January 20, 2018

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The lasting impacts of Trump's first year

By
Issie Lapowsky
WIRED Magazine

(This article originally appeared in WIRED Magazine on January 20, 2018)

As a candidate for president, Donald J. Trump scarcely mentioned the word "tech." One year since he took the oath of office, that hasn't changed much. And yet just a year in, the Trump administration has shaped policy in ways that will radically alter the country's long-term ability to innovate—and often not for the better.

Trump's public relationship with tech titans has eroded, thanks to his positions on immigration, climate change, and more, despite attempts to build up goodwill during his transition to the White House. Meanwhile, the ranks of tech talent within the administration have shrunk, with top positions like chief technology officer at the Office of Science and Technology Policy, left wide open. Senior advisor and presidential son-in-law Jared Kushner did launch the so-called Office of American Innovation, but the tiny shop's primary focus is modernizing government, not enabling innovation across the country.

Considering all this, it might seem like a safe bet that Trump's first year in office would have a minimal effect on the future of innovation in the United States. Yet despite his public focus on border walls and coal country, that's where the policies his administration have actually enacted may end up being most impactful.

Brain Drain
The most pronounced of these changes comes from the Trump administration's immigration overhaul. Just weeks after the inauguration, the president's travel ban on immigrants from predominantly Muslim countries threatened the livelihoods of so many researchers and tech workers who have come to the United States from those places. The threat to academic institutions was so grave, in fact, that it played a critical role in the Ninth Circuit's initial decision to block the ban. "The States contend that the travel prohibitions harmed the States’ university employees and students, separated families, and stranded the States’ residents abroad," the court wrote in its decision. "These are substantial injuries and even irreparable harms."

The Supreme Court later upheld a revised, but still sweeping version of the ban. Since then, the so-called Trump Effect has manifested itself in college enrollment offices across the country, where nearly half of all universities reported a decline in international student applications in an annual report by the Institute of International Education. Overall, international applications declined an average of seven percent in 2017. In Canada, by comparison, foreign applications in 2017 surged by more than 25 percent.

"It could be because of a fear that you're not going to get your visa, or once you get your visa it’s going to be yanked out," says Rob Atkinson, president of the Information Technology and Innovation Foundation. "It could be people just saying, 'I don't like the US anymore. Screw 'em.'"

The fallout extends beyond academia. Last year, the administration halted a popular policy called the International Entrepreneur Rule, which gave non-citizen entrepreneurs temporary protections for starting up their businesses in the United States. A recent court case allowed it to resume, but its longterm future remains in question. The Trump administration has also thrown additional hurdles into the immigration process for highly skilled H-1B visa holders, issuing a record number of so-called "requests for evidence," which require employers to provide additional justification for hiring immigrants. Meanwhile, the administration has floated plans that would prevent the spouses of H-1B visa holders from working.

All of this contributes to a general skittishness in would-be students, entrepreneurs, and tech workers to set down roots in the United States, even as countries like Canada, France, and Chile aggressively court them.

"Immigrants and their children founded 40 percent of Fortune 500 companies, and immigrant entrepreneurs have started more than half of startups valued at $1 billion or more in the US," says Linda Moore, president and CEO of the tech advocacy group TechNet. "That's completely impossible to argue with. Our point of view is we need to be welcoming these entrepreneurs from all over the world to start and grow their jobs here."

TechNet is also engaged in the heated debate over whether to offer undocumented immigrants who came to the United States as children some kind of legal protection. Permanently rescinding the policy known as Deferred Action for Childhood Arrivals, or DACA, could cost the country hundreds of billions of dollars in lost productivity, according to some estimates, which Moore views as a direct blow to businesses and their ability to innovate. "It’s a matter of disrupting the economy in a massive way," she says.

Slow Lanes
Trump's first year also saw the collapse of net neutrality protections. Tech companies aimed their substantial lobbying might at trying to convince the Federal Communications Commission—and its chairman, Ajit Pai—that classifying internet service providers as Title II utilities was essential to maintaining a free and open internet. Otherwise, they warned, internet providers would be able to speed up or slow down people's access to any website. "Rolling back net neutrality rules would stifle innovation and choice online,” the Internet Association, which represents companies like Google and Facebook, wrote in its comments to the FCC.

In the end, Pai pressed forward with his long-held goal of overturning net neutrality protections, a move that FCC commissioner Jessica Rosenworcel warned would give broadband providers "extraordinary new power" during her dissenting remarks on the vote in December. The long-term effects of that decision remain unknown, as legal challenges to the decision make their way through the courts. But in her testimony following the vote, Rosenworcel predicted widespread affronts to innovation online.

"They will have the power to block websites, throttle services, and censor online content," she said of broadband providers. "They will have the right to discriminate and favor the internet traffic of those companies with whom they have pay-for-play arrangements and the right to consign all others to a slow and bumpy road."

Tax Man Giveth
Despite these ongoing battles, the tech industry has cheered at least one of Trump's wins. The tax reform bill, which the president pushed and Congress passed late last year, is predicted to be a boon for tech giants' bottom lines. Under the old tax regime, companies like Apple that store hundreds of billions of dollars overseas would have had to pay a 35 percent rate on that money if they repatriated it to the US. The new bill establishes a one-time 15.5 percent tax on that money. This week, Apple announced it would indeed bring that money back into the US, and pay the $38 billion tax bill that goes along with it.

"I anticipate we’ll see more of that," Atkinson says. "Some of that money will go to real production, whether it’s research and development or in the case of Apple, manufacturing."

With that extra money to play with, Atkinson says American tech companies may be better equipped to fend off challengers in China with lower cost structures. Of course, Apple, which has $269 billion in cash and cash equivalents, wasn't exactly searching under couch cushions for ways to pay programmers and lower costs. But the reduction of the corporate tax rate, Atkinson argues, could help smaller companies compete.

Congress ended up scrapping several provisions of the bill that were deeply unpopular with the tech set, too, including one line item that would have forced graduate students to pay taxes on their tuition benefits. The plan also retained the research and development tax credit.

"We spent a lot of time getting really bad anti-tech stuff out of that bill," says TechNet's Moore. "We didn't get everything we wanted, and it’s not perfect, but overall, there were parts in there that were positive."

Still, Silicon Valley was hardly the intended beneficiary of this bill. A year in, and Trump still has given no serious indication he cares much about science and technology in the long-term. "That is just not the Trump administration," Moore says. "They have other priorities."

Look no further than his proposed budget for 2018, a plan that all but eliminates many of the the fundamental governmental pillars of innovation, proposing radical cuts to programs like the National Institute of Health, the National Science Foundation, and workforce training programs. Congress will ultimately have to pass its own version, but those are the guideposts Trump has offered. They suggest a dim future for America's ability to innovate.

"Having this marker from the president does mean funding is going to be lower than if we had a president that was committed to federal support for science and STEM education," Atkinson says. "I think that’s going to come back and bite the industry—if not tomorrow, then five years from now."

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