What Has President Obama Done for Silicon Valley?

President Obama’s appointments of Silicon Valley outsiders were only the first indications that his administration would be less than friendly to the high-tech industry, despite campaign promises. Since then, it has shown an inclination toward tight regulatory practices and away from transparency.

President Obama’s inability to fill even half of his major political appointments is in the news this week, but the appointments he’s already made are causing some in Silicon Valley to question whether they supported the right candidate. The president chose non-Silicon-Valley candidates for the nation’s two major technology posts.

In March, Obama appointed Vivek Kundra of Washington, D.C., as the nation’s chief information officer (CIO).

In April, he appointed Aneesh Paul Chopra, then Virginia’s secretary of technology, as his choice for chief technology officer (CTO).

The president said that Kundra and Chopra would be “responsible for setting technology policy across the government.”

Tech Innovation at Risk
The decision to overlook Silicon Valley drew headlines like TechCrunch’s ectnews.com “Obama Spurns Silicon Valley Vets” and Slashdot’s “Obama Appoints Non-Tech Guy As CTO.”

Some digerati, such as Tim O’Reilly, openly supported the president’s choices, but many were silently peeved.

Of course, in the larger scheme of things, what really matters is how government policies shape the future of technology innovation in America. Unfortunately, things don’t look so great on that front either.

Consider Julius Genachowski, Obama’s pick for Chairman of the Federal Communications Commission More about Federal Communications Commission. Genachowski’s entrepreneurial experience as an executive with New York-based IAC (Nasdaq: IACI) More about IAC/InterActiveCorp spurred some optimism in the Valley. But now it appears he might be angling to grow government, not innovation.

“Earlier this month, the FCC sent a letter of inquiry to Apple (Nasdaq: AAPL) Apple Store Discount on Office 2008 for Mac – Home and Student Edition . Click here. More about Apple, a company that the agency has no statutory authority to regulate,” noted Daniel Ballon, a policy fellow at the San Francisco-based Pacific Research Institute.

This action “sends a message that the FCC’s reach is expanding beyond traditional telecommunications carriers,” Ballon argued, “and will impact every company and entrepreneur who interfaces with the Internet.”

Hostile Regulatory Environment
When government gets more involved in the day-to-day activities of any business, it is a bad sign. Those who doubt that rule might ask Microsoft (Nasdaq: MSFT) More about Microsoft how much time and money government intervention has directed away from research and into lobbyists’ and lawyers’ fees. On the antitrust issue, Silicon Valley companies like Google (Nasdaq: GOOG) More about Google are starting to worry that they could be the next target.

Christine Varney, Obama’s pick to lead the DoJ’s antitrust division, rescinded guidelines limiting scrutiny of high-tech firms, leaving a void that creates much uncertainty. Yet, as troubling as that may be to large companies, “Obama’s appointment to head the FTC, Jon Leibowitz, has Silicon Valley’s Web 2.0 entrepreneurs in his crosshairs,” Ballon said.

Chairman Leibowitz has been a vocal critic of online advertising practices, warning Internet companies earlier this year that “a day of reckoning may be fast approaching” and, according to Ars Technica, “he suggested that the FTC may have to use its subpoena authority to force companies to cough up information requested by the agency.”

With the regulatory environment looking increasingly hostile, one can understand why Valley denizens might gasp with disbelief at the president’s proposal to impose U.S. taxes on overseas profits.

“It would be like an earthquake for high tech,” said Carl Guardino, chief executive of the Silicon Valley Leadership Group.

Aiming a tax grab at productive companies growing international markets while bailing out decrepit industries at home doesn’t make a lot of sense. Silicon Valley entrepreneur and investor Peter Thiel put it this way: “With its massive wealth transfers to the unproductive sectors of the economy, the government is becoming an increasingly reactionary force in American society.” The administration’s offer of subsidies to “green tech” firms fails to make up for this mismanagement.

Transparency Must Be Taken
The Department of Energy recently announced that it will lend US$465 million to Silicon Valley-based Tesla Motors to build an electric sedan and the battery packs needed to propel it. This is great news for Tesla, but such intervention distorts markets, making supply less in sync with true demand. How did a seemingly pro-tech administration move toward such a reactionary path?

“The use of tech was at the heart of Obama’s campaign,” explains Hoover Institution Research Fellow Bill Whalen, “but a tech agenda was not.” If that is true, then Silicon Valley is in for a very rude awakening.

Even the administration’s commitment to using technology has stalled. For instance, the president promised that “when there is a bill that ends up on my desk as a president, you the public will have five days to look online and find out what’s in it before I sign it, so that you know what your government’s doing.” Of course, this promise has been broken, and only one bill (the DTV Delay Act) has been exposed to sunlight so far.

Jim Harper, a Cato Institute scholar and founder of Washington Watch, is disappointed in the slow movement of the Obama administration toward greater transparency, but he’s not surprised.

Transparency “won’t be a gift from government,” Harper said. Rather, “it is something we have to take from them.”

That is not an easy task, but perhaps it’s one the tech community’s data management can help to achieve.

So far, president Obama has failed to provide an embattled tech sector with any solutions — only with a new problem to be solved. Silicon Valley needs to figure out how to move policy toward a more tech-friendly path before things get worse.

Sonia Arrison, a TechNewsWorld columnist, is senior fellow in technology studies at the California-based Pacific Research Institute.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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