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Obama Takes Messages of Innovation, Jobs to Silicon Valley Leaders

February 18, 2011 at 6:29 PM EDT
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Correspondent Spencer Michels reports from Silicon Valley on the response of business leaders and the high-tech community to President Obama's drive for innovation and the debate over how much the federal government should be involved in funding incentives for entrepreneurs amid calls for federal austerity.

JIM LEHRER: And now, back in this country: the Obama administration’s innovation proposal. President Obama made his case on a high-tech visit to the West Coast.

NewsHour correspondent Spencer Michels reports on the response from business leaders in California.

SPENCER MICHELS: So, this is the kind of innovation you’re talking about, I guess, huh?

RUSSELL HANCOCK, Silicon Valley Network: Sure.

SPENCER MICHELS: Displays of high-tech gadgets like this Google Earth exhibit at San Jose’s Tech Museum continue to amaze even the denizens of Silicon Valley, where they invent stuff like this.

We brought Russell Hancock to the museum. He is CEO of a consortium of Silicon Valley businesses and government. He says these innovations should remind President Obama how important such inventions and the Valley itself are to the nation.

RUSSELL HANCOCK: If there’s a place that can lead us out of the recession, if there’s a place that can reinvent energy in our energy future, it would be Silicon Valley. But we have to do this in partnership.

SPENCER MICHELS: The president came west this week to talk with high-tech leaders about issues like that. Last night, he dined with an elite group of Silicon Valley executives, including Google’s Eric Schmidt, Apple’s Steve Jobs, and Facebook’s Mark Zuckerberg, among others.

Today, he traveled to Oregon and met with science students in a program funded by Intel, the largest computer chip manufacturer. The company’s CEO, Paul Otellini, was just appointed by the president to his Council on Jobs and Competitiveness.

Intel is a NewsHour underwriter.

For the Obama administration, innovation is a major way to fix the stalled economy.

U.S. PRESIDENT BARACK OBAMA: Basically, if we want to win the future, America has to outbuild and outinnovate and outeducate and outhustle the rest of the world. That’s what we have got to do.


SPENCER MICHELS: In his 2012 budget, Mr. Obama proposed spending billions of dollars on research and development, including tax credits, with a focus on biomedical and clean energy technologies, increasing funding for math and science education, high-speed Internet and other programs.

And he’s turning to Silicon Valley leaders like Russell Hancock for their support.

RUSSELL HANCOCK: What we rely on is those basic investments in research, in science, in the national research labs, in those kinds of innovative activities.

SPENCER MICHELS: Federal involvement like that is exactly what T.J. Rodgers doesn’t like. He’s the CEO and founder of Cypress Semiconductor, a company that makes programmable chips that can be used in a variety of products, including LED lights and touch screen controllers. The company employs about 3,500 people, 1,000 of them in the U.S.

Rodgers says his company has weathered tough times before on its own.

T.J. RODGERS, Cypress Semiconductor: So, stop giving me the subsidies, which you take from me anyway by taxing me. Just go away and let us spend our own money, and we will create the jobs. Silicon Valley is a miracle of job creation. We really don’t need any government help to continue on with what we’ve done.

SPENCER MICHELS: But the federal government has historically played a major role in spurring innovation, says Hancock.

RUSSELL HANCOCK: There’s this mythology about Silicon Valley. People think Silicon Valley happened in a garage. And yes, those are true stories. But the real story of Silicon Valley is that it was built with federal money.

It was the Vietnam War. It was the Cold War. It was the moon shot. Federal government needed integrated circuits. They needed chips in small places. That’s what built this valley. And more recently, that funding has trailed off. And it’s a concern. We’re actually deeply concerned about it.

SPENCER MICHELS: Cypress’ Rodgers, who was once described as the bad boy of Silicon Valley for his outspoken views on the need to cut corporate welfare, says that such government spending drives up federal deficits and taxes, making it harder for executives like him to invest in technologies which spur the economy.

T.J. RODGERS: Corporate welfare is bad. It not only takes money from people it shouldn’t take money from to give it to some of the richest corporations in the world, like mine. It also hurts the corporations you give it to, because the minute you start lifting the weights from somebody, eventually, the day will come when they have to get in the arena themselves and lift the weights themselves, and they will be weaker and less competitive.

SPENCER MICHELS: Rodgers says a better alternative is the private sector venture capitalist model. Under Cypress’ own roof, an incubator funds risky startups, and one investment turned into the second largest solar company in the U.S.

But in other quarters, the president’s proposals were welcomed. In a Silicon Valley hotel, we caught up with entrepreneur Dan Carnese. He’s been starting high-tech companies for 20 years and today is CEO of KDH Systems, a firm providing hospital software.

DAN CARNESE, Silicon Valley entrepreneur: The most important thing the federal government can do is to provide incentives for the private sector to innovate.

SPENCER MICHELS: Carnese, an Obama supporter in 2008, says the president’s new initiative called Startup America creates enormous tax incentives for entrepreneurs, provides seed financing for startups, and reduces government regulations, and that helps him.

DAN CARNESE: Now, what that means is that that will make capital much more accessible to me, because people can see that investing in me, as a small startup who is at the very beginning of the stage of creating jobs, that will have much better — much more of a return to them.

SPENCER MICHELS: Carnese also insists that if federal money is cut off, there will be consequences.

What happens if — if you don’t get it?

DAN CARNESE: It’s all incremental. I mean, innovation is not going to stop. My business will keep going. Every — other businesses will, too. But fewer will succeed. Fewer will — will be able to, you know, become the next Facebook or Google.

SPENCER MICHELS: And Carnese says that will boost businesses in other countries.

As for the president’s push against offshore hiring, T.J. Rodgers says it’s naive.

T.J. RODGERS: My company has 1,000 jobs in the Philippines. We have about 1,000 jobs in the United States. I can tell you for a fact that those jobs in the United States would not exist if I didn’t have jobs in the Philippines.

Meanwhile, back here in Silicon Valley, I have got the brain trust. I have got, in effect, the Wall Street of technology right here in Silicon Valley. And we still rule the world in technology.

SPENCER MICHELS: While Silicon Valley leaders disagree over jobs and federal subsidies, they agree on one thing: Beefing up federal support for education, especially in science and math, as the president mentioned in Oregon today, is necessary for the U.S. to keep the technological edge that Silicon Valley has helped build.