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Why High Tech Has Fallen Off Washington's A-List

During the high-tech boom years, when Washington discovered campaign gold in Silicon Valley, lawmakers competed to play Santa to computer and software companies. But that was then. Except for a two-year extension of the moratorium on new Internet sales taxes, the bills that Silicon Valley got behind and that got passed in 2001 were mostly mainstream initiatives, like mandatory tests for elementary school kids.

Things aren't likely to improve anytime soon. The tech-related issues that Washington will debate in 2002--from stoking demand for high-speed data networks to protecting online privacy--are complex and divisive. And amid election-year politics, techies will have a tough time with their nonpartisan agenda. "We're not going to get a lot of `at bats' this year," says William T. Archey, president of the American Electronics Assn.

Not a very upbeat assessment, but a realistic one. The tech-led downturn has dimmed the industry's rock-star status, and fiscal reality has forced some tech titans to scale back their Washington presence. Faced with a recession, once-fawning lawmakers are more interested in macroeconomic stimulus than just lending Silicon Valley a hand. "Leadership is favoring bills that have broad business appeal," says Representative Bob Goodlatte (R-Va.), a tech champion.

What's more, the September 11 attacks elevated security over economic concerns, scuttling an industry-backed move to liberalize export controls on computers and software. The FBI and Pentagon say the curbs are needed to keep sophisticated equipment out of the hands of terrorists. House leaders pledge to revisit the issue soon, but opposition remains stiff.

Besides that, the ascendancy of George W. Bush has been a mixed blessing. A proposal to allow faster write-offs of computers and other capital-equipment purchases--and thus stoke demand--is part of the bogged-down stimulus package. But the Clintonites' unabashed adulation of the geek set has given way to a muted admiration from the new team. "The Clinton-Gore Administration cared about technology out of proportion to its political importance, and this Administration doesn't," says tech lawyer Stewart A. Baker.

Broadband, the techies' high-profile issue for 2002, is tricky, too, though not for partisan reasons. "Just as putting a person on the moon was a national goal, getting broadband to all Americans and small businesses should have the same effort behind it," argues Cisco CEO John T. Chambers. He and fellow execs are seeking incentives to rev up demand for high-speed Net service, currently used by only 11% of U.S. households. Wider use of broadband could create a market for movies-on-demand and other high-bandwidth applications. That, in turn, execs say, will trigger new sales of PCs and other gear. Trouble is, there's no consensus yet on a policy prescription.

On other fronts, tech is playing defense. Companies fear privacy legislation will limit their ability to market to Net customers. And hardware makers are aghast at Senate Commerce Committee Chairman Ernest F. Hollings' (D-S.C.) push to mandate technology to thwart copying of movies and music. "We don't want the government saying we have to have certain kinds of technology in computers," says Ralph Hellmann of the Information Technology Industry Council.

With $5 million donated by software and Net companies and their execs in the first nine months of 2001, high tech is still ponying up the cash that buys access. But as techies are discovering, money alone won't buy happiness in Washington. President Bush's economic stimulus plan may be about to lose a key Senate backer. The top Republican on the Finance Committee, Iowa's Charles E. Grassley, says if Congress can't pass a package by Feb. 1, it ought to just forget it. "As time goes on, there is less need for it and more danger in passing it," Grassley says. Even without the plan, he predicts, an extension of unemployment benefits and restoration of special interest tax breaks that expired on Dec. 31 will be approved. While Ken Lay may disagree, it often pays to have friends in high places. Just ask actress Bo Derek. The onetime starlet, now a pet-care-product entrepreneur, has been picked for a coveted six-year term on the Kennedy Center's governing board. Derek, a rare Republican in Hollywood, has developed a close friendship with Deputy White House Chief of Staff Josh Bolten. Derek accompanied Bolten to the Kennedy Center Honors gala on Dec. 2. The drug industry has been fretting that without a Food & Drug Administration commissioner in place to plead its case, the FDA will lose out in Bush's upcoming 2003 budget. But sources say the agency is actually slated for the "biggest increase in years." FDA officials credit Health & Human Services Secretary Tommy G. Thompson with realizing that the agency's budget hasn't kept up with its new responsibilities, such as protecting the food supply from terrorists.

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