How Might A Clinton Presidency Affect Silicon Valley?
Editor’s Note: Today’s post is Part 2 of a two-part series that examines how the U.S. presidential race could affect Silicon Valley innovation, an ecosystem that’s affected by economics, immigration policy, international relations, and other factors.
These positions were publicly stated by each campaign; instead of characterizing proposals as good or bad, we’re merely speculating on their impact.
Part 1 looked at the potential outcomes affecting Silicon Valley from a Trump presidency; today, a look at Hillary Clinton’s Tech & Innovation agenda.
Hillary Clinton’s positions on innovation and tech are well-documented and generally reflect prevailing industry attitudes. This is likely because the candidate’s campaign team includes former government officials with tech backgrounds, as well as executives and entrepreneurs. Today, we’ll dig into the details, and the exceptions.
1. Use Federal Grant and Loan Programs To Jump-start Startup Ecosystems
To promote greater regional, gender and ethnic diversity in startup funding, Clinton’s plan calls for a national network of “innovation clusters and entrepreneurship hubs” in “underserved areas” that will support 50,000 entrepreneurs.
To free up capital where VCs are scarce or unknown, she’d double spending for Treasury’s Community Development Financial Institutions Fund, which boosts growth in “distressed communities” and the State Small Business Credit Initiative, a $1.5 billion fund. Clinton’s plan would also extend the New Markets Tax Credit, a mechanism created to boost capital flow that’s set to expire in 2019.
Analysis: These efforts could stimulate more regional startup growth, but a President Clinton would need to secure majorities in the House and Senate to fund these programs.
2. Taxes: Eliminate Carried Interest Deduction, Implement “Buffet Rule”
Like her opponent, Clinton has called for an end to the Carried Interest Deduction, which taxes investment proceeds at 23.8%, instead of the higher rate that’s levied on personal income. Clinton said she’ll ask Treasury to make the change if Congress fails to take action, a nod to the fact that Democrats have made multiple failed attempts to eliminate the deduction in the past.
Clinton’s tax proposal also calls for a 4% “fair share surcharge” for those earning $5 million/year, as well as an implementation of the Buffett Rule, which would make sure anyone with an annual income over $1 million paid an effective tax rate of 30%.
Analysis: As with many of her proposals, it could only become law with Congressional Democratic majorities. If enacted, VCs and their partners would receive a smaller slice of payouts; whether that would stifle innovation is anyone’s guess.
3. Defer + Forgive Student Loans To Incentivize Young Entrepreneurs (And Startup Workers)
Clinton hopes to coax more startup founders into the marketplace by giving them the option to freeze payments and interest on federal student loans for up to 36 months “while they get their new ventures off the ground.” To help those founders build teams, she “will explore a similar deferment incentive” for “early joiners, such as the first 10 or 20 employees.”
Founders who launch in “distressed communities” or “provide measurable social impact and benefit” could see up to $17,500 of their student loan debt forgiven after five years.
Analysis: Many Millennials cite personal debt as a leading reason for not starting a business. Combined with other existing and proposed programs created to spur investment in underserved areas, these incentives could produce results.
3. Immigration: “Staple” Green Cards To STEM Degrees, Startup Visas For Founders With Funding
To reduce “visa backlogs and other barriers,” Clinton would reform immigration guidelines to offer green cards to students who receive “STEM Masters and PhDs from accredited institutions.”
If an immigrant startup founder can “obtain a commitment of financial support,” her proposals would create a pathway to a green card as long as a founder agrees to “create a certain number of jobs and reach performance benchmarks.”
Analysis: Without Democratic majorities in the House and Senate and/or a new Supreme Court appointee, it’s likely that her proposed immigration reforms would be defeated.
4. Expand Consumer Broadband, 5G + Free Public WiFi
By 2020, Clinton plans to connect every American household to “affordable broadband” by funding existing programs and by ordering agencies in her administration to consider expanding the use of “fiber, fixed wireless, and satellite” connectivity.
She’s also called to step up the deployment of 5G wireless to “enable the Internet of Things and a host of transformative technologies.” Accelerating the rollout of 5G networks will spur the development of “smart factories, driverless cars, and much more.” To support these efforts, she plans to “reallocate and repurpose spectrum for next-generation uses,” which could include bands in use by federal agencies.
Her agenda proposes a new $25 billion Infrastructure Bank that awards grants for projects that bring more people online, whether it’s by reducing regulatory barriers or developing partnerships between the private and public sectors. Grants would also be available for projects that perform technology upgrades in concert with other infrastructure investments.
Analysis: Reallocating existing spectrum and speeding up 5G rollout could open up new opportunities in telecom and consumer tech. If the Infrastructure Bank becomes a reality, it could expand markets for homegrown startups and established players alike.
5. Open Internet Standards, Defend Net Neutrality
Clinton says she’ll press foreign governments to provide its citizens with access to an open internet free from restrictions, forced technology transfers, and censorship. To govern international standards, she calls for “a global community of engineers, companies, civil society groups, and internet users,” instead of “government-led multilateral organizations.”
Analysis: It’s unclear if a President Clinton would be successful when it comes to promoting open standards internationally; any efforts to do so would likely be rolled into trade agreements, which can take years to negotiate and ratify.
6. Cut “Excessive” Patent Litigation, Strengthen IP Protections + Consumer Privacy
The Clinton tech agenda calls for additional reforms to “rein in frivolous suits by patent trolls” and streamlining Patent and Trade Office procedures to ensure “faster review of patent applications and clear out the backlog of patent applications.”
To cut red tape and orchestrate these efforts, she plans to appoint a Chief Innovation Advisor to “spearhead reforms across the government.” Additionally, Clinton would permit the Patent and Trade Office to keep the money it collects from patent applications and reinvest it in day-to-day operations. (Currently, Congress diverts those fees.)
Without going into details, her plan pledges to protect American IP via Export Control Reform and promote policies that will counter Chinese “cyber-enabled economic espionage.”
Her plan would protect consumer privacy via “regulatory enforcement,” but “without stifling innovation.” To gird US cybersecurity defenses, Clinton seeks to unlock additional funding and build more public-private partnerships.
Analysis: Patent litigation reform is a popular idea, but it’s been hard to accomplish to date, as rules vary between regions.
If Clinton can prevent forum-shopping and can bring more transparency to the litigation process, it may provide some industry relief.
7. Encryption: Greater Cooperation Needed, Not Backdoors
Although her campaign hasn’t officially staked out a position on encryption, Clinton said she supports a “Manhattan-like project” that allows the government and the private sector to work together.
In a December debate, Clinton said she opposed efforts to require tech companies to create backdoors for law enforcement, but wants to see more cooperation regarding data-sharing.
“There must be some way,” she said. “I don’t know enough about the technology to be able to say what it is, but I have a lot of confidence in our tech experts.”
Analysis: None of Clinton’s public statements offer any specifics for achieving greater cooperation between tech and law enforcement.
Conclusion: It Takes a Village
Although Clinton offers more specificity, and innovation-friendliness, in her plans for the tech industry, most of her ideas would be extremely unlikely to come to fruition unless she’s also able to secure Democratic majorities in the House and Senate.
Even then, she’d need to retain those majorities after mid-term elections in 2018, which would buck historical trends.
The considerable delta between Clinton’s expressed plans and their execution serves as a reminder of Clinton’s own aphorism, “It takes a village.” Indeed, it takes not only a village but a House, a Senate, and a public to accelerate futuristic promises into actionable reality.
>> Read Part 1, how a Trump presidency would affect Silicon Valley’s innovation ecosystem <<
