different perspective of our national wealth and how to increase it.

Mr. Rohatyn is chairman of the CSIS Commission on Public Infrastructure.

 

 



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