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The New Landscape on the Hill:
What Will it Mean for America’s Entrepreneurs?
Now that the dust from
Election 2006 appears to be settled, it is time to take a closer look at
the potential effects of the changed political landscape on America’s
innovation economy. Most of the recent economic news has been pretty
good. American companies are prospering, and the base for innovation and
entrepreneurship is fairly strong. However, long term worries -- related
to trade and current account deficits and a challenged K-12 education
system -- lay on the horizon.
At the highest level, it’s unlikely that Democratic control of Congress
will change this pattern very much. While Democrats have assumed the
majority, their margins are not huge – and quite vulnerable to a veto
from the White House. Thus, Congress will be unlikely to introduce huge
shifts in policy in the coming two years. However, they will be able to
get new issues and ideas on the table via Congressional hearings, and,
as we will see below, they will also likely generate some changed
policies and priorities in targeted areas.
Key Committees will have new leadership with many new ideas and
proposals. Among these new leaders are:
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Appropriations, Senate:
Sen. Robert Byrd (D-WV)
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Appropriations, House:
Rep. David Obey (D-WI)*
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Banking, Senate: Sen.
Chris Dodd (D-CT)
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Commerce, Senate: Sen.
Daniel Inouye (D-HI)
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Energy and Commerce,
House: Rep. John Dingell (D-MI)*
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Finance, Senate: Sen.
Max Baucus (D-MT)
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Science, House: Rep.
Bart Gordon (D-TN)*
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Small Business, House:
Rep. Nydia Velazquez (D-NY)*
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Small Business and
Entrepreneurship, Senate: Sen. John Kerry (D-MA)
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Ways and Means, House:
Rep. Charles Rangel (D-NY)*
*Expected Chairman.
House Chair positions have not yet been announced.
We can also expect a
continued pattern of innovation being generated by the nation’s
Governors. As
a
recent Inc.com article notes, entrepreneur-friendly governors
and candidates did quite well in November. In fact, the four governors
who received Inc.’s top rating for entrepreneur-friendly policies
won their races by an average of 21.4%.
In Congress, we’ll likely see some interesting proposals, and new
initiatives to support America’s entrepreneurs. Earlier this year, House
Democrats announced an
Innovation
Agenda that would double spending on R&D, expand broadband access,
train more scientists and engineers, and provide more support for small
businesses. While Senate Democrats have not produced a similar proposal
of their own, Senate Majority Leader-elect Harry Reid (D-NV) has
supported similar proposals in the past. In fact, Reid is the chief
sponsor, along with current Majority Leader Bill Frist (R-TN), of the
National Competitiveness Investment Act of 2006 (S. 3936). This
bipartisan bill has a strong chance of being enacted this year, but, if
it fails to pass, it should have strong momentum in 2007. It calls for a
doubling of the research budgets at key Federal agencies (e.g. NASA,
NSF, NIH, and Energy), creates a new advanced research agency (modeled
on the Pentagon’s DARPA) at the Energy Department, and includes a host
of steps to improve the quality of science and math education in the US.
Within these broad contours, we can expect Congressional Democrats to
bring new perspectives to several key issue areas:
Research and Development:
Democrats are likely to continue and perhaps expand on recent trends of
increased Federal investments in major R&D programs. These efforts are
likely to be somewhat non-controversial. The same cannot be said for
expected Democratic efforts to revisit debates on stem-cell research and
research into global warming.
Immigration:
While President Bush’s push for immigration reform fell short, the issue
will not be going away soon. For the technology community, the main
issue concerns H-1B visas which allow skilled foreign professionals to
work in the US for up to six years. At present, H-1B visa quotas are
inadequate and efforts to expand the number of visas have been rebuffed
by House Republicans. With new Democratic leadership, the prospects for
raising the current H-1B visa ceiling seem to be improved.
Technology Development Programs:
Democrats have traditionally been strong supporters of technology
development programs, such as the Commerce Department’s Manufacturing
Extension Partnership (MEP). President Bush has called for MEP’s
elimination on numerous occasions, but Congress has rebuffed him each
time. We can expect these programs to have an easier budget path over
the next two years.
Sarbanes-Oxley:
Incoming Speaker Nancy Pelosi (D-CA) has publicly criticized the
Sarbanes-Oxley law for its burdensome effects on business. Her position
should ensure that efforts to reform Sarbanes-Oxley, especially as it
affects smaller firms, will not disappear from the Congressional radar.
Taxes:
Democrats have roundly criticized President Bush’s tax cuts, but it is
unlikely that they will produce a tax cut repeal. The tax cuts expire in
2010, and it may be easier for Democrats to simply accept the status
quo. Any effort to repeal the tax cuts would likely trigger a major
legislative battle as well as veto threats from the White House.
However, Democrats are expected to a make an early and major push at
reforming the Alternative Minimum Tax (AMT).
Health Care:
At present, it appears that Congressional Democrats are focusing on the
issue of reducing the number of uninsured workers in the US. With this
focus, it appears unlikely that various proposals to promote Association
Health Plans (AHPs) can be enacted. Congress has failed to enact such
legislation on several occasions in the past few years.
Trade:
It’s pretty clear that Congressional Democrats will be less pro-free
trade than their Republican predecessors. Yet the last Congress was not
quite a bastion of free trade sentiment with continued concerns over
offshoring and other issues pushing a tougher stance by many on trade.
In reality, positions on free trade do not split on clear partisan
basis. But, we can expect a slightly colder reception to various free
trade agreements than might be found under a Republican-led Congress.
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