Obama innovation plan gets mixed reviews

Senate Republican High Tech Task Force Chairman Orrin Hatch on Monday slammed President Obama's same-day speech about innovation, arguing that his words did not match his policy proposals and in several instances "go in exactly the opposite direction." Obama's address at Hudson Valley Community College in Troy, N.Y., was hailed by a range of technology industry stakeholders as a bold step toward achieving economic recovery and maintaining American competitiveness.

Obama articulated his support for making permanent a research and development tax credit, which is proposed in his FY10 budget request, by noting that it would help companies afford the high cost of developing new ideas, technologies and products. "What he failed to say, though, is that he and congressional leaders squandered the best chance in a generation to do this by not including a permanent extension in this year's stimulus bill," Hatch said. "Instead they opted to expand government social programs."

Also among Obama's talking points was the importance of a lower tax rate on capital gains to spur investments in start-up businesses. He said zeroing out the tax for investments in certain businesses is essential because they are engines of innovation and produce 13 times more patents per employee than large companies. Hatch countered that the FY10 budget "calls for a devastating tidal wave in the form of a capital gains rate increase that will totally swamp the small island of tax relief that he has proposed."

Obama spoke in broad terms about U.S. competitiveness but failed to remind his audience that his budget proposal would change international tax rules in a way that would "further tilt the playing field away from our interests and give U.S.-based multinational companies, including high tech firms, which often sell more outside the U.S. than within our borders, an incentive to leave the United States or to sell to a parent company based in another country," Hatch said.

Finally, Hatch took Obama to task for praising FCC Chairman Julius Genachowski's plan to expand network neutrality rules. Obama said the changes would help lay common-sense ground rules to spur innovation. Hatch argued that "further regulation of the Internet will hinder investment and innovation in our nation's broadband networks and lead to more government encroachment into private enterprises."

TechNet, a political network of Silicon Valley CEOs, lauded Obama's strategy saying that now, more than ever, "America's future prosperity is tied to the enactment of policies that foster a culture of innovation and job growth." Business Software Alliance President Robert Holleyman said Obama's vision is aligned with the tech sector's belief that government should "set ambitious goals, create incentives for innovation and investment, create a favorable business environment, and allow companies to compete."