Commerce chief defends economy

by Guest Contributor | Jul 23, 2004 2:31:00 PM

Tags: Guest Contributor

Takeaway: Tech leaders are told they're fueling growth but hear nothing about a popular bill that would largely preserve the stock option system.

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By Ed Frauenheim
CNET News.com

PALO ALTO, Calif.--At a "town hall meeting" in the heart of Silicon Valley, U.S. Commerce Department Secretary Donald Evans on Thursday defended economic progress under the Bush administration and applauded business leaders here for fueling growth. But he was mum about a stock options bill that is widely popular among tech industry folks.

Evans also said the Bush administration's tax cuts were perfectly timed to boost the nation's economy, and that his team has notched successes when it comes to creating a level playing field with China. In particular, he mentioned victories related to a wireless networking security standard and a value-added tax for semiconductors.

"The high-tech economy has got a lot of momentum," he told a nearly full auditorium at Hewlett-Packard's headquarters. "I can't remember a time when the economy was stronger."

Evans said the U.S. economy appears poised for better-than-average growth this year. The tech industry, though, hasn't been showing a dazzling performance of late. Recently, a host of software companies have warned of worse-than-expected financial results.

Not everyone in crowd seemed to share Evans' upbeat assessment of the overall economy. One woman asked about the federal deficit, which represents a marked turnaround from the surplus that existed during the Clinton administration. Evans responded that the deficit is a product of war, the Sept. 11, 2001, terrorist attacks and a recession. He also said the deficit has been higher in the past relative to the country's economy, and that the Bush plan is to cut the deficit in half in five years through economic growth. "The deficit, though unwelcome, is understandable and affordable," he said.

Asked about the administration's position on a bill that would largely preserve the current method of accounting for the cost of stock options, Evans declined to comment. He said the Bush team is backing a process for reviewing accounting methods that is led by the Securities and Exchange Commission, which has recommended that an independent board set financial accounting standards in the United States. That board, the Financial Standards Accounting Board, or FASB, has proposed that all forms of share-based payments to employees, including stock options, be recognized as a cost in the income statement--a change that many tech industry leaders and workers say will dampen innovation.

Under current rules, companies can disclose the expense of employee stock options in footnotes to financial statements.

The U.S. House of Representatives on Tuesday voted overwhelmingly to back the bill that basically preserves the status quo, essentially rejecting the FASB proposal. But the bill's future is uncertain in the Senate, where the accounting panel enjoys broader support from key senators.