Remember Clinton's Industrial Policy? O.K., Now Forget It

The Republican takeover of Congress may please most business execs, but John L. Simonds is worried. He heads a San Diego consortium that's developing high-capacity computer storage systems. The group--whose members include IBM, Hewlett-Packard, and Eastman Kodak--receives millions from one of the Clinton Administration's favorite industrial-policy efforts, the $431 million Advanced Technology Program. But now, the ATP tops the GOP hit list of technology programs to slash. "That would be a serious blow," says Simonds.

He'd better brace himself: The cuts won't end with ATP. House Republicans, led by incoming Budget Committee Chairman John R. Kasich ef Ohio and GOP Whip candidate Robert S. Walker of Pennsylvania, are taking aim at all Administration efforts to spur U.S. commercial technologies. Other targets include the Pentagon's plan to create a U.S. flat-panel-display industry, a multi-agency program that funds research on supercomputers, and advanced networks and industrial research at the national laboratories. The programs cost just a few billion dollars, but their symbolism is big: They represent Clinton's high-profile attempt to promote high-tech industries.

ENDANGERED PETS. The GOP sees a better way to win Corporate America's heart than through what it calls misguided industrial policy. "Our priority is to create the right climate," explains Representative Sherwood L. Boehlert (R-N.Y.), a key House Science Committee member. By that, he means ending subsidies to develop commercial technologies and using the money for tax cuts and credits for investment and research and development. Although the approach would hurt some R&D mavens such as Simonds, the vast majority of executives prefer the GOP philosophy. "While our industry certainly needs R&D funding, the broader benefits of a capital-gains tax cut would help the economy more," notes Jerry R. Junkins, CEO of Texas Instruments Inc. That's why businesses aren't "going to fall on their swords" to save ATP, says William G. Morin, technology policy chief at the National Association of Manufacturers.

Administration officials admit that saving their pet programs will be tough. "If this is about politics and ideology, we are not going to make a lot of progress," says Arati Prabhakar, director of the National Institute of Standards & Technology, which runs ATP.

Still, the GOP hit squad faces obstacles. For one, proponents are already doing chameleon acts, recasting programs as examples of R&D that the GOP favors: support for basic research and national defense. Take flat-panel displays. A few months ago, companies were trumpeting the Defense Dept.'s $587 million flat-panel initiative as a boon to the U.S. economy. Now, they're labeling it as a national security imperative that allows the military to buy screens at an affordable price.

What's more, GOP ranks are far from united. While ideologues such as Walker want to rub out all traces of industrial policy, moderates such as incoming Senate Budget Committee Chairman Pete V. Domenici back government-industry collaborations, particularly when they aid the vast national laboratories in his state, New Mexico. Also, some programs on the hit list, such as the effort to develop advanced computers and networks, really do involve the kind of basic research the GOP favors. "Some of my colleagues are not as conversant as we would like them to be on these subjects," admits Boehlert, who backs the computer initiative.

That's the kind of high-tech program that should survive, so long as it wears the right set of policy clothes. But there's no avoiding a harsh reality for Clinton: His great industrial policy experiment is heading for a dramatic slowdown.