Should tax dollars subsidize the Net?

IF MICHAEL JORDAN were caught cashing welfare checks, "60 Minutes" would make it the lead story. If Bill Gates were collecting food stamps, Congress would rush to hold hearings.

Yet when barons of high technology stampede to the federal trough, many politicians consider it business as usual and the media seem to take little interest.


The latest example of high-tech welfare is President Clinton's proposed $300 million "Next Generation Internet" initiative. The administration's aim is to create an Internet that is more reliable, secure, affordable, and very much faster than what we have today.

Laudable goals, to be sure. But who honestly thinks a government program holds the key to a better Internet?


Sorry history

After all, the government has a long and sorry history of "investing" in new technology. The administration recently admitted its own Internal Revenue Service wasted $4 billion attempting to modernize its computer systems. And after 10 years and billions of dollars, the government-run air-traffic-control system is still the nation's largest user of 1960s-era vacuum tubes.

Are these the folks we want "investing" in the next generation of the Internet?

Once the government creates this program, it is unlikely Congress will ever hold hearings to examine the unintended consequences. Two such consequences come to mind.

First, because the program requires "matching grants" from the business community, only large companies with the cash to invest will benefit, while smaller businesses will be frozen out.

Second, the American people will end up paying for Internet research twice -- as taxpayers and consumers. Americans will pay once as their tax dollars subsidize the development of new Internet products, and they'll pay again when they purchase the products themselves.

Politicians justify spending our tax dollars on such projects by claiming that much of the necessary research is too long-term or high-risk for the private sector to fund. With the Internet, the administration seems to believe technology firms have little interest in making the medium faster and cheaper. In reality, there's nothing these firms want more, at least if they care about making a profit.

Indeed, success in the private sector often depends on long-term investment and risk-taking. That's why within the past five months Microsoft has spent more than $1.5 billion to acquire stakes in companies focusing on tomorrow's potential breakthrough technologies. There's no immediate benefit, no guarantee of success. But Microsoft and other private-sector leaders know that to stay on top they must look at the long term and tackle the so-called "high-risk" areas head on.


Fortunately for taxpayers, some members of Congress recognize the absurdity of subsidizing the Internet. The House and Senate shot down $35 million the Energy Department was supposed to receive for the "Next Generation Internet" project in fiscal year 1998.

Appropriators said the administration could "not explain the need for a multimillion-dollar government program at a time when hundreds of private companies are investing billions of dollars on hardware and software innovations." To wit, IBM, Bell South and Microsoft have each developed next-generation Internet projects, and long before the Clinton administration offered to shower the private sector with $300 million in taxpayer money.

Net gains

But other lawmakers weren't so tight-fisted. In the end, the Internet initiative walked away with $65 million in fiscal year 1998 through appropriations to the Commerce Department, Defense Department, NASA and the National Science Foundation, all of which will dutifully funnel the money to private companies.

The government should keep its hands off an industry that is arguably doing as well as any in the history of our nation.

While it is true that the Defense Department created the Internet, it is also true that the Defense Department and the rest of the bureaucracy proved incapable of harnessing the power that lay right beneath their noses.


Now, years later, after the private sector has done wonders with what the government could only marvel at, the Clinton administration wants to get involved again.

Congress should pull the plug on the project before it is too late.

Geoffrey Freeman is a research assistant at the Heritage Foundation, a Washington-based public policy research institute.

Pub Date: 9/23/97