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Are Proposed IT Budgets Too Low?

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By Allan Holmes March 14, 2007

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Spending on federal IT has slowed in recent years, with the Bush administration proposing a meager 2.6 percent increase in overall federal IT spending for fiscal 2008 over the fiscal 2007 proposal. Whether that is a wise or shortsighted strategy is debatable.

But according to a study released yesterday by the Information Technology and Innovation Foundation in Washington, D.C., investing in IT is the primary way to increase productivity, the level of services provided and innovation when compared to other investments -- by a long shot. For example, IT investments improved worker productivity four to five times greater than investments in non-IT capital, such as buildings and machines, according to the "Digital Prosperity" report. "Policy, according to the study, should focus less on incentives to use certain technology products or help particular companies than on encouraging market forces to hasten the pace of technology-aided change in industries," according to an article on the report in today's New York Times. A disclaimer: Technology companies such as IBM, Cisco Systems and eBay support the non-partisan foundation, but foundation President Robert Atkinson says the foundation does not advocate policies that give tax breaks to technology companies to encourage technology investments.

The study comes at a time when many federal agencies are facing IT budget cuts. Bush's 2008 budget request would cut IT budgets at 11 agencies, including the Homeland Security Department and NASA, as we reported. The Army Corps of Engineers, Interior Department, U.S. Agency for International Development and Office of Personnel Management also would receive cuts of at least 11.6 percent in IT spending, and six agencies, including the Defense and State departments, would receive budget increases below the Congressional Budget Office-projected inflation rate of 2.2 percent.

So, the question is: Is the Bush administration's proposed IT budget cuts and slower spending growth threatening productivity gains, quality of public services and innovation at federal agencies? Let us know what you think.

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