IT Spending Gets A Hand From Congress

Congress is closer to consensus on a scaled-down economic stimulus bill that could goose IT spending, just as the economy seems to be emerging from the recession. On Thursday the House of Representatives overwhelmingly approved (417-3) the bill, which would provide tax incentives for new capital expenditures. It's not the first time the Republican-led House has passed a version of this bill, but it looks as if the latest version will pass muster with the Democratic-led Senate, too.

H.R. 3090 includes an additional 30% write-down provision for capital expenditures for the next three years. "This is just playing catch-up with something that's long overdue," says James Johnson, professor of finance at Northern Illinois University. "The life cycle of [IT equipment] gets shorter and shorter all the time." Twenty years ago, companies might have mainframes for nine years; now that's closer to three, he says.

Federal Reserve Chairman Alan Greenspan suggested that tech spending is already headed in the right direction during his report Wednesday to the Senate Committee on Banking, Housing, and Urban Affairs. "Recent evidence suggests that a recovery in at least some forms of high-tech investment could already be under way," Greenspan said. He pointed out that production of semiconductors, which increased last fall, has been a leading indicator for computer production. Greenspan also said that expenditures on computers rose at a double-digit annual rate in real terms last quarter.

The House bill also contains provisions that will be welcomed by another segment of the IT industry: the unemployed tech workforce. The bill extends unemployment benefits by 13 weeks; the current limit is 26 weeks. The bill excludes some tax provisions that Republicans previously backed, such as accelerated marginal tax rate cuts.