TCS Daily

Tech Central Station Host James K. Glassman interviews Majority Leader Dick Armey

By James K. Glassman - March 1, 2000 12:00 AM

Jim: Mr. Majority Leader, thank you for joining us.

Armey: Hi, Jim.

Jim: Let`s go ahead and get started. I want to talk about the e-contract. So, tell us, who has signed the e-contract, and what is its purpose?

Armey: Well, the e-contract was conceived really to highlight the important realization we have in Congress. We might have thought for some time that high-tech America was providing the little extras on the economic automobile, but the fact is, right now it is the driving engine of not only the American economy, but the world economy.

Jim: So the contract itself is a set of bills of specific legislation, some of which already might have been introduced?

Armey: Actually, the contract is more like a set of principles around which we will try to associate legislation.

Jim: Right, right.

Armey: We want to say that when somebody comes out with a piece of legislation, we want to sort of juxtapose it against these principles of fostering creative innovation and invention, creativity and meritocracy and make sure that we push the thing that really fits for this enormous, dynamic economic engine that we`ve got.

Jim: So sometimes the best thing you can do to promote e-commerce basically is nothing.

Armey: That`s right. And sometimes the e-contract implies that this latest, hottest idea that comes down the pipe is not going to happen. But you know for example right now, I think the political demagogues are going to take this privacy issue and if we don`t have some sort of an e-contract guiding set of principles that says, sometimes you have to slow down, study and understand things before legislation develops, you can get stampeded into things that are really impeding the use of the Internet.

Jim: Now, in one part of the e-contract, you discussed reigning in government antitrust lawyers. Do you intend to rewrite the antitrust law?

Armey: Well, this has been a problem for some time. First of all, we have a tendency to excessively regulate in our agencies. But my own view has been -- since even before the high-tech revolution, even before I came to Congress -- if you go back to the great "cereal case" of the `70s, which was the Justice Department Anti-trust Division, it made it look silly. Or the IBM case which they had to drop. You have to be a little careful about the application of laws for railroads in the latter part of the 19th century to these changes going on here. I am not above trying to rewrite antitrust laws. But the first thing we`ve got to do is trying to rein in their application of laws in what we think are inappropriate ways.

Jim: Is one of the things you might be thinking about the fact that under the current antitrust law, it`s not like other laws in the sense where you have to be proven guilty of harming a specific victim, it`s more kind of general harm. Would you consider rewriting the laws to raise the government`s burden of proof?

Armey: Well, I think that`s something we might want to address in tort reform in general, you know, lawyer-initiated lawsuits and joint and several liability. That`s something that at some time has to be addressed. I believe that you can apply that same concept of justice in the use of the law relative to the high-tech community.

Jim: We heard that there are reports of Justice antitrust divisions now investigating e-Bay because the company does not want to share its data with its competitors. Do you think that Justice is going too far in that case?

Armey: Well, we have to look at that. I wouldn`t be surprised if they were doing that. But I think the Justice department operates on a fairly superficial criteria for what they think of as a violation of antitrust. If you`re large and successful, they`re probably going to look at you with a jaundiced eye and eBay I think would be a candidate simply because they`ve been successful. I don`t know.

The fact of the matter is, I would like to remind my friends in the Department of Justice, that you don`t have people getting up at five o`clock in the morning to get in line to buy their latest court briefs like they did for example with Windows 98. But, here they are all sitting down preparing their cases on Windows 98 because they think somehow Microsoft has done a disservice to the consumers. But the consumers are pretty sharp in this case, by the way. These people that are buying software are knowledgeable and are expert buyers. They know what they are doing. And I thank the Lord for every one of those experts that explain to me how to make my equipment work.

Jim: Another element of the e-contract is to cut capital gains taxes again. How much and how soon?

Armey: Well, we need to do as much as we can as soon as possible and that`s where I think the rate of change and the rather short shelf-life of a technology in this industry is so important. If you`re going to have the incentive to make a capital investment, you have to have the promise to recoup your investment with a decent return in a fairly quick period of time because this might be obsolete by some, you know, high school students next year and capital gains erosion of that is very important. So, I think the cutting of capital gains as much as we can as quickly as possible is critical to the innovative spirit in this industry.

Jim: But specifically, you want to see the cap rate reduced to ten or ...

Armey: Well, you know the optimal capital gain is taxed at zero, but we have forces of opposition to it that essentially think of capital gains as a tax on rich people, which is kind of a shame.

Jim: Even though 48 percent of Americans own stock now, right?

Armey: Yeah, right. But you know that`s changing. Americans are understanding. Stockholders are very important across the country.

Jim: Absolutely.

Armey: It`s you and me now, it`s not just some rich fat cat. And the capital gains reduction is seen by more and more people as an increased pension value. So we will have more luck. But right now, the people who sort of demagogue it on the basis of tax equity and fairness still have a very powerful voice in this town and we still have to fight harder to overcome them.

Jim: You also make reference to encouraging Research and Development. Most business people think that means renewing the R&D tax credit. But you also pointed out that your flat tax would be very friendly to R&D. Can you explain that?

Armey: Well, the first thing is - when you write a flat tax as I did, you have zero double taxation, so this means the incentive for invention and development is very, very big. You also of course eliminate the specific punitive taxes on creativity such as the capital gains tax and others. So, the flat tax world is the world that says to people no matter how you make your living, whether it is by creating something new and better or a higher degree of productivity, you are going to be taxed the same as everybody else. That way you have equal incentive.

Jim: You also talked about encouraging the deployment of fast Internet access. Is there anything Congress can do about that?

Armey: No. We can do very little except perhaps get out of the way. But we have the innovations coming from America and the thing that amazes me - I mean, I can remember when word processing was the most torturous thing in the world, almost as torturous as pencil and pad -- the technology is becoming more and more user-friendly so that we can really get to work with it. What we need to do in Congress is again see this world of creativity and stay out of the way. But what we can do by way of promoting it is to be very, very careful that Congress does not get into the business of regulating and mandating technology.

Jim: What would you say is Congress` most important, recent accomplishment in the area of high tech?

Armey: Well, I think we`re working on a lot of things - digital signature, the HI-B visa legislation that we passed, it may be the Telecommunications Act itself.

Jim: What about the moratorium on the Internet taxes?

Armey: Oh, that`s big. I think that`s very important because you know, we`ve seen this before historically in America. We get something that has a lot of life to it and it`s got the vitality and you either begin to tax it or regulate it into submission. And we need to make sure that we don`t do that. So the moratorium on Internet taxation I think is critically important to us.

Jim: And you want to see that extended?

Armey: Yes, I do.

Jim: Permanently?

Armey: Well, I`d like to, yes. But then again, there are a lot of people out there that are seeing the opportunity to kill that. We will have a report from the Advisory Commission on Electronic Commerce out in April and think that will help us all better understand this. And we intend to follow it up with legislation.

Jim: Great. Well, I appreciate this, Mr. Majority Leader.

Armey: Okay, I hope it is helpful to you.

Jim: Very helpful, as always.

Armey: I might have guessed that you`d be one of the first guys who are quick-witted enough to think that one of the things we need to get online is more and better thinking. So I hope I`ve contributed to that.

Jim: Well, thanks, and please go and check the website,

Armey: I will, I will, as soon as I get my local Bell to get my phone fixed so I can get back on line.

Jim: Well - that`s the big problem. But anyway, thanks a lot.

Armey: Okay. You bet.

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