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November 11, 2016

After the Earthquake: Trump, Politics and Tech Policy


When Donald J. Trump was elected the 45th President of the United States, our nation experienced a seismic shift that exposes growing ambivalence about the power of technology to create economic opportunities in all corners of the country. Now in the aftermath, we examine what this historic election means for the tech industry going forward.

First we must ask: what will President-elect Trump do? And given his relative silence about the technology industry and policies, what will it mean for tech?

The biggest challenge ahead: will the technology industry learn the lessons of Election 2016, when many Americans sent a clear message that they feel left behind in a modern economy that is often defined by technology?

One thing is clear: the technology industry’s political position in Washington will be diminished as a result of this election. Only time will tell how much. The answer will in large part be determined by the tech industry’s ability to adapt to and address the challenges that were exposed this election cycle.

The Big Lessons from the 2016 Election
Under President Obama, technology was often the golden child; it was the first group he met with in the early days of his presidency and, to many, Google seemed like the “help desk” for Obama advisers whenever a problem arose. And, in this most recent election, tech executives and employees overwhelmingly supported Hillary Clinton.

Yet, the election made apparent that there are large swaths of Americans who feel left behind in the modern economy.

Trump’s genius was his ability to listen to the pain felt in places like the upper Midwest and tap into those feelings. Bernie Sanders did the same, albeit with a very different message. Trump was able to leverage his support within these communities into a win, and we should expect both parties will aggressively court these voters over the next four years.

This will have significant repercussions for the tech industry.

When the Internet first emerged, it was viewed as an egalitarian tool that would level the playing field for small companies, less powerful voices, and people around the world. Location no longer mattered, only access to an internet connection. The reality in America, however, is that the vast majority of the opportunities and benefits created by the Internet and technology have flowed to coastal and urban areas.

In fact, many communities have seen the negative impacts of international trade, automation, and technological disruption, particularly as factories, jobs and opportunities disappeared. These impacts were heightened by the great recession, and weren’t addressed over the past six years when gridlock dominated Washington, DC.

Republicans and Democrats alike will be looking for solutions to address the challenges these communities face.

The tech industry has a choice: be part of the solution or be branded as part of the problem.

Trump “Tech Agenda”
Tech faces a more uncertain policy future than at any time since the Internet emerged two decades ago. Unlike Hillary Clinton – who had a detailed plan – President-elect Donald Trump doesn’t have an expressed tech agenda.

Yet, there are a few issues that he has signaled will be a priority.

Trump has said he’ll order an immediate review of all U.S. cyber defenses and vulnerabilities, including critical infrastructure, by a Cyber Review Team of individuals from the military, law enforcement, and the private sector.

Trump’s likely point-person on technology and telecom issues is a proponent of the FCC taking a hands-off approach to regulating companies. Jeffrey Eisenach, of the American Enterprise Institute, has been a foe of current FCC Chairman Tom Wheeler’s efforts to impose new regulations on telecom and technology companies.

Tax Reform
Tax reform that lowers tax rates for corporations, individuals, and small businesses seems like it will be one of the first issues in the new Congress, and may need only a majority of votes in the House and Senate to pass. This will greatly benefit tech companies like Apple who have a large stake overseas.

IP Protection
Trump has also signaled that he’ll work to protect American tech assets and intellectual property: “I am a big believer in technology and will be a strong supporter of expanding tech capabilities in the United States. As President, my goal would be to ensure that the intellectual property produced in America remains the property of those who produce it. Letting other countries steal our property will not happen on my watch.”

In his first 100 days, Trump has vowed to withdraw from TPP, start the process of renegotiating NAFTA, and label China a currency manipulator (effectively launching a trade war). Republicans in Congress may not be fully supportive of these moves, but it could be an area where he’s able to cross party lines and work with trade skeptics like Bernie Sanders and Elizabeth Warren in the Democratic party.

As part of trade politics, we should expect a new focus on tech companies shifting jobs overseas. He’s criticized IBM, for example, for moving hundreds of thousands of jobs outside the United States. Whether that will just be political rhetoric or will lead to policy consequences remains to be seen.

Beyond these core issues, a Trump White House is likely to be reactive on technology issues.

For instance, he’s indicated he’ll be make it harder for tech companies to bring in overseas workers. Trump supports tougher standards for issuing H1-B visas, which allow American companies to sponsor immigration for skilled foreign works. According to The Information, he believes in an “America first” approach that requires companies to hire American workers before hiring from foreign countries.

Trump called for a boycott of Apple when it was embroiled in a dispute with the FBI about unlocking the phone of a suspected terrorist.

At the heart of many of these issues: how do we protect American’s privacy? We should expect conflict between Trump’s law and order instincts and the reluctance of tech companies to be used by law enforcement and national security agencies to get information.

Personnel is Policy
Trump also seems poised to delegate policy minutiae to others.

As the tech industry grapples with how to engage the Trump White House, it may be surprised who could be its go-to source: Vice President-elect Mike Pence. Trump signaled multiple times during the campaign a limited interest in the details of policy making – he reportedly proposed that Ohio Governor John Kasich, if he were to accept the VP role, would be in charge of domestic and foreign policy.

If Trump follows through, it is likely to give Vice President-elect Pence an outsized role in shaping policy. This may portend bad news for Silicon Valley. Pence had a high-profile battle with Apple CEO Tim Cook over legislation to let business owners and workers cite religious objections as a reason not to serve customers. Cook claimed it would lead to unjust discrimination against consumers based on their physical appearance or sexual orientation.

Other Key Roles
Additionally, other individuals that Trump names to key Administration posts will have a great deal of latitude:
• White House economic adviser
• Secretary of Commerce
• U.S. Trade Representative
• Secretary of Energy
• EPA Administrator
• Attorney General (Department of Justice)
• Chairman of the Federal Communications Commission
• Chairman of the Federal Trade Commission

Those last three are likely to be the most critical. Here’s why. DOJ will be responsible for approval of mergers and acquisitions. The first test will be the proposed merger of AT&T and Time Warner. Trump came out against it during the campaign, so we’ll see if that was just rhetoric.

At the FCC and FTC, there are issues likely to be re-litigated (Net Neutrality), dropped (set top box regulations) and emerge (privacy). It’s highly unlikely that these issues will get the personal attention of the President as they have in the Obama administration.

Additional Issues
Regardless of the Trump presidency, many of the most significant policy issues have been fought at the state level, not in Washington. This won’t change.

Issues such as how we modernize laws and regulations to adapt to the sharing and gig economy will still be played out in states and cities. We are at an early stage in the emergence of digital platforms like Uber, Lyft, TaskRabbit, Thumbtack, and more. These platforms connect services with demand. States and local government must decide whether and how to regulate them.

At the same time, we are at the cusp of an “Age of the Entrepreneur” with 40 percent of Americans saying they expect to start their own business someday. Fifty-six percent of Americans in a recent Vrge survey said that technology makes it easier to start a business. Ultimately, the policy challenges caused by these changes must be addressed by the federal government, states and localities.

The Future of Work
Policies are needed at the local, state and federal to address changes in how we work. For example, as digital platforms become a larger part of the economy, it will require a re-think in how we distribute benefits (how health care is often provided by companies, etc.) and collect taxes (again, by companies, then to government).

At the core of this will be a federal response to the Future of Work. How, when and where we work is being transformed by technology. Fifty-six percent of Americans expect they will work in “unstructured jobs, where work is often done remotely without fixed hours.”

The changes ushered in by technology create an opportunity to provide advice to federal policymakers on how we adapt. Voters expect this: 60 percent of Americans don’t think that the “pillars” that support our economy (education, regulations and laws, corporate culture) have been adapted to deal with a modern economy.

This will be, perhaps, the biggest technology-related policy challenge facing the Trump White House, because its comprehensive and long-range – and doesn’t have a “quick fix” that Trump seems to gravitate to.

The technology industry faces a significant period of uncertainty and potential weakness. There was a clear playbook with a Clinton presidency, with a clear connection on policy, politics and fundraising. The Trump victory wiped that all away.

But technology is still a driving force in the economy and a defining force in society. In short, the industry must practice what it preaches about disruption and adapting to a changing world.

If you’re interested in learning more about how the new administration will affect your business or organization, please contact us at info@vrge.us

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